Offshore Wind Insurance: Providing unparalleled cover for wind source volatility

The traditional market does not offer coverage for deficiency or excess of wind, leaving wind farm operators financially exposed

Worldwide, corporations and governments are investing significant capital into the development of large renewable energy projects as part of their commitment to reducing carbon emissions. 2022 saw the total new investment in renewable energy amount to approximately $495 billion USD worldwide, including the offshore wind sector in Asia, Latin America and the Atlantic. 

As wind farm development continues to expand across areas with high wind resource availability, financial exposures also increase due to wind’s inherent volatility. This rising financial risk impacts not only the producers themselves but other stakeholders, including developers and financiers. However, the traditional market does not offer coverage for wind resource volatility, leaving clients at risk for hefty additional costs due to Nat-Cat-driven damage or loss of revenue due to a drop in production. 

“Wind droughts” also threaten wind resource volatility. The 2021 wind drought in Northern Europe, for example, took a particular toll on regions dependent on wind energy – Denmark (44%), Ireland (31%), Portugal (26%), Spain (24%), Germany (23%), UK (22%), and Sweden (19%). Due to the reduced average wind speed, Ørsted, an energy company based in Denmark, reported a $366 million USD loss. In their latest report, the IPCC predicts a 6% to 8% drop in average wind speeds across Europe by 2050. This not only confirms the precariousness of wind resource volatility, but also leaves clients’ revenues and their renewable assets uncovered.

This is where parametric risk transfer solutions step in, providing capacity and innovative cover against revenue volatility. Descartes’ bespoke and customizable covers deliver swift liquidity when power generation does not meet pre-agreed thresholds. Our parametric covers provide clients full financial security, protecting them against unanticipated revenue loss and supporting wind farm operators, investors and stakeholders as they navigate production fluctuations and their balance sheets. Parametric cover is primed to bring swift liquidity, enabling the net zero transition

Discover how parametric insurance can protect offshore wind farms against yield-driven revenue volatility amidst an increasing demand for renewable energy.