Claims data from a specialist renewables underwriter shows cost reduction in the offshore wind industry must not come at the expense of risk management, with foundations, cables and natural catastrophes areas of concern
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 catastrophes and extreme weather. 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, according to GCube Insurance.
GCube’s analysis of claims data gathered over the past 12 months from construction projects and operational offshore windfarms highlights several key trends that must be carefully managed to ensure project success. These include costly inter-array cable faults caused by malfunctioning fibre optics designed to monitor cable performance. Cabling losses account for 55% of total claims handled by GCube in the past 12 months.
Others include 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 – and significant mechanical breakdown losses incurred at all but one of the floating wind installations currently in operation worldwide.
Other areas of concern included increased exposure to natural catastrophes 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 are also an issue, as the industry drives to reduce the levelised 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.
GCube Insurance Services president Jatin Sharma said, “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.
“If the industry continues to squeeze the supply chain, while at the same time commercialising new technology in new markets, it will become increasingly vulnerable to large-scale financial losses that dent investor confidence and put projects at risk.”
Mr Sharma said 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.