Insurance
have built up their reputations over time as reliable manufacturers with proven technologies and durable track records. These factors, which are backed up by considerable operational data, make them an attractive proposition to operators, investors and insurers. Sharma says: “Insurers are traditionally
reluctant to ‘welcome’ new original equipment manufacturers (OEMs) and underwrite their initial projects outside their domestic market.”
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But while the small loss profi le of the technologies poses a problem, some manufacturers have welcomed insurers into their companies and allowed them to conduct assessments. “While the limited loss history presents
a challenge, many Chinese OEMs have been very forthcoming about allowing London-based insurers like GCube to undertake technical due diligence reviews of their turbines, manufacturing hubs and, importantly, the quality of their people,” Sharma says.
“The big mistake made by developers and OEMs is leaving engagement with the insurance market until it’s too late to ask meaningful questions and share lessons learned.” Halperin-Smith also believes it is
good practice for new manufacturers to off er up information to assist insurers: “New manufacturers must be willing to share data with the insurance industry in order to help them understand the risk, otherwise insurers will continue to favour proven technology with wider cover and more competitive pricing.” And while greater competition on the manufacturing side will no doubt help to drive down costs for both investors and developers, it will ultimately also be welcomed by insurers who will be pleased at its potential to reduce claims costs as well. Within the wider renewable energy industry, it is in the photovoltaic panel- manufacturing sector where prices have
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Manufacturers have welcomed insurers into their companies and allowed
them to conduct assessments
really fallen as a result of oversupply, with China leading the way. Sharma predicts costs
will fall further as more countries and companies get involved: “Chinese fi rms are
at the forefront, though Taiwan, South Korea and India have an established tech market for silicon, LCD TVs [and] microchips, which means there will be synergies in the industry while also reducing costs.” Cost obviously plays a signifi cant part in the technologies developers use and whether investors will back them, though Halperin-Smith says a proven track record is more important. “Cost will also play a large part in project
development, but I believe reliability and track record, particularly off shore, are the most important factors to developers. The established turbine suppliers have a track record of rectifying defective designs and this brings a great deal of comfort to developers, lenders and insurers.” Halperin-Smith cites the recent deal between developer Mainstream Renewable Power and Chinese wind turbine manufacturer Sinovel Wind Group, which will see 1,000 megawatts of projects built in Ireland over the next
fi ve years, as evidence that these new markets will be utilized if the risks are managed appropriately.
But as Sharma explains, much of the industry’s success will depend on cost: “Greater cost competitiveness is driving the renewable energy market. There is a growing perception that Chinese turbine manufacturers are selling turbines at a lower cost, but it is diffi cult to substantiate because of the number of non-disclosure or confi dentiality agreements. It’s easy to understand why the Chinese OEMs might be more competitive – labour [and] manufacturing costs are cheaper, as are raw materials.” While investors, developers and
insurers will all hold reservations over some of the new entrants into the market, a number of the companies getting involved have proven engineering expertise in other industries, and it seems likely they’ll be able to transfer this dedication to the renewable energy market. Halperin- Smith says: “When you look at some of the companies looking to expand in this area I am sure the technology will be robust and reliable. It’s just a question of quantifying this for insurers and giving them the comfort to insure this new technology.” ||||
“Reliability and track record, particularly off shore, are the most important factors to developers”
ISSUE 04. SEPTEMBER 2011
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