Partner Article

Businesses must be aware of wind farm insurance

Businesses who set up wind farms must ensure that they have the right type of insurance cover, or risk losing hundreds of thousands of pounds in lost revenue or profits.

The number of European wind farms grew by 11% in 2011, while 5000 applications are currently being processed in the UK alone.

To meet demand, Bluefin Insurance have established a specialist team to deal with insurance for renewable energy, and while enquiries have vastly increased, there are still high numbers of operators who have failed to take out the correct insurance cover.

Commenting on the problem, David Wilson who leads the Bluefin team of renewable energy insurance specialists said: “A lot of people are not fully aware of the insurance risks involved in setting up a wind farm.

“Usually the manufacturer and contractor will provide a basic level of cover, however this often only provides cover against damage to the wind turbine itself and does not provide any cover in respect of delayed start up or advanced loss of profits, or the dozens of other potential risks associated with setting up a wind farm which can cost hundreds of thousands of pounds in lost revenue or profit.

“The risks start from the moment the wind turbine or ancillary equipment are in transit from the manufacturers to the site. If something gets damaged, it could easily take six months to replace the damaged item as the equipment is so specialised, potentially leading to significant loss of earnings”

The increase in applications has been attributed to the Government’s introduction of financial incentives for generating renewable energy, which is coming up for review this September. This has resulted in an increase in the number of applications, particularly from the farming sector.

Initial start-up costs are relatively high at £1.2 million, but in the correct conditions, it is possible to generate between £350,000 and £400,000 annually for the life of the turbine.

Insurance is required at a number of different stages of the process, including damage or loss of the equipment whilst in transit, any delays to start up, the construction phase and advanced loss of profits. When all equipment is in place, ‘Operational All Risks’ insurance will be needed.

Wilson added: “Farmers and growers, who are increasingly expanding into the renewable energy market, are particularly vulnerable as they have less specialist technical knowledge than the large energy companies so are often not fully aware of the insurance cover required.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .