On Tuesday 24th September, GCube held its 3rd Offshore Wind Risk Seminar in London, focusing on how well the industry is ‘facing up to a new risk landscape’. With offshore wind now a major player in the renewable energy market, experts from across the industry attended the event to join the growing discussion around risk trends and opportunities in offshore wind today, as well as the most effective strategies to mitigate these risks.
Fraser McLachlan, CEO of GCube, kicked off the event with a frank overview of the challenges currently being faced in offshore wind insurance, including an emerging ‘claims culture’ and the need for more accountability throughout the supply chain.
In doing so, he introduced our speakers and the key talking points for the day – namely managing investor risks for new technology, new market risks for offshore wind, evolving offshore wind claims, managing Nat Cat exposure, and tackling offshore cyber risk.
Offshore Wind Market Analysis
Fraser then welcomed Tom Harries, Senior Associate at BNEF, who highlighted that offshore wind installations are predicted to be increase rapidly over the next 10 years, from 22GW installed in 2018 to 177GW predicted in 2030. China is set to become the biggest producer of offshore wind energy based on current growth rates.
With increased technological innovations and the uptake of net zero commitments, developmental cost reductions are accelerating, with record strike prices of £39.65 per MWh appearing from the latest UK CfD auctions.
These cost reductions have helped fuel the rapid growth in offshore wind in the US and Asian markets like China, Japan and Taiwan. These new prospects are great opportunities for the industry, but come with a range of new risks that need taking into consideration for offshore renewable energy developers and their supply chains.
Investor Risks & New Technology
Following on from Tom, Rhodri James, Leading Business Developer for Equinor, spoke about investor risks and the new opportunities for floating offshore wind caused by accelerated cost reduction and decarbonisation. By 2050, offshore wind could reach 1TW with floating wind delivering 150GW (15%) of this.
Floating turbines represent an opportunity to build out into greater water depths, further away from shore, whilst simultaneously leading the industry to encounter new logistical hurdles, which will be further compounded by potential vessel shortages and a lack of experience amongst new businesses operating in the supply chain.
Rhodri also continued the industry conversation on Nat Cat risks, highlighting how they can be partially mitigated by improving anchor penetration depths, tracking past hurricane routes and developing offshore wind turbines which can neutralise their blades to shut down generation. However, as Fraser pointed out in his welcome address, it is not yet known if typhoon-class turbines can fully withstand a typhoon as no wind farm has so far been hit by one.
New Market Risks: Asia, Europe & North America
After the coffee break, both Jonathan Wheatley, UK Representative of DEME Offshore, and Tim Mannaerts, O&M Civil Team Lead for Parkwind, spoke on new market risks for offshore wind in Asia, Europe and North America in their presentations, focusing on the challenges facing the industry in these new markets.
With different markets posing different risks, and with no previous experience in markets such as Japan, Vietnam and Taiwan, it is essential for renewable energy developers to collect as much data as possible on environmental conditions, supply chains and other factors that can impact on offshore portfolios.
Claims: Has Offshore Wind Reduced its Risks?
Roy Munoz and Paul Nicholls, Head of Claims and Senior Claims Adjuster at GCube respectively, then took to the stage, revealing how offshore wind claims have changed compared to pre-2016. With contractor error claims and inter array cable and foundation losses on the rise, the industry has seen no evidence of a reduction in risk, with an overall 30% increase in the number of claims post-2016.
Roy and Paul subsequently dissected some examples of costly and complex claims from the sector, pointing to the need for ongoing dialogue and transparency between parties throughout the supply chain.
Following lunch, delegates took part in two in-depth workshops, hosted by members of the GCube team, focusing on managing Nat Cat and cyber risks, respectively.
Could Cyber dwarf Nat Cat?
Despite annual Nat Cat losses accounting for approximately $337bn across all industries, Geoff Taunton-Collins, Senior Analyst at GCube, highlighted how it pales in comparison to the threat of cyber-attacks, which caused annual losses of $1,100bn in 2018, $117bn of which was felt by the energy sector. However, the insurance industry has been slow to respond to this threat with global Nat Cat insurance worth $144bn compared to just $5bn for cyber insurance.
In his presentation on cyber risks, Geoff Taunton-Collins also talked through GCube’s non-damage cyber product, a first-in-market cyber risk coverage for renewables against malicious and non-malicious non-damage events and electronic data liability. This marks a step forward in the insurance industry, with cyber threats becoming increasingly recognised for their impact on insureds.
Thank you to everyone for attended this year’s risk On- and Offshore Wind Risk Seminar. Our programme for next year is now shaping up; watch this space for details as they are confirmed.