BigWind can now purchase ‘insurance’ for UNDERperformance…guess who PAYS?

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Wind insurer, GCube, reports that “Well-documented recent wind speed lulls in established markets such as North America, Europe and Australia – often triggered by unforeseen and widespread climatic phenomena – have affected the ability of operational assets to deliver the outputs that were forecast by resource analysts prior to their construction.” “In turn, these issues demonstrate that resource underperformance has now surpassed mechanical breakdown and component damage as the major obstacle to achieving bankable wind energy projects.” So now the insurance industry has developed a product called Weather Transfer Risk (“WRT”) policies to provide compensation in years of resource underperformance, mitigating the financial impact of long-term wind speed fluctuations. In turn, they create certainty in revenue forecasts, which confers a number of benefits for financing and refinancing, alongside the broader risk management, investor confidence and reputational advantages that derive from stable returns. The upshot is now we will get to pay the insurance premiums for when the “wind don’t blow and the sun don’t shine.” ☹…

Weather Risk Accounts for $56 Billion in Untapped Wind Asset Values WorldwideNew York, 31st January 2017 – Failure to efficiently transfer weather risk has left wind energy stakeholders across the globe with untapped asset values totalling an estimated USD 56 billion¹. This estimate, produced by leading renewable energy underwriter, GCube Underwriting Ltd. (GCube), emphasises the long-term financial impact of wind speed volatility on portfolio and project revenues and highlights the size of the market for Weather Risk Transfer (WRT) mechanisms in the sector.

In a new report released today, entitled Gone with the Wind: An Asset Manager’s Guide to Mitigating Wind Power Resource Risk, GCube outlines the scale of the threat posed by resource underperformance to wind energy operators and investors around the world.
Well-documented recent wind speed lulls in established markets such as North America, Europe and Australia – often triggered by unforeseen and widespread climatic phenomena – have affected the ability of operational assets to deliver the outputs that were forecast by resource analysts prior to their construction.
These deviations from expected performance not only impact financial results for project owners, Independent Power Producers (IPPs) and utilities, but have also resulted in damaging ratings downgrades. Furthermore, in high-capacity regions such as Texas where the grid is highly dependent on wind energy, production shortfalls have created energy security concerns.
In turn, these issues demonstrate that resource underperformance has now surpassed mechanical breakdown and component damage as the major obstacle to achieving bankable wind energy projects. GCube estimates that, for a 50MW onshore wind farm worth USD 80 million, successfully mitigating or transferring weather risk could achieve a total Net Present Value (NPV) increase of USD 5.8 million. By comparison, the same 50MW asset with comprehensive Operational All Risks (OAR) insurance coverage in place is likely to see just USD 1.5 million on average of financial losses throughout its lifetime attributed to technical failure and associated downtime….
Source: » Weather Risk Accounts for $56 Billion in Untapped Wind Asset Values Worldwide

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