The offshore wind sector needs more sustainable approaches to risk management and insurance in order to respond to a global changing risk profile, according to renewable energy insurance provider GCube Insurance.
As explained, the global expansion of offshore wind sector along with a fall in prices and rise of technology, has made asset owners and investors increasingly exposed to technical and supply chain risks, alongside natural catastrophe and extreme weather.
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.
GCube’s analysis of claims data gathered over the past 12 months from construction projects and operational offshore wind farms highlights several key trends that must be carefully managed in order to ensure project success, including:
- A number of costly inter-array cable faults caused by malfunction of fibre optics designed to monitor cable performance. Cabling losses account for 55% 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% 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 US 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, putting pressure on the supply chain, and begins to work with inexperienced local teams in emerging markets. Human error is involved in 70% of total claims over the past 12 months.
If the industry continues to squeeze the supply chain, while at the same time commercialising 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,
…concluded Sharma.
