Project-protection policies typically bought by wind farm operators tend to only cover damaged assets as opposed to the loss of revenue caused by project delays, Fraser McLachlan, CEO at clean energy insurance firm GCube told Windpower Monthly.
“You don’t really have any damage here,” he added. “This is probably not the news (operators hoping to make a claim) want to hear.”
The COVID-19 outbreak has hindered the production of wind power equipment in China in recent weeks due to quarantines and travel restrictions, with major turbine manufacturers such as Vestas and Siemens Gamesa downing tools in the world’s largest wind power market.
Consultancy Wood Mackenzie predicted up to half of the 28GW it forecast China to add in 2020 could be at risk if the epidemic continues to impact wind power supply chains into the middle of the year.
While the limited number of reported cases of the virus and containment measures have insulated other wind power markets, the build-out in the US — where developers are rushing to meet construction deadlines for expiring government subsidies — is also at risk.
While insurance packages are available to protect operators against failing to meet the deadline to claim US tax credits due to business interruption, these policies only cover losses resulting from not meeting the cut-off date, rather than loss of revenue caused by unexpected delays, GCube’s McLachlan explained.
Policies that do offer protection against the type of delays caused by travel restrictions and quarantines are not cheap.
Therefore, they are typically only bought by companies in more acutely exposed sectors such as the restaurants and leisure industries — rather than by renewable energy operators — he said.
Under such policies, the cause would also need to be named — in this case, something like ‘outbreak of a contagious disease’ would be sufficient — if the claim is to be successful.
Renewable energy developers now looking to insure themselves against delays indirectly caused by coronavirus are likely to find the costs of these policies prohibitively high, McLachlan added.
Applicable policies would typically have cost 3-7% of the value of the limit they are insuring prior to the outbreak — but following the epidemic and subsequent, widespread press coverage, premiums will have gone up.
“These policies are normally taken out prior to an outbreak,” he explained. “The disease is already out there, and it’s well-publicised.
“So anyone coming to the insurance market now will be hard-pressed to buy one. It will be very difficult to get any form of insurance coverage unless you had bought it prior to the disease breaking out.”