Offshore wind insurance has fortunately not had the industrial mega claims yet, but there are a few close calls around that raise concern in the insurance sector. As construction accelerates towards the green energy targets set for the end of the decade it is important that the insurance market works even more closely with projects for capacity to be confidently and commercially dispatched.
A Close Call
Earlier this year, a flaw in the design of offshore wind turbine structures was discovered at one European wind farm. Upon further investigation, engineers diagnosed the same problem on 600 offshore wind turbines. The outcome is that affected turbines are slipping up to 1cm per year which has lead to significant changes in the previously agreed grouting standards, a noteworthy defect. Lessons have been learned but not all of the costs are destined for the insurance market.
Then there are cables, export cables and array cables have provided more frequent losses to the insurance market. Cables usually come out of factories wound on to carousels and seemingly spend most of their time trying to get back in to a coil! Many projects have had cables claims and some unfortunately have had multiple cable claims.
This is an area requiring significant attention if insurers are to take this risk; failures in 2011 extend to other sub sea power interconnectors, not just those attached to offshore wind farms.
Choice of equipment and laying methodology as well as an experienced and skilled crew and vessel are high priority, but looking at it from the insurance perspective, I think projects have to be prepared to sacrifice some of the time schedule and wait for the best conditions to ensure that cables can be laid successfully.
EPC Mega Losses
And finally, you only need to look at the quarterly reports of some of the world’s largest engineering, procurement and construction (EPC) contractors to understand just how challenging offshore wind can be. Weather delays and heavy cost overruns at some offshore wind projects have taught EPCs an expensive lesson, some to the tune of over half a billion dollars.
At this magnitude, the quantum of loss as an insurance claim could dramatically redefine offshore wind insurance. With plenty of chances to try again I think the insurance market will stick around for the long haul, in fact, we all should hope they do, because if you can’t assuredly transfer some of the risk pot then you’re not going to stay in the game.