Research identifies challenges for onshore and offshore wind projects over the coming year

07 June 2017

  • Research reveals three in five wind projects are reducing risk exposure by limiting number of contractors

  • A quarter of projects have underestimated the cost of operational expenditure, leading to concerns of a significant impact on the bottom line

A report launched today by wind consultancy K2 Management and specialist insurance broker, JLT Specialty Ltd., has identified the key challenges and trends that will shape the future of onshore and offshore wind projects over the next twelve months.

Launched at the Offshore Wind Conference 2017 in London, ‘Reducing The Levelised Cost of Energy: Challenges, trends and opportunities in today’s wind projects for tomorrow’s business cases’ reviewed data from sixty onshore and offshore projects throughout Europe and Latin America.

The project clients varied from independent developers, state-owned utilities and private investors, giving a broad view of the challenges and opportunities facing the sector from a variety of different perspectives. 

The key findings from the report include: 

  • A quarter of wind projects are looking to extend the life of their project – potentially by a further five years. Currently, twenty-five years is considered to be an achievable lifespan for an offshore project, but thirty years may be an achievable target. This news will be welcomed by developers and investors who, given the high cost of developing wind projects, are increasingly keen to optimise their return on investment.

  • Developers are taking action to reduce their risk exposure on projects, with 60% of pre-construction offshore projects adopting five or less Engineering, Procurement, Construction and Installation (EPCI) contracts. Limiting these contracts could potentially reduce the costs of projects overrunning and the likelihood of a knock-on effect on other contractors as a result.

  • A quarter of projects had underestimated the costs of operational expenditure, leading to concerns that this could have huge implications on performance and valuation of the project further down the line. Many of the projects that were surveyed had not yet reached the twenty-year lifetime, and so much of the project budgeting was based on educated assumptions, but there was real concern that these underestimations could up the costs of projects by millions.

Simon Luby, Global Head of Due Diligence at K2 Management, said: “This report gives an opportunity for the industry to gain an insight into real wind projects in the bigger picture, and our experts have used this data to deliver insight into how these trends will reflect on the projects of the future.” 

“As a technical consultancy, we are on the forefront of projects at all stages of the lifecycle, supporting clients through the challenges and opportunities that they face in making their projects a success. Some of these trends will be familiar but this report offers foresight and anticipated future trends based on real project experience and expertise.”

Duncan Gordon from JLT Specialty’s Renewable Energy team, said: “This insight we’ve jointly provided on a number of common trends materialising in the wind sector will be of familiarity and interest to all in the industry.” 

“Our client first strategy and specialist focus ensures our clients are informed and expertly advised of the insurance and risk implications of relevant emerging trends within the wind sector. Competition, adaptation and development are crucial for businesses to thrive and supporting our clients to succeed in this process is one of our key aims.”

The full report features legal commentary from Eversheds Sutherland.

Download Report 

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ENQUIRIES:

JLT 

Corinne Gladstone, PR Manager | JLT Group | Email: corinne_gladstone@jltgroup.com | Tel: +44 (0)20 7895 7705 | Mobile: +44 (0)7799 340658

K2 Management

Jo Clarkson, Content Manager and Communications Specialist | K2 Management | Email: jcl@k2management.com | Tel: +44 (0) 7824 156 451 

About K2 Management

K2 Management supports its clients in their efforts to develop, improve and optimize wind projects to achieve the best possible return on their investment. Our global advisory and service offerings within wind project management and planning, risk and opportunity management make K2 Management a unique wind project consultancy covering the entire value chain; from the earliest phases of planning and development, to the actual construction and maintenance of wind projects. 

K2 Management is headquartered in Denmark with 10 global offices and accumulated our experienced team has been involved in more than 1,000 wind projects – both onshore and offshore – in over 30 countries. www.k2management.com 

About Jardine Lloyd Thompson Group

Jardine Lloyd Thompson (JLT) is one of the world’s leading providers of insurance, reinsurance and employee benefits related advice, brokerage and associated services. JLT is quoted on the London Stock Exchange and owns offices in 41 countries with more than 10,600 employees. Supported by the JLT International Network, it offers risk management and employee benefit solutions in 135 countries.

About JLT Specialty 

JLT Specialty Limited (JLT Specialty), part of Jardine Lloyd Thompson Group, is a specialist insurance broker and risk consultant, providing market leading industry knowledge and expertise in specialist fields to some of the world's largest companies.

The company provides wholesale and retail insurance broking, risk management and claims consulting services in areas where it can make a difference.

JLT Specialty’s client proposition is built upon its deep specialist knowledge, client advocacy, tailored advice and service excellence.

JLT Specialty Limited is a Lloyd’s broker and is authorised and regulated by the Financial Conduct Authority. 

For more information about JLT visit www.jltspecialty.com and www.jlt.com