Green Energy – Red Results for Insurers? - R+V Versicherung
Green Energy – Red Results for Insurers? - R+V Versicherung
Green Energy – Red Results for Insurers? - R+V Versicherung
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For internal use only<br />
Dieter<br />
Schimana<br />
Risikoberatung und Schadenmanagement<br />
<strong>Green</strong> <strong>Energy</strong> <strong>–</strong> <strong>Red</strong> <strong>Results</strong> <strong>for</strong> <strong>Insurers</strong>?<br />
A new look at risks of wind power offshore <strong>–</strong> some examples<br />
For internal use only
For internal use only<br />
◙ This presentation contains solely the personal opinion of the<br />
speakers.<br />
27. September 2012<br />
Disclaimer<br />
◙ Aim of the presentation is to show some insights into the risks of<br />
offshore wind farms during erection and operation.<br />
◙ Explanations and advice are not to be considered as legal advice<br />
and do not constitute any individual assessment of each offshore<br />
project.<br />
◙ These documents are <strong>for</strong> your internal use only. Any legal rights<br />
such as copyrights, remain with the authors.<br />
◙ Use of the in<strong>for</strong>mation contained is on the sole risk of the user.<br />
◙ The speakers are in no case liable <strong>for</strong> any loss or damage<br />
resulting from the use of this in<strong>for</strong>mation.<br />
Axel Wensch Dieter Schimana<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
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For internal use only<br />
© EnBW Baltic I<br />
27. September 2012<br />
© Bard offshore<br />
Offshore Wind<br />
© Bard offshore<br />
© DOTI Alpha Ventus<br />
© DOTI Alpha Ventus<br />
© EnBW Baltic I<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
http://www.ict-aeolus.eu/about.html<br />
© DOTI Alpha Ventus<br />
3<br />
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27. September 2012<br />
Offshore Wind in General<br />
Potential business <strong>for</strong> insurers in Germany<br />
Stiftung Offshore Windenergie 2007:<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
4<br />
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◙ Actual wind power installed offshore < 250 MW<br />
◙ Expected capacity until 2022: 10,000 MW<br />
Installation per year ~ 1,000 MW<br />
Investment cost ~ 3,500 EUR/kW<br />
Investment cost p. a. ~ EUR 3 to 4 Bio.<br />
◙ Potential Premium:<br />
During erection ~ EUR 50 Mio. p.a.<br />
During operation + EUR 25 Mio. p.a.<br />
Potential Premium in 2022 > EUR 250 Mio.<br />
◙ Plus Grid Connections ~ 25 %<br />
27. September 2012<br />
Offshore Wind in General<br />
Potential business <strong>for</strong> insurers in Germany<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
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high<br />
rate<br />
Low<br />
rate<br />
27. September 2012<br />
Offshore Wind in General<br />
Cost of Credit vs. Total Cost of Risk<br />
Low risk<br />
… A+<br />
<strong>Red</strong>uction of risk<br />
by risk allocation and<br />
insurance<br />
Risk assessment of the project High risk<br />
BBB- C…<br />
Rating<br />
purchase price<br />
Insurance cost<br />
Additional margin<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer? 6<br />
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◙ Construction/Erection: No EPC contracts <strong>for</strong> the whole wind farm<br />
Interface risk to be transferred to C/EAR insurers<br />
World wide cover <strong>for</strong> all premises used during manufacturing, assembling,<br />
transportation, pre-storage, installation and commissioning<br />
◙ New Technology<br />
27. September 2012<br />
Offshore Wind in General<br />
Project Finance Being the Driver of Broad Insurance Solutions<br />
Some of the risk elements of offshore wind and how to deal with them:<br />
Full defective parts cover expected in conjunction with warranties and<br />
extended service contracts<br />
◙ Weather conditions<br />
Additional budget <strong>for</strong> CAPEX and OPEX compared to insurance cover<br />
◙ Grid connection<br />
Not part of the offshore wind farm but high vulnerability regarding Business<br />
Interruption<br />
◙ Lead time of spare parts<br />
Long indemnity periods necessary<br />
◙ Revenue <strong>for</strong>ecast<br />
Conservative assessment in terms of lenders‘ view (P90) demand high<br />
percentage of additional liability to meet revenue achieved (P75)<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
