Parametric Insurance Against Wind Power Volatility in India

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.

Check out our case study to discover how Descartes’ parametric insurance cover can protect a wind farm operator’s balance sheet in India.