The renewables sector is experiencing:
Challenges with project funding due to Nat Cat- driven damage & financial loss
Disruptions to construction, transportation and installation, material damage and delay in start-up
(DSU)
Clients forced to pay significant additional project costs due to weather-driven damage and delays
Significant halts to maintenance and operations, including business interruption
Key benefits
Fresh capacity:
Parametric products offer a solution for wind yield, as it is not easily insurable.
Customised protection:
Flexible and straight-forward structure tailored to clients' needs & production.
Transparency:
Provide the client with their index performance over multiple years, where the payout is tailored to their specific production capacities.
Timely claims payment:
Gridded weather data enables clients to bolster their balance sheet when their wind assets are ineffective or cause a significant drop in revenue.
Climate change is slowing down the hum of India’s wind farms, yet traditional insurance solutions are unable to provide cover against revenue loss driven by wind power volatility
Following the Paris Agreement in 2015, countries agreed to decrease coal powered production significantly, eradicate insufficient fossil fuel subsidies, and ultimately work to ramp up the deployment of renewable energy rapidly. Current commitments leading up to 2030 would put the world on track for a 2.4 degree Celsius rise in average global temperatures; making revisions of targets is an utmost priority to create a Paris-compliant policy pathway.
Meanwhile, India has set up strong ambitions for climate change mitigation by pushing for rapid deployment of renewable energy sources, with wind power being crucial. India contributed 6% of the global GHG emissions in 2022, and power generation accounts for 64% of its energy sector emissions. Notably, the energy sector contributes to 73% of the country’s total GHG emissions – making wind energy vital to India’s clean energy transition.
Amidst the race to meet net-zero targets, the growth of wind players across India has been substantial, particularly as the country’s monsoon season between June and September makes the country optimal for wind production. The prime time typically ensues wind speeds ranging between 23 and 29 kilometers per hour, which fuels wind turbines to generate electricity. During the monsoon season, two-thirds of its total wind energy is generated.
However, renewable wind energy operators and investors across India have seen an unprecedented drop in energy production in the most recent years Annual wind speeds and wind energy production are trending downward during the past two decades: the 2020 season showed the slowest wind on record at an average wind speed of between 20 to 27 kph, making it the lowest in 100 years. According to the IITM, as climate change intensifies, India’s wind potential is expected to slow down over North India.
This introduces an immense strain on wind farmers’ revenue flow as enduring a poor wind season causes significant drops in production. Moreover, the traditional market does not cover revenue loss driven by wind power volatility, leaving clients and their balance sheet completely unprotected. Without a solution in the traditional space to insure against the unpredictability of renewable revenues, stakeholders ranging from operators to developers and financiers are left absorbing the gap when wind yield impacts revenue flow.
With Descartes’ expertise in modeling the realistic behavior of annual wind speeds and designing a parametric insurance cover based on wind turbines’ specific power curves, wind manufacturers across India and the globe can have peace of mind that their coverage will respond as intended, mitigating the largest risk a wind producer may face – revenue loss. Descartes’ parametric solutions ultimately offer a financial hedge against wind yield volatility through a straightforward, index-based solution that triggers based on objective, third-party data.
case study example
Case study example
Learn how a parametric insurance cover protects a wind farm owner-operator in India:
Problem
A wind farm owner-operator endured low wind speeds in India, resulting in underperformance of the client's wind power portfolio, thus, the inability to hit their revenue targets. What's more, the traditional market does not offer coverage for wind volatility cover, leaving the client and their balance sheet uncovered.
Solution
With our parametric wind yield cover, the client effectively introduces stability to their revenue flow by hedging the risk that power generation does not meet the pre-determined threshold. Most importantly, the client has cover for wind yield volatility, which is uninsurable in the traditional market.
Result
Our parametric cover would provide full financial security with the client swiftly receiving payout if they were to experience a drop in energy production, stabilizing their balance sheet against revenue loss.