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27. September 2012<br />
Offshore Wind <strong>–</strong> Construction / Erection<br />
Multi Contract Approach<br />
No EPC contracts <strong>for</strong> the whole wind farm<br />
◙ Wind turbine developers with onshore experience<br />
No experience with water linked erections sites<br />
No experience in offshore risks<br />
No marine technologies<br />
◙ Construction companies with offshore experience<br />
No experience in wind industry<br />
◙ Oil & Gas is a competitor<br />
No interest in “small” wind turbine business?<br />
Higher fees and salaries<br />
◙ No readiness to support offshore EPC contracts<br />
Interface risk to be transferred to C/EAR insurers?<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
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Several interfaces to be managed by the Principal<br />
◙ Foundations<br />
◙ Cables<br />
27. September 2012<br />
Offshore Wind <strong>–</strong> Construction / Erection<br />
Project Management is Key<br />
◙ Wind turbines<br />
◙ Offshore plat<strong>for</strong>m <strong>for</strong> the grid connection<br />
Interface to • Turbine<br />
• Cable<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
Interface to • Foundation<br />
• Turbine<br />
• Offshore plat<strong>for</strong>m<br />
Interface to • Foundation<br />
• Cable<br />
Interface to • Foundation<br />
• Cable<br />
• Grid connection<br />
Interface protocols have to be part of the underwriting in<strong>for</strong>mation<br />
Risk management support of insurers supports “black results”<br />
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27. September 2012<br />
Offshore Wind <strong>–</strong> Construction / Erection<br />
Project Management is Key, but …<br />
Risk management support of insurers supports the “black results”<br />
But Risk Management will not avert losses through<br />
◙ Contract uncertainty<br />
◙ Insolvency of Contract Partners<br />
◙ “unknown Unknowns”<br />
◙ …<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
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27. September 2012<br />
Offshore Wind <strong>–</strong> New Technology<br />
Some Differences to the Onshore Technology<br />
Differences in surrounding conditions<br />
◙ Load Factor<br />
Onshore 30% vs. Offshore up to 50%<br />
◙ Additional stress factors<br />
Tidal Current, Waves add up with internal dynamics and wind<br />
◙ Corrosion protection<br />
Salty Atmosphere and High Humidity<br />
◙ New Technology<br />
Size, Weight, …<br />
Can onshore technology work offshore without changes?<br />
How to deal with new players going offshore directly?<br />
What are the challenges of 10 MW turbines?<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
11<br />
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For internal use only<br />
27. September 2012<br />
Offshore Wind <strong>–</strong> New Technology<br />
Some Examples how it works<br />
Who is taking the responsibility?<br />
◙ Different types of foundations<br />
◙ How to deal with the dynamics?<br />
◙ How to protect against the salty atmosphere?<br />
◙ How to deal with new players and new turbine size?<br />
Extended warranties are necessary <strong>for</strong> full insurance cover<br />
Technical expertise of insurers supports the “black results”<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
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For internal use only<br />
27. September 2012<br />
Offshore Wind <strong>–</strong> New Technology<br />
Some Examples how it works, but …<br />
Technical expertise of insurers supports the “black results”<br />
But any expertise will not avoid losses through<br />
◙ Failures in Design and Material<br />
◙ Run out Warranties<br />
◙ Insolvency of Contract Partners<br />
◙ New Risks nobody has in Mind yet<br />
◙ …<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
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Floating equipment instead of land based equipment<br />
◙ Onshore basis<br />
Lay down areas<br />
Pre-assembling area and facilities<br />
◙ The marine spread<br />
Installation vessels/cranes/barges<br />
Traffic control<br />
◙ Weather windows<br />
Significant wave height<br />
Wind / storm<br />
◙ Service during operation<br />
27. September 2012<br />
Offshore Wind <strong>–</strong> Weather Conditions<br />
Challenges during Erection and Operation<br />
How to get the service team to the turbines?<br />
How to change components of the turbines?<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
