Renewable growth continues to power ahead in Europe, despite wider geopolitical uncertainty, according to Santiago Herrero, Head of PRCB Iberia and Heiko Schlick, Lead Underwriter PRCB at AXA XL in Germany.
Despite headwinds, the renewable energy sector continues to go from strength to strength. Worldwide, wind and solar power generation overtook coal in the first half of 2025 for the first time on record, according to Ember.
By 2030, global renewable power is forecast to more than double - an increase equivalent of adding the EU, China and Japan’s total power generation capacity combined, according to the IEA. Around 80% of this growth is expected to come from solar – where costs have fallen and permitting processes are relatively simple - although offshore wind is also predicted to grow by a healthy 45%.
Europe plays a leading role
Renewable capacity in Europe is forecast to grow by 67% between 2025 and 2030. Almost three-quarters of this rise is from just eight countries: Spain, Germany, the UK, Türkiye, Italy, France, Poland and the Netherlands. In fact, improved growth prospects for solar and offshore wind in Spain and Germany recently led the IEA to raise its growth forecast for Europe. Having transformed their energy sectors over the past decade, the two countries are now among the world leaders in the energy transition, generating more than 40% of their electricity from wind and solar. Spain currently aims to generate 81% of its power from renewables by 2030.
Confidence in renewables remains strong. Most major developers in Europe have either maintained or raised their 2030 deployment targets, while many large utilities are making large investments in renewable projects outside their home markets – one major Spanish utility plans $100 billion of investment in grid modernization and selective renewables in Germany, UK and US.
Grid challenge laid bare
While the story of Europe’s energy transition is one of success, it has not been without its challenges. The fragility of the region’s power grids was exposed in April 2025 when a series of cascading over-voltages (a surge in electrical supply) resulted in the total loss of the power supply in Spain and Portugal and the largest blackout in Europe in over two decades. Insufficient voltage control contributed to the blackout, according to a government report published in June .
The incident is a wake-up call for policymakers and a sharp reminder of the need for investment in power storage and grid stabilization technology, such as battery storage, hydro power storage, and green hydrogen. In the absence of fossil fuels, countries like Spain and Germany will need to invest heavily in such solutions to mitigate "dark lulls" and avoid future power outages. Germany faces the additional challenge of transitioning to low-carbon energy without relying on nuclear power, which was phased out in 2023. Spain, which currently generates a fifth of its electricity from nuclear, plans to phase out nuclear by 2035.
Capacity crunch
The successful expansion of renewables is also dependent on the overall capacity and modernization of power infrastructure. The pace of renewable growth in many countries has been outstripping that of the grid, yet demand for electrical power is expected to rise with increases in electric vehicles, heat pumps and artificial intelligence. Demand from data centers worldwide is set to more than double by 2030, with demand from AI expected to more than quadruple. As a result, many electricity grids are now stretched. Distribution and transmission grids in Spain, for example, are running at around 85% capacity, while in some regions this is closer to 99%.
Constraints on grid capacity and lack of storage could hamper future investments in renewable projects, although governments are looking to invest in grid modernization. Spain, for example, recently proposed a €13 billion investment to strengthen the power grid by 2030, although the plan proposes a relatively low investment remuneration which will need to compete with more profitable overseas projects.
Fluctuations in supply and demand also have consequences for pricing. Spain’s investments in wind and solar mean it now has some of the lowest wholesale electricity prices in Europe – the country’s wholesale electricity price was 32% lower than the EU average in the first half of 2025. However, periods of oversupply have also led to an increase in times of near-zero or negative prices: in Germany and Spain, the share of hours with negative prices on the wholesale market reached 8-9% in the first half of the year, up from 4-5% in 2024.
Role of political risk and credit insurance
Growing investment in renewable energy and grid modernization create opportunities for Europe’s operators, lenders and insurers. In the past decade, the EU has increased its commitment to clean energy, with investment reaching almost $390 billion in 2025. Under the EU’s Green Deal, the European Commission aims to mobilize at least €1 trillion in sustainable investments across the EU over the next ten years.
Insurance plays an important role in supporting banks and non-bank financing entities that invest in or finance renewable energy generation, storage and grid infrastructure projects. Financing renewable energy projects can involve high values and long maturities, with financing agreements lasting up to 25 years. However, delays in construction, regulatory or policy changes, insolvency, technical challenges, and physical risks like fires or floods, all carry the risk of non-payment for lenders. Insurance solutions can unlock and scale transition finance, transferring the risks from these long-term projects.
Non-payment insurance helps facilitate the financing of renewable projects by protecting lenders against the risk of payment defaults. It also provides banks with capital relief and supports risk management, managing exposure to particular technology, operator or territory. By working with insurers, banks and private investors can protect their balance sheets and potentially free up additional financing capacity.
Committed
Despite grid capacity constraints in Europe, and wider geopolitical and economic uncertainties, interest in renewable projects remains strong. We continue to see a good pipeline of transactions, with plenty of capital and liquidity in the market for financing renewable energy and energy infrastructure modernization projects, both within Europe and in emerging markets.
One notable trend in recent years has been the diversification of this asset class, which has seen an increase in portfolio financing, holding company financing and supply chain finance transactions – all of which AXA XL is keen to support. Our political risk and credit insurance teams in Spain and Germany have a strong interest in renewable energy projects and as an insurer with an AA- rating from S&P, AXA XL is one of the few specialist insurers that can offer high capacities for long terms.
