Offshore Wind Needs Long-Term Risk Management Strategy – GCube
Offshore wind industry must quickly respond to a changing global risk profile in order to avoid large-scale financial losses, GCube Insurance said.
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, the renewable energy insurance services provider said.
More sustainable approaches to risk management and insurance are required to ensure that this changing risk profile does not impact project delivery and successful long-term operations.
GCube’s analysis of claims data gathered over the past twelve months from construction projects and operational offshore wind farms highlights several key trends that must be carefully managed in order to ensure project success.
This includes 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.
The analysis has also revealed a rise in the frequency and severity of claims relating to foundations – particularly monopiles installed at deepwater sites. Foundation-related losses now account for 35% of total claims.
When it comes to the floating wind, significant mechanical breakdown losses incurred at all but one of the floating wind installations currently in operation worldwide, GCube Insurance said.
Looking beyond Europe, 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.
And lastly, 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.
“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 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.”