© Trianel Borkum West<br />
14<br />
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27. September 2012<br />
Offshore Wind <strong>–</strong> Weather Conditions<br />
Early Contracting and Weather Forecast are Key<br />
Enough buffer supports success<br />
◙ No just-in-time production<br />
◙ Availability of floating equipment<br />
◙ Responsibility <strong>for</strong> weather conditions<br />
◙ Extended service contracts<br />
Weather delays only insurable after substantial time buffer<br />
Project management to be supported by BI-<strong>Insurers</strong><br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
© EnBW Baltic I<br />
15<br />
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27. September 2012<br />
Offshore Wind <strong>–</strong> Weather Conditions<br />
Early Contracting and Weather Forecast are Key, but …<br />
Project management to be supported by BI-<strong>Insurers</strong><br />
…once the Loss is there, Project Management will not diminish Risk of<br />
◙ High Cost of Offshore Equipment<br />
◙ Weather related delays<br />
◙ No or Poor Repair Strategy<br />
◙ …<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
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Four Clusters within the German Bight <strong>for</strong> about 10 GW<br />
◙ BorWin<br />
BorWin 1 (400 MW) / BorWin 2 (800 MW)<br />
BorWin 3 and 4 to be developed<br />
◙ DolWin<br />
DolWin 1 (800 MW) / DolWin 2 (900 MW)<br />
DolWin 3 and 4 to be developed<br />
◙ HelWin<br />
HelWin 1 (576 MW) / HelWin 2 (690 MW)<br />
HelWin 3 and 4 to be developed<br />
◙ SylWin<br />
SylWin 1 with 864 MW<br />
SylWin 2 to be developed<br />
◙ Further single wind farm connections<br />
27. September 2012<br />
Offshore Wind <strong>–</strong> Grid Connection<br />
TenneT is responsible <strong>for</strong> most of them<br />
New Technology due to long distance<br />
Onshore connection at<br />
TenneT Substation Dörpen/Diele<br />
Onshore connection at<br />
TenneT Substation Büttel<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer? 17<br />
http://www.tennettso.de/site/netzausbau/de/offshore-projekte<br />
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Offshore Wind <strong>–</strong> Grid Connection<br />
Double Sockets in the German Bight?<br />
No Provision is made <strong>for</strong> the vital connecting cable yet to<br />
make the huge Contingency Risk insurable:<br />
Stiftung Offshore Windenergie 2007<br />
27. September 2012 <strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
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Insurance solution <strong>for</strong> outage of Grid Connection to<br />
be developed<br />
◙ AC connection to the offshore plat<strong>for</strong>m<br />
◙ HVDC/AC technology<br />
◙ Long distance cable connection to onshore<br />
© Marsh<br />
◙ New draft law: Liability of Grid Operators <strong>for</strong> Grid-Availability<br />
27. September 2012<br />
Offshore Wind <strong>–</strong> Grid Connection<br />
New Technology and New Liability<br />
German Government expects insurers to introduce cover <strong>for</strong> grid losses<br />
What’s the right combination of deductible, TPL cover and BI cover?<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
Only single<br />
line<br />
connections<br />
No spare<br />
capacity or<br />
second line<br />
support<br />
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27. September 2012<br />
Offshore Wind <strong>–</strong> Grid Connection<br />
New Liability <strong>–</strong> Limits of Insurability<br />
German Government expects insurers to introduce cover <strong>for</strong> grid losses<br />
Grid Losses are likely to be passed on to electricity consumers.<br />
Due to huge PML <strong>Insurers</strong> will probably concentrate on<br />
◙ Property Risk of new Grid Technology<br />
◙ Single Windfarm or single grid connection risks<br />
◙ …<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
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27. September 2012<br />
Offshore Wind <strong>–</strong> Spare Parts<br />
Lead time assessment <strong>for</strong> BI Insurance<br />
Serial production of wind turbines supports spare part supply<br />
◙ Main turbine components supply<br />
Power train two weeks?<br />
Set of blades two weeks?<br />
Electrical equipment two weeks?<br />
Tower three month?<br />
Foundation three month?<br />
◙ Sea cables<br />
power cable six month?<br />
Cable joints one month?<br />
◙ Offshore plat<strong>for</strong>m and substation<br />
