Europe’s largest onshore wind farm was officially switched on at the end of May. Developers ScottishPower Renewables said the Whitelee wind farm’s 140 turbines, near Glasgow, will produce enough electricity to power 180,000 homes.
The utility has already lodged plans to expand the £300m development on Eaglesham Moor in East Renfrewshire by adding a further 81 turbines to the site.
“This is now the first over 300 megawatt (MW) wind farm in the United Kingdom and we believe others will follow,” ScottishPower Renewables director Keith Anderson told the BBC.
Growth prospects for wind power
The growth prospects for wind power in Europe are excellent, experts say.
“Consider that in 2008, more wind power capacity was installed in Europe than any other electricity producing technology", says Alex Lumby, chief executive of Lloyd’s specialist insurer Ascot Renewco. “In fact 43% of all new capacity was wind, 35% was gas, 13% oil, 4% coal and 0% nuclear,” he points out.
All EU countries now have a legally binding renewable energy target which is enshrined by EU law. This is part of the EU's 20-20-20 climate and energy package which includes a 20% reduction in CO2 emissions and a 20% improvement in energy efficiency by 2020, Mr Lumby explains.
Some countries are doing better than others. Britain, for example, has the largest wind energy ‘resource’ in Europe, of somewhere between a quarter and one third of the total. But at the end of 2008 with 3,200MW of installed capacity, Britain was ranked only fifth in Europe, behind Germany (24,000MW), Spain (17,000MW), Italy (3,700MW) and France (3,400MW).
“But the UK government only recently passed legislation to encourage the quicker deployment of wind farms,” Mr Lumby says. “And the UK leads the world in the development of offshore wind technology.”
Plans for an integrated European electricity network infrastructure to exploit the continent’s large offshore wind resource are now underway in Europe.
Clean energy insurance
None of these clean energy projects can get off the ground without insurance and Lloyd’s companies have proved to be a reliable risk transfer resource through the development of bespoke wind power risk products.
But insuring a wind farm is different to any other big civil engineering project and brings its own challenges, according to Fraser McLachlan, chief executive of GCube, a provider of insurance services for renewable energy.
“You have more complicated warranty issues with windfarms and it is imperative to understand how these interact with the insurance policies,” McLachlan explains. “Moreover, the technology is advancing at such a rate that it is sometimes difficult to keep up with the advances. Insurers can sometimes end up writing manufacturers’ R&D risk if they’re not careful.”
The most important insurable risks facing a windfarm once it’s switched on is equipment breakdown and external damage from perils such as lightning.
“The ability of an insurance policy to make the insured whole again, especially following lost revenue during turbine downtime is critical,” McLachlan says. “This is even more important during the warranty period when availability guarantees may not be triggered.”
Offshore construction
Offshore projects are more expensive to construct than onshore windfarms and they are inherently more risky when operating.
In the early days there were reliability issues, with key components such as gearboxes and generators failing, for example. More recently there have been technical problems leading to cable claims.
“What's more interesting is that there has been a lot of naive [insurance] capacity thrown at the offshore wind market, probably attracted by the relatively high premiums in comparison to onshore projects. “Time will tell if these new players have got it right or badly wrong, as we have sometimes seen in the past,” McLachlan says.
Ascot Renewco and Lloyd's invite you to attend a seminar on the key economic issues surrounding renewable energy. Experts will discuss how the growth of this sector has been impacted by the current global financial crisis and the risks and opportunities renewable energy projects present for the insurance industry.
Speakers include Dr Ian Mays MBE, CEO of Renewable Energy Systems, Prof Leon Freris, Professor of Renewable Energy and Charlie Field, Head of Operations of marine engineering specialists SeaRoc
Date: 3 June 2009
Time: 09.00 - 11.30
Location: Lloyd's - The Old Library
Tea, coffee and pastries will be served
RSVP: jenny.love@ascotuw.com
