Wind energy is set to lead the clean energy transition and become one of the world’s most important energy sources. Locating windfarms offshore has many advantages, such as steadier and faster wind speeds, but it also presents unique challenges.
As the energy transition accelerates and wind technology continues to evolve, investors, operators, and insurance markets will be focused on managing key risks and ensuring offshore windfarm project success.
The primary risk considerations include:
- Location. A project’s location could increase construction or maintenance costs, or expose assets to extreme weather or natural catastrophe events.
- Equipment faults. Common offshore wind technology issues include damage to cables and outages caused by transformer failures, which may lead to revenue losses and affect return on investment.
- Technology scale-up. Wind turbine technology is still evolving. Insurance markets often take a cautious approach to ‘unproven’ technology advancements.
- Maintenance. Restricted access to remote sites may cause delays to maintenance and fault repairs, and local regulations may define requirements for contractors and maintenance crews.
- Project financing and insurability. Lender-financed projects can have complex contractual structures. Investors must use an appropriate risk allocation model, consider probable loss scenarios, and align insurance requirements of all stakeholders.
