With limited opportunities for debt within the offshore wind capital structure, unknown risks from the power price, regulatory risks, technology risks, and the resource fluctuation of wind energy itself; offshore wind poses a number of investor challenges. These challenges are further compounded by Government pressure to lower the cost base of the industry, and continued policy uncertainty.

In order to overcome this future industry investment impasse, GCube believes that a step change needs to take place in the way that future offshore wind assets are built, managed and valued. This will entail seeking greater levels of collaboration between investors, developers and operators at an earlier stage; ensuring that projects are more effectively geared towards the needs of capital providers and that they can adapt to the regulatory and policy environment.

As part of the 5GW underwriting milestone, projects that GCube currently insure include Scroby Sands, Robin Rigg and Blyth, all of which were constructed under the UK’s Round 1 and 2 tender process. Further afield in Northern Europe, additional projects include the Danish initiative Rodsand II, located in the Baltic Sea.

“It seems obvious, but as new projects continue to come online and as existing technology improves, develops and matures, offshore wind energy still carries a large amount of risk,” said Jatin Sharma, Head of Offshore Wind, GCube.

“As such, it is the way in which we currently assess project construction and operating risk within the market that continues to require focus. Moreover, while a great deal of lessons have already been learned, it would be foolhardy to think that our understanding of risk ends here.

“At GCube, we underwrite a significant portfolio of offshore wind and work closely with developers and utilities to ensure that the initiatives they are currently constructing, appeal to the secondary investment market in future.”

“If we are to safeguard and secure the future of the offshore wind industry, we must ensure that the assets locked away within it are attractive to investors from the private equity and pension fund communities. Only then can we start to truly achieve the long-term ambitions in offshore wind that the policy makers are really aiming for.”

GCube has underwritten major offshore wind initiatives for almost ten years and has been involved with many of the large Round 1 and Round 2 projects currently in construction or operation.

This tenure and experience has enabled the business to develop a comprehensive understanding of the unique challenges within the market. And, in doing so, help develop a set of solutions that aid the industry in reducing its cost base through improving its risk management practices.

About GCube
GCube is the leading provider of insurance services for renewable energy projects in wind, solar, biofuels and biomass, geothermal, wave, hydro and tidal around the globe.

Its specialized focus and robust underwriting authority offers unparalleled property and liability insurance coverage for all construction and operational risks. With over 25 years’ experience in the renewable energy sector, GCube understands the unique exposures of these power generation projects and assists its clients in identifying, quantifying and mitigating risk efficiently and economically while helping them achieve their business objectives.

To learn more about how we can support your insurance coverage requirements, please visit our website at www.gcube-insurance.com.

The contention comes at a critical time for the North American wind and solar markets, as the use of energy storage facilities gains momentum, despite the high profile battery fire at a small wind farm in 2012.  The total loss to property and the interruption of business is in the vicinity of $30 to $50 million, much of which is addressed by insurance.

While the exact cause of the fire is still under investigation, many expect the precise details of the incident will remain unknown. 

However, what has quickly become apparent is that while it may never be clear exactly how the fire started, the incident went undetected and destroyed the building and its contents because there was no fire detection, alarm and suppression system.

“Given the ambitions by owners and operators to install and operate similar energy storage devices to help better manage the flow of electricity to the grid, this finding is particularly significant,” says John McLane, President, GCube Insurance Services, Inc.

“When managed, maintained and operated effectively, energy storage technology presents a clear and growing opportunity for the wind and solar energy markets.  And, despite the record size of the insurance claim, it’s a technology that we will continue to support and back,” he added.

“However, in order to ensure that such technology remains both viable and effective, an established system of procedures and routine checks need to be regularly carried out, with the system carefully monitored, in order to help mitigate against future industry loss.”

According to GCube, while the establishment and development of these standards will require initial industry investment, without further action, future growth of renewable energy could be further curtailed if there is a repeat of this event.

Fraser McLachlan, Chief Executive Officer, GCube Underwriting Ltd., added, “Make no mistake, our insurance policies are in place to help enhance and protect all forms of renewable energy assets.  A fundamental part of this business is therefore about supporting the industry and paying claims.”

“While the battery fire loss was large and unexpected, that is the very nature of our business.  It’s imperative that we work directly with the market to establish and drive new industry standards, over and above simply having the ability to write a large check.”

With over twenty-five years of experience, GCube currently safeguards and protects over 30,000MW of renewable energy assets currently in operation and under construction around the world.  To date, its experienced, in-house team has paid out in excess of $200 million in claims.

In 2012, GCube secured $175 million in additional construction underwriting capacity to assist the development and evolution of the emerging biomass and geothermal energy markets. 

This, combined with a significant partnership deal struck in 2012 with Munich Re, has seen the business open up new insurance lines and enhance its existing dedicated renewable energy insurance offerings.

About GCube

GCube is the leading provider of insurance services for renewable energy projects in wind, solar, biofuels and biomass, geothermal, wave, hydro and tidal around the globe. 

Its specialized focus and robust underwriting authority offers unparalleled property and liability insurance coverage for all construction and operational risks. With over 25 year’s experience in the renewable energy sector, GCube understands the unique exposures of these power generation projects and assists its clients in identifying, quantifying and mitigating risk efficiently and economically while helping them achieve their business objectives. 

To learn more about how we can support your insurance coverage requirements, please visit our website at www.gcube-insurance.com.

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Erin Gill of Windpower Offshore interviews GCube Head of Offshore, Jatin Sharma March 21, 2013

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