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Understanding the risks for subsea interconnector projects

Subsea interconnector projects have a unique and challenging risk profile, which requires expert advice.
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10/07/2023 · 5 minute read

Electricity interconnectors facilitate the transmission of power across geographical boundaries, increasing the reach of electricity from renewable sources and helping to mitigate longer-term energy security concerns. Subsea interconnector projects have a unique and challenging risk profile, which requires expert advice. This article series explores the specific risks to the design and construction, supply chain, protection, and ongoing monitoring of subsea electricity interconnector infrastructure as well as the risk mitigation and finance strategies to be considered.

Interconnector design and defect concerns

Subsea interconnector projects rely on cables and converter stations to deliver power across borders.

High voltage direct current (HVDC) cables can broadly be split into two technologies: mass-impregnated (MI) cable and cross-linked polyethylene (XLPE) cable. Both can contain either copper or aluminum conductors.

Generally, MI cables — the older cable technology — are proven at higher voltages for larger projects’ use; XLPE cable designs have yet to demonstrate adequate long-term function at the required 525 kV level. Issues with manufacturing defects have also emerged for XLPE cables, and insurers are particularly cautious about their use. Insurers generally are reluctant to provide wide cover for prototypical designs or untested technologies for this reason, and their use could lead to restrictive coverage conditions for damage caused by defects.

Converter stations are powered by various technology forms. Currently, insurers do not classify any of these to be problematic from a risk perspective. However, the coverage offered by insurers for damage caused by defects may still be restrictive.

Delays and extended repair timetables

The increase in the number of interconnector projects — either in development or under construction – has led to pressure on supply chains. Globally, there are relatively few companies with the facilities and expertise to manufacturer either the HVDC cables or converters required for interconnector projects. Consequently, manufacturing capacity is limited, with factories experiencing a backlog of orders. The specialist vessels required for cable installation are also in great demand, and availability at short notice can be limited and expensive.

Strained supply chains and a scarcity of specialist equipment can result in delays to the start or re-start of operations, possibly inflating an insurance claim from both cost and time for repair perspectives. The cost of repairing installed cables can further increase due to delays caused by poor weather or other circumstances — such as the distance of the repair vessel from the cable location — even if a vessel is available to perform the repair.

However, there are ways to manage or improve the delay risk. In addition to sparing, some developers may consider building their own cable manufacturing plants or commissioning dedicated installation and maintenance vessels.

Insurers are acutely aware of the supply chain constraints, so delay in start-up or business interruption insurance can be challenging to source or expensive due to the perceived exposure.

External third-party damage and cable protection

The primary risk to subsea cables, whether during construction, once laid on the seabed, or once operational, is external third-party damage. The predominant cause is generally from anchor strikes or fishing trawler nets. The only sufficient defense available to protect cables against strikes is seabed burial or by using either rocks or concrete mattresses. However, the prevailing standard for cable protection has changed over the decades, therefore older cables may not benefit from the same level of protection as newer cables, and even these methods have their limitations.

Burial methodology and protection systems will vary substantially based on geography, seabed conditions, marine traffic, currents, and various other considerations. When buried, cables are normally positioned at depths of between 1 to 8 meters in the seabed. Burial and protection works require significant technical expertise and specialist equipment.

Seabed topography can drastically change over time due to the action of tides and currents. Consequently, buried cables can be uncovered or become insufficiently buried. Interconnector cables require continuous monitoring to ensure protection remains adequate. It is vital that operators view this as an on-going task, and go beyond simply protecting these assets during construction.

Insurers are particularly interested in the cable-protection methodology and ongoing inspection protocols used by developers, including remedial actions where cables get exposed or where time proves the level of protection to be inadequate.

Accounting for interconnectors risks

Interconnectors are set to play an increasingly pivotal role in the energy transition by maintaining secure and efficient transmission of power across and under borders. The complexity of interconnector projects — from installation challenges, to potential delays in manufacturing, and maintenance — means it is imperative to understand the risks and have in place a robust risk management strategy that meets the needs of all project stakeholders. Our next article in this series will focus on the insurability of an interconnector project.

Contact your local Marsh office for risk management advice and global insurance market solutions related to these and other renewable resource projects.

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Marsh India Insurance Brokers Pvt. Ltd. having corporate and the registered office at 1201-02, Tower 2, One World Center, Plot-841, Jupiter Textile Compound Mills, Senapati Bapat Marg, Elphinstone Road (W), Mumbai 400 013 is registered as a composite broker with Insurance and Regulatory Development Authority of India (IRDAI). Its license no. is 120 and is valid from 03/03/2021 to 02/03/2024. CIN: U66010MH2002PTC138276.