The total capital value of wind farms worldwide has reached approximately £1.9 trillion*, according to new study from global specialty (re)insurance group Chaucer. The transition from coal and oil-based energy generation to low carbon energy sources such as wind and solar farms has required an unprecedented level of investment in infrastructure.
Chaucer says that with so much capital invested in clean energy assets it is vital that those windfarms and solar farms are adequately insured. Greater levels of insurance cover could expedite the flow of capital from investors into the clean energy sector.
Offshore wind farms in tropical and subtropical regions, such as those on the US Eastern Seaboard and in Southeast Asia, can find it harder to get competitive insurance cover. Those regions suffer higher risk from tropical storms such as hurricanes and typhoons, as climate change increases the impact of these weather events. Ironically one the biggest threats to windfarms is from more severe weather caused by climate change.
Older windfarms and windfarms with larger turbine sizes can also find it harder to get the most cost-effective insurance cover.
A recent study found that even by 2017 natural events were the largest global contributor to wind turbine accidents, beating human factors or mechanical failures. Strong wind was the leading cause of damage causing 32 incidents, followed by lightning, which is increasingly frequent in more intense storms, with nine incidents.
In February 2022 a £20 million turbine in South Wales collapsed during record high winds produced by Storm Eunice, while a recent sandstorm in Dubai caused $200 million worth of damage to solar facilities in the region. These are just two examples of the damage inflicted by extreme weather on renewable energy projects.
The unpredictability of weather patterns made more extreme by climate change and the inability to test renewable assets in those conditions make it more difficult to model the risk posed to wind and solar farms. An aggregating factor is that these projects are typically built in sparsely populated regions where weather event data is limited, especially for secondary perils such as Severe Convective Storm (notably hail and lightning strike).
Alex Nelson, Class Underwriter at Chaucer specialising in renewable energy projects, says: “Wind farms are facing a growing threat from the new normal of extreme weather caused by climate change.”
“At the same time some of the global windfarm stock is reaching the end of its originally intended lifespan which makes those windfarms more vulnerable and more costly to insure.”
“The surge in construction activity combined with cost inflation over the last two years has pushed up the cost of building, maintaining and repairing damaged windfarms.”
*The research is based on build costs and output of 100 of the world’s biggest wind farms. The results of this analysis have been applied to the global installed wind power capacity of 899,000 MW (International Renewable Energy Agency).
