Offshore windfarms

The global offshore wind industry is growing at an extraordinary rate, playing a major role in the world’s net zero objectives. Dr GuangQuan Xu, Offshore Renewable Energy Underwriter at SCOR in the UK, gives a broad overview of offshore wind farms, looking at their history, the main components and main insurance products

Insurance market ready to support exponential growth in offshore wind

Since the first offshore wind farm was inaugurated in 1991, 2.5km off the Danish coast at Vindeby, and after three decades of rapid growth, offshore wind farms have become a major source of affordable renewable energy, helping to decarbonize economies and tackle global warming worldwide. According to The Economist, almost of half of the 54GW of offshore wind farm capacity installed globally is in China. (Figure 1).

A typical offshore wind farm is located in an offshore area with relatively shallow water, not too far from the coastline and naturally with a good wind resource.

It comprises a number of wind turbine generators (WTGs), supported by different types of foundations, which are fastened to the seabed. Turbines generate electricity from the wind energy, which is then transmitted to an offshore substation via subsea cables, called inter-array cables.

At the offshore substation, the electricity is converted to a higher voltage current, which is then transported to an onshore substation via different subsea cables (export cables) before being integrated into the grid system and distributed to customers (Figure 2).

The following sections give a brief introduction to the main components of offshore wind farms:

> Wind Turbine Generators (WTG) > Foundations > Cables – Inter-array and export cables > Substations – Offshore and onshore substations

WIND TURBINE GENERATOR – BIGGER AND BETTER

The turbine is an essential part of a wind farm. It comprises a nacelle where the generator is housed, blades (modern

FIGURE 1: GLOBAL INSTALLED OFFSHORE WIND CAPACITY

turbines generally have three), a hub/rotor which attaches the blades to the nacelle, and a tower (steel tubes that attach the nacelle to the foundation.) There are two main types of wind turbine: gearbox and direct drive (Figure 2): The gearbox is a more traditional technology for wind turbines, through which a lower rotational speed by the blades is increased significantly by a gearbox to produce electricity. It is relatively cheap to manufacture, however as there are many moving parts inside a gearbox. This means that this type of turbine is usually more vulnerable. In the case of the direct-drive, the rotor is directly connected to the generator without a gearbox. Direct-drive turbines have fewer rotating components and a more efficient generator, but, they are traditionally more expensive to manufacture and heavier in weight.

In the past decade, the capacity of WTG has increased significantly, from an average of 3 MW to 8-9 MW, and up to 12-14 MW on the latest projects under construction. Offshore wind pioneer and father of the modern wind turbine, Henrik Stiesdal, recently predicted that by 2030, the next generation of offshore wind turbines will probably be around 27 MW, with a rotor diameter of 275m.

AN OFFSHORE WINDFARM FIGURE 2: GEARBOX VS. DIRECT-DRIVE TURBINE

FOUNDATIONS – FROM FIXED TO FLOATING

The selection of a suitable foundation type is based on several factors, but, the two main ones are water depth and seabed soil condition at the site. Typical foundation types are summarized in the table below, together with their pros and cons (Table 1). To date, the most installed foundation types are monopiles, however other types of foundation are being developed as offshore wind farms advance into deeper waters.

SUBSEA CABLES – STRATEGIC AND FRAGILE

The main function of cable systems in an offshore wind farm is to transmit the electricity produced by wind turbines to the grid. There are two types of cables used in a typical offshore wind farm. These are: > Inter-array cable: Typically, 7-10 turbines are connected in one string of inter-array cable, which transmits the medium-voltage electricity generated by the turbines to an offshore substation, where it is stepped up to high voltage, e.g. 130 kV to 220 kV; and, > Export cable: An export cable is then used to transmit the high-voltage electricity from the offshore substation to an onshore substation. Because they are usually only a short

TABLE 1: WIND TURBINE GENERATOR FOUNDATION TYPE

TABLE 2: TYPICAL INSURANCE REQUIREMENTS FIGURE 4: COST COMPONENTS

distance from shore, the majority of early offshore wind farms do not include an offshore substation, and electricity generated from the turbines is directly transmitted to the onshore substation.

Cables remain the “Achilles heel” of the offshore wind industry because of their complicated manufacture and installation processes that can result in many losses and insurance claims.

SUBSTATIONS – THE HEART AND THE BRAIN

Two types of substations are usually constructed as part of an offshore wind farm, one offshore and one onshore. A typical offshore substation consists of a topside, where several different systems and equipment are housed, sitting on a steel jacket, which is fixed onto the seabed with steel piles.

In general, an onshore substation not only includes a transformer and other electrical systems, but, also a control system. This is the “brain” of the wind farm, through which the project team can monitor each turbine’s performance in real-time, to analyse the state of its health using advanced machine learning and big data technology, and to plan maintenance activities accordingly.

ROLE OF INSURANCE

Insurance plays a key role in offshore wind farm development, by providing financial security to project owners and investors. The extent of insurance cover differs depending on the category of the insured. For large construction projects, the main insured is usually the owner/ developer (Principal) who prefers to control the insurance for the project, especially where Delay in Start Up cover (DSU) is involved.

Typical cover requirements are presented below: There are standard policies for operation and construction (WindOP and WindCAR). But, there are also tailor-made key clauses to consider project specific requirements and risk appetite of the developers.

In conclusion, the energy transition is a pathway toward the transformation of the global energy sector, with ambitious targets by the second half of this century. At SCOR we are committed to implementing new initiatives to protect the climate and promote the energy transition.

OFFSHORE WIND ECONOMICS

Figure 4 shows the cost breakdown for a typical 500 MW offshore wind farm in Europe. With upcoming projects located further away from shore in deeper water areas, the costs of operation and decommissioning are increasing significantly (up to 43% and 7% of total costs respectively).

Offshore wind costs have declined steeply over the past few years. According to the latest report published by the UK Department for Business, Energy and Industrial Strategy (BEIS), the forecast Levelized Cost of Energy (LCOE) for projects commissioning in 2025 will range from £51/MWh up to £63/MWh, reduced from £99 - £175/ MWh in 2018.