2016 ushered in a milestone moment - wind farms generated more electricity than coal for the first time in the UK's history. With greater scrutiny focused on how our energy is produced, the UK has seen considerable growth in renewable power. A combination of closures of coal plants and government incentives to introduce wind energy alternatives are key factors behind this. In 2016, carbon emissions dropped by 20% when compared to the previous year. As coal production is slowly being phased out, the emphasis on energy generated by wind power will continue to grow as an alternative, cleaner and less polluting energy source.
However, there is still a long way to go with questions still remaining regarding reliability and production capacity.
The lack of continuous wind is the main concern regarding the further implementation of this technology. From the business interruption perspective, production from sources such as coal is currently more reliable and therefore does not have this issue. As there is not an easy solution to this, we need to equally focus on alternative energy production such as solar, geothermal and wave and tidal. Whilst still producing clean energy, this can fill the void for energy production when there is a downturn in wind.
The next phase of wind development is therefore heavily focussed on energy storage. The ability to store energy produced by wind power when there is excess and releasing this when a lack of wind is preventing production is seen as a key component of successfully replacing fossil fuels.
As the technology has evolved, the insurance industry has seen large reductions in pricing with underwriters more comfortable with the risks. Rates have been declining year on year as the wind power industry has become more developed and the technology more reliable, which has decreased related installation costs. The price of building wind farms is also reducing, which is largely due to the number and size of wind farms being built, leading to economies of scale from suppliers.
In this changing landscape it is vital for wind developers to understand the importance of taking the correct level of cover and correctly valuing the sums insured for revenue, damage and catastrophe. An insurance broker has a fundamental role in educating clients on how to manage and mitigate their risk. Establishing the correct level of cover that is required is key to making sure companies transfer the appropriate amount of risk and are not left with a potential hole in their balance sheet from inappropriate or insufficient insurance cover.
GCube have been a leading renewable energy underwriter for over 25 years and senior underwriter, Charlie Richardson comments “the technology has evolved and become generally more reliable resulting in the inevitable squeezing of margins, but we equally need to stay abreast and compliment the need for innovation in the industry. By running regular risk management seminars and workshops, your broker and underwriters can add valuable insight sharing their knowledge on the challenges faced from their contemporaries, mitigating their own risk exposures in order to contribute to the successful operation of wind farms.”
Richardson adds “the news that windfarms in the UK generated more electricity than coal in 2016 is not just a sign that the inevitable has finally taken place, but also the dawn of a new generation of mixed-asset based power generation with sustainability at its heart”.
Without the active support of insurance, wind projects would potentially struggle to gain the financial support they require to grow and develop. It is therefore essential to create a close working partnership between the wind energy producers and their brokers to ensure appropriate risk management is always in place to continue the rising growth of this field.
If you are interested in receiving invites to our forthcoming power workshops, please do not hesitate to send me an email.
For further information, please contact Jonny Martin, Account Handler, Renewable Energy on +44 20 7558 3905 or email firstname.lastname@example.org