Claims for older turbines are creating a pinch in a generally soft market.
RISK REPORT: ENERGY
A Shift in the Wind
As warranties run
out on wind turbines,
insight into their long-
By Gregory DL Morris
Wind energy is all grown up. It is no longer an alternative, but in some wholesale markets has set the incremental cost of generation. As the industry has grown, turbine towers have as well. And as the older ones roll out of their warranty periods, there are more claims.
This is a bit of a pinch in a soft market, but it gives underwriters new insight
into performance over time — insight not available while manufacturers were
repairing or replacing components.
“There is a lot of capacity in the wind market,” said Charles Long, area senior
vice president for renewable energy at broker Arthur J. Gallagher.
“The segment is still very soft. What we are not seeing is any major change in
forms from the major underwriters. They still have 280-page forms. The specialty
underwriters have a 48-page form. The larger carriers need to get away from a
standard form with multiple endorsements and move to a form designed for wind,
or solar, or storage.
“It is starting to become apparent to the clients that the firms have not kept up
with construction or operations,” at renewable energy facilities, he said.
Third-party liability also remains competitive, Long noted.
“The traditional markets are doing liability very well. There are opportunities
for us to market to multiple carriers. There is a lot of generation out there, but the
bulk of the writing is by a handful of insurers.”
Broadly the market is “still softish,” said Jatin Sharma, head of business
development for specialty underwriter G-Cube.
“There has been an increase in some distressed areas, but there has also been
some regional firming. Our focus is very much on the technical underwriting. We
are also emphasizing standardization, clean contracts. That extends to business
interruption, marine transit, and other covers.”
THE BLADE PROBLEM
“Gear-box maintenance has been a significant issue for a long time, and now
with bigger and bigger blades, leading-edge erosion has become a big topic,” said
Sharma. “Others include cracking and lightning and even catastrophic blade loss.”
Long, at Gallagher, noted that operationally, gear boxes have been getting
significantly better. “Now it is blades that have become a concern,” he said.
“Problems include cracking, fraying, splitting.
“In response, operators are using more sophisticated inspection techniques,
including flying drones. Those reduce the amount of climbing necessary, reducing
risk to personnel as well.”
Underwriters certainly like that, and it is a huge cost saver to the owners,
however, “we are not yet seeing that credited in the underwriting,” said Long.
He added that insurance is playing an important role in the development of
renewable energy beyond the traditional property, casualty, and liability coverages.
“Most projects operate at lower capacity than anticipated. But they can
purchase coverage for when the wind won’t blow or the sun won’t shine.
“Weather risk coverage can be done in multiple ways, or there can be an actual
put, up to a fixed portion of capacity, plus or minus 20 percent, like a collar; a
As useful as those financial instruments are, the first priority is to get power
into the grid. And for that, Long anticipates “aggressive forward moves around
storage. Spikes into the system are not
good. Grid storage is not just a way of
providing power when the wind is not
blowing; it also acts as a shock absorber
for times when the wind blows too
hard. There are ebbs and flows in wind
and solar so we really need that surge
Long noted that there are some
companies that are storage only.
“That is really what the utilities are
“Most projects operate
at lower capacity than
anticipated. But they can
purchase coverage for when
the wind won’t blow or the
sun won’t shine.”
—Charles Long, area senior vice president for
renewable energy, Arthur J. Gallagher
• As older turbines run out of
warranty, claims are increasing.
• Blade damage and failure is now
a primary concern.
• Manufacturer consolidation has
increased standardization of parts.