Technical Topic: Tackling Turbine Fires

 

Towering Inferno cover smallGCube is pleased to announce the launch of its latest report, Towering Inferno for its brokers and insureds. The December 2015 publication uses GCube’s proprietary claims data and publicly available news sources to quantify the financial and wider market impacts of wind turbine fires, offering strategies for mitigating fire risks. Here, Jatin Sharma, Head of Business Development and author of the report, explores the reputational impact that a turbine fire can have on a wind farm owner.

In October, a Nordex wind turbine caught fire at the Midtfjellet wind farm in Norway. It was a project owner’s nightmare, combining the loss of an expensive asset, lengthy and costly downtime, and an inevitable flurry of negative media attention.

Unfortunately, as the wind energy industry grows, so too does the potential for fire incidents to damage its standing as a low-risk, investment grade sector. Although turbine fires are relatively infrequent – around 50 each year across a 300,000-strong international fleet of wind turbines (a rate of 1:6000) – when they do occur, they cause project owners, and their insurers, a disproportionate amount of trouble. There are a number of reasons for this.

Firstly, despite the increasing use of fire suppression throughout the industry, turbine fire incidents typically result in the total or near-total loss of a multi-million dollar asset. Indeed, GCube estimates that a wind turbine fire and its associated downtime will cost a project owner a total of $4.5 million on average.

As the operators of sites like Midtfjellet have discovered, it takes time to identify the root cause of a turbine fire, during which period the wind farm is typically taken offline and energy production levels remain at zero. Naturally, this results in severe financial repercussions for projects, which not only suffer the loss of a multi-million dollar turbine, but then also see profits fall considerably for the duration of the resulting downtime. On average, GCube estimates that total downtime for a turbine damaged or destroyed by fire is around 9 months.

The financial impact of such downtime is exacerbated by long-term reputational damage, not only leading to strained relationships with investors and OEMs, but also affecting public perception of safety and reliability standards in the industry at large. Turbine fires are greatly outnumbered by problems relating to blades and gearboxes, yet media scrutiny driven by the anti-wind lobby – and the dramatic appearance of incidents – has resulted in a disproportionate amount of negative national and international news coverage on turbine fires.

Concerns about the safety of wind turbines have been fuelled further by recorded incidents of bush fires sparked by burning debris from turbine fires in high-risk locations such as South Australia and California. As the wind industry grows, projects are increasingly being built in remote, forested regions of North America and Europe, and, consequently the risk of forest fires becomes much higher.

These fires can cause significant damage to the surrounding area, as well as to the wind farm itself. A few years ago, for example, a Gamesa turbine caught fire at Infigen’s Kumeyaay Wind Farm located on the Campo Indian Reservation in San Diego. The fire occurred after a heavy storm and caused a bush fire in the immediate surroundings. As well as damage to the surrounding environment, the wind farm suffered so much damage that all 25 turbines had to be replaced.

From an insurance perspective, it’s hard to ignore the commercial implications that this combination of factors has for stakeholders in wind energy projects. A history of high-profile incidents demonstrates that a more rigorous approach needs to be taken by the industry towards turbine fires, both in terms of preventative maintenance procedures and the implementation of active fire protection, detection and suppression systems.

In response, GCube recently published a report named Towering Inferno for its insureds and brokers. This report seeks to promote industry collaboration by quantifying both the financial and wider market impacts of a turbine fire, using a combination of proprietary claims data and publicly available news sources. It explains the main causes of turbine fires and offers strategies for mitigating fire risks.

The majority of turbine fires occur in the nacelle – the fibreglass housing for the major components such as the gearbox, generator and other parts of the drive train. The nacelle is connected to the rotor, converting rotational energy into three phases of AC electrical energy. As in a car, when highly flammable materials and electrical components are packed closely together, the chances of combustion are significantly higher. Increased oxygen supply, faulty parts and overheating can all spark a fire – which, once ignited, is difficult to extinguish.

The second most likely place for a fire to occur is in the control cabinet at the base of the tower, containing a large proportion of the electrical monitoring equipment. Further to the inherent fire risk in both the nacelle and control cabinet, the failure of operators to undertake sufficient due diligence based on maintenance checks is an increasing cause of concern for insurers.

As well as failure to pre-empt a fire from faulty or defective equipment, operating wind farms outside of their design parameters has been noted as a significant contributor to fires. This is especially noticeable in warmer climates, where narrow temperature thresholds can be exceeded for cables, transformers, nacelle components and the control cabinet.

Currently, there are no requirements under law to implement fire detection and control measures in new wind turbines. In light of this, it is important that wind farm owners and developers create their own fire-emergency plans to satisfy investors and the wider community. Larger wind farm developers tend to have stringent fire detection and mitigation procedures in place as standard, but ideally these should be implemented as part of a best practice approach across the industry.

As highlighted by the recent GCube report, there are several measures that can be taken to mitigate the risk of turbine fires on a wind farm, not least frequent maintenance checks, lightning protection systems, radiant barriers and condition monitoring systems (CMS). Moreover, if a fire does occur, there are several measures that can be taken to minimize its impact, such as the installation of fire detection systems and suppression systems.

The report also goes into some detail about best practice in dry, hot climates, where extra measures should be taken to mitigate the increased risk of turbine fires leading to bush fires. These include the installation of firebreaks and maintaining a supply of physical firefighting equipment on site.

The wind industry as a whole must confront the physical and reputational risks of turbine fires. As part of our goal to achieve investment grade renewables, we need to address the causes and consequences of these incidents, and as a community, recognise that they affect each company in the industry, rather than ‘affecting our competitors’. Although infrequent, the substantial financial severity of incidents remains a key contributor to construction and operation cost overruns.

Furthermore, while the vast majority of renewable energy losses escape the attention of the international media, it seems that, every few weeks, a turbine fire makes the headlines, fueling the negative campaigns of anti-wind lobbying groups.

GCube’s long-standing and extensive experience as the only dedicated renewable energy underwriting specialist has helped us avoid writing specifics OEMs. Some of these have demonstrated batch production and, on occasion, serial issues leading to turbine fires as well as other failures covered in GCube’s proprietary reports.

However, coverage is still readily available as carriers try to piggy back off inexperienced lead underwriters fattening up before an acquisition, or reinsurers in consortiums or quota share placements, notably for European offshore, Latin American and South African renewable energy projects – right at the time when the market should have started to harden.

The industry needs to promote collaboration and best practices that minimize balance sheet losses, and insurance claims. Turbine fires will inevitably occur now and again, but, in order to satisfy increasingly risk-averse lenders and the insurance industry, more needs to be done to keep the number of incidents to a minimum.

GCube’s brokers and insureds can request a copy of Towering Inferno by emailing info@gcube-insurance.com.