Offshore Wind Industry Faces Technology, Natural Catastrophe Risk
Claims data from specialist renewables underwriter GCube Insurance highlight that offshore wind cost reduction must not come at expense of risk management.
As the offshore wind sector expands globally, prices fall, and technology evolves, asset owners and investors are becoming increasingly exposed to technical and supply chain risks, alongside natural catastrophe and extreme weather, says Gcube which underwrites over 13.5GW of offshore wind capacity in Europe, the U.S., Taiwan and Japan.
GCube’s analysis of claims data gathered over the past 12 months from construction projects and operational offshore wind farms highlights several key trends. These include:
• A number of costly inter-array cable faults caused by malfunction of fiber optics designed to monitor cable performance. Cabling losses account for 55 percent of total claims handled by GCube in the past 12 months.
• A rise in the frequency and severity of claims relating to foundations – particularly monopiles installed at deep water sites. Foundation-related losses now account for 35 percent of total claims.
• Significant mechanical breakdown losses incurred at all but one of the floating wind installations currently in operation worldwide.
• Increased exposure to natural catastrophe in the Taiwanese and U.S. offshore wind markets as well as losses involving extreme weather events that cause significant project damage but do not fall under conventional definitions of natural catastrophe.
• Ongoing issues related to contractor error as the industry drives to reduce the levelized cost of energy in established markets and works with inexperienced local teams in emerging markets. Human error is involved in 70 percent of total claims over the past 12 months.
“Many of these claims trends could be marked down as ‘growing pains’ linked to global expansion and a drive for cost parity with conventional energy. However, if they are not properly managed, they will put these goals at risk,” said Jatin Sharma, President, GCube Insurance Services.
“If the industry continues to squeeze the supply chain, while at the same time commercializing new technologies in new global markets, it will become increasingly vulnerable to large-scale financial losses that dent investor confidence and put projects at risk. A long-term, responsible outlook is required – both from offshore wind asset developers and owners and from insurance providers – to ensure that lessons are learnt quickly and take into account the changing risk profile of construction and operation.”