Major offshore wind farm projects are struggling to be commercially viable, says Aon
Development of offshore wind farms around the coasts of the UK and Europe may well be hindered by the high price of insurance, warned a London market figure.
Tom Sexton, energy renewables practice leader at Aon, explained that the economics of wind farm development were proving a problem because of the complexity of the risks and corresponding high cost of insurance.
Speaking at the AEGIS European energy conference in Madrid, Sexton said: ‘Major offshore wind farm projects are struggling to be commercially viable. Even though their size is increasing, costs are not coming down.’
‘Right now, insurance can be the highest single operating expenditure for an offshore wind farm. The challenge is to reduce that cost but the insurance market is suffering from poor loss ratios. Farms are also moving into deeper, riskier waters further offshore.’
‘Strategies must be developed to manage these costs or insurance costs will hinder the development of offshore wind farm projects,’ he said.
Sexton pointed out that wind farms which use multiple contractors create significant issues in the management of risk.
Also, the lack of availability of specialist vessels used in constructing and repairing wind farms was leading to delays and claims, he said.
Sterling’s declining value against the euro also raised costs for UK projects, he warned.
Underwriters, Sexton said, viewed the sector as ‘tainted’ by losses to cables and problems with the foundations of the wind turbines.
