Wind Power Yield — Descartes
Group 8

Parametric Insurance Case Study: Offshore Wind Power Volatility

Client Need: While offshore wind farms tend to have a high capacity factor, their generation output varies significantly, fluctuating up to 20% from one hour to the next (IEA, 2019)². This leads to substantial yield and income volatility over the course of a year for production facilities. 

Pain Point: An off-shore wind company developing a new site in Taiwan must obtain insurance as part of financial terms set by its bank to receive a loan. The bank requires proof that the new site will be covered against all risks, including loss of revenue due to lack of wind resources. However the traditional market does not offer coverage for lack or excess of wind, thus the company must find an alternative solution in order to continue construction.

Our Solution: A parametric wind yield cover that swiftly pays out when power generation does not meet the pre-agreed target production thresholds. Exposure of the offshore site is monitored in real-time by official wind measurements provided by satellite data. The policy is structured based on analysis of more than 20 years of data and customized precisely to the off-shore location, exposure, and turbine technology. 

The Result: The company was able to meet the loan requirements established by their bank and construction continued seamlessly. By holistically evaluating the data associated with the underlying cause of reduced yield for this particular wind farm, our model more closely resembles the client’s unique experience with wind volatility. This ensures that they only pay for what they actually need during construction and operation – leaving clients and lenders satisfied with declining project risk and increased profit security.

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