Main trans<strong>for</strong>mer 12 month?<br />
Full plat<strong>for</strong>m 18 month?<br />
Strategic spare part<br />
agreement necessary<br />
Individual per project<br />
Spare cable length<br />
and cable joints to<br />
be stored <strong>for</strong> the<br />
project<br />
Standardization needed<br />
Individual construction<br />
Not only availability of spare parts is key to define indemnity period<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer? 21<br />
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27. September 2012<br />
Offshore Wind <strong>–</strong> Spare Parts<br />
Availability of installation equipment<br />
Main Component exchange needs heavy lift equipment<br />
◙ Onboard cranes on turbines<br />
Limited capacity (e.g. 2.5 tons)<br />
Repair friendliness of components is limited<br />
◙ Weight is driving the vessel size<br />
Rotor ~ 25 tons<br />
Gear ~ 60 tons<br />
Nacelle > 200 tons<br />
◙ Mobilization time can be very long<br />
Clear definition of responsibility<br />
Reservation agreement<br />
◙ Weather conditions can limit access<br />
Service staff located at the wind farm<br />
Transfer by ship or by helicopter<br />
Heavy lift vessels are limited by wave height<br />
Clear service concept backed by sustainable contracts is key<br />
Very limited influence after signing of EPC contract<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
Additional availability<br />
guarantee of manufacturer<br />
Change of components not<br />
possible on all turbines<br />
Service contractor or wind<br />
farm operator<br />
Solutions depend on<br />
distance to shore as well<br />
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27. September 2012<br />
Offshore Wind <strong>–</strong> Spare Parts<br />
… and the Limits<br />
Clear service concept backed by sustainable contracts is key<br />
Even with good service concept, the remaining risk calls <strong>for</strong><br />
adequate Policy Conditions:<br />
Limited<br />
◙ Availability of Offshore Equipment<br />
◙ Repair Options Offshore<br />
(on some Turbines Usually Exchange of Nacelle)<br />
◙ Availability of Spare Parts once Construction Boom is over<br />
◙ Access of Maintenance and Repair Crew<br />
◙ …<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
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Sum insured <strong>for</strong> BI-Insurance<br />
◙ P75<br />
◙ P90<br />
Investors want to gain the up-site,<br />
but capacity drives the premium<br />
Minimum requirement as<br />
Lenders are looking <strong>for</strong> security<br />
◙ Experience<br />
50 % load factor are achievable in German Bight<br />
27. September 2012<br />
Offshore Wind <strong>–</strong> Revenue of the Wind Farm<br />
Conservative vs. progressive approach<br />
0,6<br />
0,55<br />
0,5<br />
0,45<br />
0,4<br />
Load factor<br />
0,35<br />
50 60 70 80 90 100<br />
Example <strong>for</strong> Probability of Success [%]<br />
Due to high BI-Premium clients ask <strong>for</strong> sum insured on P90<br />
Automatic increase clause to cover P75<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer? 24<br />
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For internal use only<br />
27. September 2012<br />
Offshore Wind <strong>–</strong> Revenue of the Wind Farm<br />
Revenue of the Windfarm<br />
Automatic increase clause to cover P75<br />
What does that mean in terms of Euros?<br />
◙ Standard Plant Capacity 400 MW<br />
◙ Load Factor 47.5 %<br />
◙ Annual Production 1,6644 GWh/a<br />
◙ Feed-in Tariff 190 EUR/MWh<br />
◙ Revenue 316m Euro/a<br />
◙ Indemnity Period at least 18 month<br />
◙ Needed Capacity <strong>for</strong> BI ~ 500m Euro<br />
◙ …<br />
<strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
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Thanks <strong>for</strong> Listening<br />
Axel<br />
Wensch<br />
Dieter<br />
Schimana<br />
Lorens-de-Hahn-Straße 29<br />
25980 Sylt OT Westerland<br />
email: DSchimana@aol.com<br />
Contact Axel Wensch<br />
Immermannstraße 23<br />
40210 Düsseldorf<br />
email: info@teko-duesseldorf.de<br />
Telefon:<br />
Fax:<br />
Mobil:<br />
Contact Dieter Schimana<br />
Fon:<br />
Fax:<br />
Mobil:<br />
+49 211 38 516 0<br />
+49 211 38 516 20<br />
+49 172 299 87 37<br />
+49 46 51 33 82 835<br />
+49 46 51 94 29 047<br />
+49 17 22 44 22 01<br />
27. September 2012 <strong>Green</strong> <strong>Energy</strong> - <strong>Red</strong> <strong>Results</strong> <strong>for</strong> Insurer?<br />
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