Lockton Specialise in Renewable Energy Insurance

Through its Energy Team Lockton offer a range of services to achieve the intelligent planning and cost-effective placing of risk transfer programmes for all types of Renewable Energy projects.

Lockton’s Renewable Energy team are specialists fully conversant with the different technologies within the sector, including the problems that new technologies can create for insurers.

This includes finding innovative insurance solutions often outside the traditional insurance market.

Wind Energy

There is a well developed and competitive wind energy insurance market that has grown considerably over the last five years. Cover for construction is available on an All Risks basis, including Machinery Breakdown, and also for the Testing and Commissioning phase. Cover can be structured to accept individual turbines going operational prior to the project Completion Date, and to accommodate any phased handover of the project so as to avoid potential gaps in cover.

The international markets based in London and Scandinavia lead the insurance industry for Wind Energy projects around the world, with local insurers in various countries adding to the competition. Although wind energy is growing globally at a rapid rate, it still sometimes suffers from technology issues that have plagued the industry since the 1980’s. Furthermore, as wind turbines increase in size, new models are often viewed as unproven by insurers until the required amount of operational hours is achieved by the lead turbine.

Manufacturer support in terms of Warranties and Availability Guarantees is important as insurers may restrict cover for losses due to defective design or parts. There is a more limited insurance market for Offshore projects, with technology issues sometimes having an adverse effect on coverage availability.

Biomass & Waste to Energy

There is a mature insurance market for Biomass and Waste to Energy plants, providing All Risks cover including Machinery Breakdown and Business Interruption. Additionally, insurance products are available for all phases of a project - Marine, Construction, Operation and Third Party Liability. Other specialist types of insurance are available such as Environmental covers.

The main issues relating to Biomass plants are similar to those relating to power plants in general, namely a good understanding of the technology and a thorough analysis of contractual guarantees and obligations (Supply Agreements, Power Off-Takes, Contractor Guarantees and Warranties).

A key part of any plant’s insurances is Business Interruption (and DSU) where consideration needs to be given to the contracts above (and others) and issues such as Carbon Credits, etc. Other topics relating to Biomass projects may include fuel storage capabilities (combustibility of straw, chicken litter, etc).

Waste to Energy plants come in a number of different forms in relation to the type of waste and the method utilised to convert the waste into fuel or Energy. Some pyrolysis or gasification technologies may be viewed as prototypical by insurers. Environmental concerns are often a significant issue and there are creative insurance solutions available for this.

Solar

Solar power projects are on the increase, with the two main methods of utilising the sun’s energy being photovoltaic panels and solar collectors. Some new projects in the US are now up to 300 MW. Potential issues include exposure to natural elements (such as hail and wind storm) and also the prototypical nature of some of the technology. Insurance for solar projects is readily available and competitively priced.

Wave Energy

The wave energy industry is still a new and undeveloped field in the Renewables generation sector. At present, there is only limited appetite for wave energy projects in the international insurance market. Consequently, insurance for such projects is expensive, with rates being higher than those experienced in other sectors.

Virtually all wave energy models are prototypical, unique in design and therefore unproven, so this severely restricts competition and buyer choice. The few insurers who are prepared to provide cover for the technology typically charge higher premiums.

For further information on how Lockton's Renewable Energy expertise can be of benefit to your organisation, email scott.brown@uk.lockton.com or telephone +44 (0) 117 906 5005.