Allianz Global: Offshore wind project risks (USA)

Allianz Global’s insurance expert, Robert Maurer, gave some interesting insight into offshore wind energy project risks. Usually, offshore projects are watched and assessed from the technical or economical point of view, but we thought it would be interesting to cite this article as a different way of looking at offshore wind.

First off, the difference between onshore and offshore wind energy projects needs to be looked at. Onshore projects require much less logistical support to implement. The workforce involved in the development of onshore wind projects is also much easier to accommodate, and transport to the construction site. Usually, along with the onshore projects, comes major infrastructure development, such as new roads.

Building and operating an offshore wind energy project is a whole lot different. There are no roads, everything is transported using ships, or in some cases airlifts. The turbines cannot be anchored easily, as the wind farms are usually very far from the coast, even 100 miles, where water depths can reach 70-80 meters. This poses a significant problem for construction, requiring special foundations, upon which wind turbine towers will be installed. Also, accomodating the workforce is also a big issue – transporting the construction crews to the offshore construction site on a daily basis can prove to be very costly. This is why many offshore wind developers resort to hiring hotel ships, providing nearby accommodation for the crews right near the construction site.

One of the latest approaches in offshore wind development is the assembly of the whole wind turbine while on shore, and then tranporting and installing the units in “one piece” at the wind farm site. This avoids some of the risks involved with assembly on site, in ocean weather conditions.

According to Maurer, the offshore wind industry represents a new insurance market for Allianz Global, but for many reasons, some of which have been mentioned earlier, this area of the insurance market will pose some significant challenges for insurance companies. Typical risks include storms, ship collisions, high waves which may cause great damage. There are some very specific risk areas such as offshore power cables that need to be installed on the sea bed, connecting offshore wind facilities with onshore power grids.

Another area of challenge for offshore wind insurance is the lack of data, since the industry is still quite immature. Long term data is necessary in order to get a clear picture of all the risks involved. Serial losses of power are among the main problems looked at here. Also, single unit repairs, while causing profit losses due to less produced power, also cost quite a lot. In this context, the bigger the installed offshore wind turbines the better, since this is the way to maximize profits from offshore wind energy facilities. Even though Allianz Global’s clients include some of the largest offshore wind turbine manufacturers and developers, risk management involved with these projects still remains a challenge. Upcoming large scale projects are especially affected by this, with banks requiring huge sums to be insured, especially regarding business continuity. Indeed, most of the offshore large scale projects are being developed by large utilities and developers, who have the capital leverage to be able to take these great risks.

[mappress]

Source: renewbl, May 10, 2010;