Insights

Mitigating the Risks of Wind Energy Growth

Originally appeared in the North American Clean Energy July/August 2013 Issue

By Lauren Berry, Travelers, Clean Energy & Technology practice

Reprinted with permission


A recent Gallup poll revealed that Americans overwhelmingly want a greater emphasis on renewable energy production,with 71% of respondents favoring increased production of domestic energy through wind power.  Wind farm owners, operators, and developers can capitalize on these positive consumer sentiments about renewable energy production, but they must also be aware of various risks that can arise around wind farm development.  

Following are several key risk areas that business owners should discuss with a risk professional around theft, maintenance, and transportation.

  • Theft

The equipment and materials that make up wind farms can be worth hundreds of thousands of dollars or  more.  From generators with valuable copper power cables, to the components of sophisticared control systems, thieves stand to make significant gains by targeting unprotected wind farms.  Theft threatens a wind farm's growth, as business disruptions could result in heavy costs related to replacing expensive equipment materials and/or lost revenue from turbine downtime.  Such interruptions might not only lead to losses in power, but to lost clients as well.

  • Maintenance

Though business may be growing, many wind farm owners and operators might delay purchasing new equipment in favor of saving costs by using existing machinery.  This can help minimize expenses and maximize financial growth for the wind farm in the near-term - assuming the equipment is being properly maintained.  As turbines work harder or longer to meet growing demand, however, performing timely maintenance becomes even more critical.

Skipped maintenance updates can cause equipment to age more quickly, increasing the likelihood that an entire system will need to be replaced.  In some cases, this might mean the difference between replacing a $200 part and buying an entire gearbox for $600,000.  Many owners have a tendency to rely on manufacturers' warranties to cover needed repairs or replacement.  But, it's important to note, that warranties rarely address all the issues wind equipment could potentially face.  Without proper maintenance, any equipment damages or failures that aren't covered by a warranty can create a significant financial and operational burden on a wind system.

  • Transportation

Transportation becomes an issue when an owner wants to expand or establish a new site.  Moving or re-locating costly and oversized 50-ton wind turbines, or 150-foot blades from the manufacturer, requires experienced shippers who have a dedicated focus on wind transportation.  In fact, turbine transportation costs account for 20% of a project's total expense, which has to be taken into consideration when expanding to a new site.

Targeted risk management

There are simple best practices that can be  implemented by wind farm owners and operators to help mitigate costs and potential risks.  Consider these three tips:

  1. Security measures.  Prevention can save a lot of hassles, headaches, and unplanned (and unnecessary) expenses.  Consider flood lighting, security systems, and fencing at any wind farm site.  Employing security patrol services can also go a long way to helping deter theft and criminal activity.  Wind farms can also work with an organization specialized in recovering stolen equipment and materials to avoid major financial setbacks in the event theft occurs.
  2. Check and balances.  Regularly completing diagnostic tests as part of a maintenance schedule is critical to keeping equipment in good operating condition.  Operators and owners should work with an insurance agent or broker to identify the recommended diagnostic tests, and when such analysis should be performed as part of the maintenance schedule.  The following tests are recommended as part of an effective maintenance plan to help troubleshoot areas that are prone to malfunction.  These five steps help serve as important indicators of early problems. 
    • Battery load test.  Battery testing is essential, and typically takes minimal time to complete since failure can place the turbine in a precarious position.  Further, it could take days to get a replacement installed, necessitating downtime that can sap productivity and profits.  It's also worth noting that battereies do not last as long in colder climates.
    • Oil analysis.  This test provides information about what's happening inside the gearbox through the presence (or absence) of metal particulates in the oil.  It's generally inexpensive, and serves as one of several reliable indicators of the overall health of the turbine.  The goal is to conduct this test often, so as to address causes of wear before catastrophic damage.
    • Vibration analysis.  All turbines have a baseline vibration.  A vibration test involves an anlysis of the gearbox, shafts, bearings, and other rotating parts to ensure they are working harmoniously.  A higher level of vibration is an easy-to-detect sign that someting isn't working optimally.  A blade could be out of balance, for example, a gear might need to be changed or aligned, or a bolt could be loose.
    • Acoustical testing.  This is similar to the vibration test as it "listens" for many of the same things, indicating physical stress or fatigue to the equipment.  All turbines generate some level of sound, so it's important to establish a baseline; an extra-noisy turbine is an indication something might be out of alignment.
    • Gearbox internal inspections.  These inspections should be done annually, or sooner if indicated by vibration or oil samples.  They're usually performed with a borescope camera, which is basically a small camera on a flexible wand that can view those areas between gears.  A borescope camera is used to look for abnormal wear.  This inspection can also be a leading indicator of the health of the turbine, and can be used proactively to identify any necessary repairs or possibly prevent catastrophic damage.

Many testing companies require a baseline reading, so they can then detect deviations and possible issues upon further testing.  Don't forget to run these tests when running new equipment for the first time - especially the oil and vibration analysis and acoustical testing.

  3.  Safe travels.  Operators considering expanding and moving operations to new site locations need to ensure that      equipment and materials are safely transported from the manufacturer.  Given most wind farms are in remote locations,    and equipment will likely need to travel significant distances from the manufacturer, working with a risk management    professional and an insurance provider specialized in wind transportation is important.  This collaboration helps ensure  the owner's transportation risk exposures are properly addressed.

  When choosing insurance coverage, wind farm operators should consult with a carrier that offers specialized risk  management professionals, who go beyond simply outlining an  insurance policy and can identify unique risks to the  business.  

Increased demand for renewable energy presents a significant growth opportunity, and investing in the right risk management solutions can help owners and operators obtain the support needed to weather long-term risks and, ultimately, achieve business success.