Record storms will bring aftershocks

The Atlantic hurricane season is generally thought to run from 1 June to 30 November, so there remains time for further extreme-weather events to follow in the wake of hurricanes Harvey, Irma and Maria.

The 2017 season has already featured the highest total accumulated cyclone energy and the greatest number of major hurricanes in a single year since 2005.

Fraser McLachlan, CEO of leading renewables insurers GCube, admits to having spent much of September anxiously tracking the paths of the cyclonic storms against the assets his firm covers in the Gulf of Mexico and the Caribbean. Relief when Harvey caused only around $5,000 worth of damage to a wind farm in Texas — a sandblasted transformer - was countered by the impact of Maria on Puerto Rico.

Pattern Energy's 101MW Santa Isabel project on the island's south coast came through largely unscathed. But Gestamp's 23.4MW Punta de Lima wind farm on the east coast took the full force of the category-five storm, which ripped off blades and brought towers crashing to the ground.

Wind turbines have a good record for their resilience to natural catastrophes — much better than solar PV panels — but few machines designed for a 20-25-year operating life are likely to stand up to a one-in-500-years event.

However, that reputation for resilience has attracted a number of new players into the renewables insurance business looking for new revenue streams to counter the low interest rates that have pervaded financial markets since the crash of 2008.

This has led to something of a price war in the sector, which may be good news for renewables developers and operators, but leaves some of the insurers looking vulnerable to the high costs of claims from storm damage.

Rising costs

Today's taller, heavier and more powerful turbines are also much more expensive to repair and replace than those of a decade ago, a factor some market newcomers may not have fully accounted for.

McLachlan suggests it would only take one or two more big hurricanes this season to drive some insurers out of business. The most likely effect, though, is a very steep rise in their reinsurance costs - the price they pay to cover their own potential losses — which will ultimately feed into the premiums they charge renewables developers, or reduce their appetite for providing this kind of cover at all.

Either way, the impact of Harvey, Irma and Maria is going to be felt in the wind business for years to come.

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