Risk and Insurance – Issues for the Tidal Energy Sector
Without routine maintenance, these projects are at risk of mechanical failure, rising repair costs and loss of revenue. For this reason, insurers will endorse projects with thorough operation and maintenance strategies and comprehensive spare stock.
Investment in the Sector
The wave and tidal energy industry has sparked interest from major utilities, manufacturers and banks, which are all looking to invest in the research and development of the sector. With appropriate investment at this early stage, the potential revenue that could be produced in the UK from power production by 2050 is a predicted £4.2 billion per annum. This is an encouraging figure.
Many projects are heavily reliant on capital investment and a continuous source of funds throughout the operational phase. To meet the industry’s 2020 target and reduce the risk of insolvency, £1 billion needs to be invested in the industry by the government. Currently, grants from the government sit at less than £200 million. To secure continued funding, developers must demonstrate their successful designs supported by good risk management to assure investors that risk exposures are limited and that developers have the appropriate insurance cover with regards to their devices.
The Crown Estate is playing a positive active role with the current leasing rounds in Pentland Firth and Orkney waters. This round will have the potential generating capacity of 1.2 GW (600 MW wave and 600 MW tidal), with 10 demonstration and commercial projects. Industry giants such as E.ON, Vattenfall AB and Scottish Southern
Energy are partnered in the Crown Estate’s project. The interest surrounding this leasing round has been promising for the industry,
To meet the industry’s 2020 target and reduce the risk of insolvency, £1 billion needs to be invested in the industry by the government.
but most of the developers cannot retain the risk themselves. This is where insurance plays an important role by providing risk transfer.
Insurance
To continue the development of the industry, insurance is a prerequisite for equity and debt providers. The market for renewable energy has vastly expanded over the last few years and some branches of this market are taking an active interest in the tidal energy industry. The insurance industry continues to take a cautious approach, however, while it takes account of the first large losses and benchmarked risk-management strategies. Once this process of maturity has taken place, the insurance industry will be much better positioned to make an informed decision on the necessary cover. It will then be able to determine suitable pricing for the deployment and operation of wave and tidal devices. n
Events Diary 26–29 September 2011
China Chengdu 2011 Solar Energy International Forum & Fair Chengdu, China
www.cdnee.com
27–29 September 2011 WinDABA 2011
Cape Town, South Africa
www.windaba.co.za
10–11 October 2011 Solar Med 2011 Paris, France
www.solarmed.com 11–12 October 2011
Energy Solutions – Efficient, Sustainable, Renewable London, UK
www.energysolutionsexpo.co.uk 11–12 October 2011
UK Infrastructure Forum 2011 London, UK
www.infraforum.co.uk 17–20 October 2011
Solar Power International 2011 Dallas, Texas
www.solarpowerinternational.com/2011/ custom/spi/
index.htm
19–21 October 2011 China Wind Power 2011 Beijing, China
www.chinawind.org.cn/home.html 25–27 October 2011
The Power Turbine Congress 2011 Vienna, Austria
www.turbinecongresseurope.com
25–27 October 2011 RenewableUK 2011 Manchester, UK
www.renewable-uk.com/events/annual- conference/
index.html
25–28 October 2011 Solar Power UK 2011 Conference & Exhibition Birmingham, UK
www.solarpowerukevents.org 26–27 October 2011
IHT Global Clean Energy Forum Barcelona, Spain
www.eiseverywhere.com
7–9 November 2011
World Congress on Sustainable Technologies (WCST-2011) London, UK
www.wcst.org
Continued on page 93
MODERN ENERGY REVIEW – VOLUME 3 ISSUE 2
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