Are the “winds of change” blowing through the Renewable Energy industry? At every stage of the lifecycle of a typical renewable energy project, new challenges and risks are emerging that, if not managed correctly, can threaten the very viability and long-term profitability of the project concerned.
At our inaugural European Renewable Energy seminar held in Prague in October 2019, over 100 delegates gathered to hear a range of experts “de-risk” the renewable energy industry by following a project lifecycle through from project start-up to final decommissioning.
As always at our events, we used app-based interactive voting technology to find out what the delegates themselves felt about some of the key issues presented by our expert speakers. We thought that some of the results were interesting enough to reproduce within this Review.
Over 100 delegates gathered at the Intercontinental Hotel, Prague last October for our inaugural European Renewable Energy Seminar.
Head of Global Natural Resources Graham Knight opens the seminar.
Head of Renewables GB Steve Munday outlines the agenda for the day - “de-risking” a typical European renewable energy project.
In one of the most striking results produced by our voting technology, no less than 84% of the renewable energy industry delegates disagreed with the assertion that “The European renewable energy industry knows how to quantify and manage its exposure to cyber risk.” This view was shared by a similar proportion of insurer and Willis Towers Watson delegates. This question followed a presentation by Willis Towers Watson’s Myles Milner in which he set out what is now considered to be the key cyber-related risks, as well as the best practice for the industry in the event of a cyber-attack - adding that achieving cyber resiliency can become a significant competitive advantage over a renewables company’s peer group.
Following a presentation by Willis Towers Watson’s Adam Piper, delegates were divided when asked if decommissioning risks for renewable energy assets are currently properly identified, quantified and managed. While 43% of the industry delegates thought that they were, the majority (57%) did not - this majority increased to 66% in the case of the insurer delegates and rose to 89% in respect of the Willis Towers Watson delegates. Adam’s presentation focused on the benefits arising from improving Returns on Investment via a Long Term Decommissioning Bond – an instrument that most delegates were unfamiliar with.
Another decisive vote during the seminar was recorded in advance of an excellent presentation by Manish Hatwar, Senior Product Manager for GE Wind Energy GmbH. A very large majority – virtually all the delegates with the exception of 18% of the industry delegates and 8% of the insurer delegates - agreed with the notion that bigger turbines, while an exciting development, carried with them risks that have not yet been fully quantified. As part of his presentation, Manish showed how GE is ensuring the reliability of bigger turbines by adopting processes beyond component testing to drive reliability, including highlighting blade and tip joint testing and certification, rig tests for pitch bearing and full rotor testing, machine head testing and gear box testing.
Another issue which split delegate opinion at the seminar was whether or not sponsor and lender interests in the renewable energy industry were generally aligned with or were in conflict with those of the contractor. The industry delegates voted by a small majority (58%) that the lenders’ interests generally competed with those of the contractor; however, there was substantially more agreement to this notion from the insurers (76%) and Willis Towers Watson (86%). HFW’S Ben Mellors and Joseph Botham provide their insights into the bankability of the renewable energy sector, and within their presentation highlighting the need for a proper (and early) identification and assessment of the risks involved, together with complete and adequate pre-contract studies, adequate time for all parties to assess risks and a proper evaluation of the risk itself.
HFW’S Ben Mellors and Joseph Botham provide their insights into the bankability of the renewable energy sector
For several years now the insurance industry has been at pains to put out the message that the more sophisticated the insurance market submission, the better the changes are of buyers achieving sufficient differentiation to obtain more favourable terms. Following a presentation by Nigel Spencer, Global Development Manager, RSA, a proposition was put to delegates that “to keep prices to a manageable level, the European renewables industry will respond effectively to what insurers want from it”. While it might be expected that 95% of the industry and Willis Towers Watson delegates agreed, perhaps more surprising was that as many as 84% of the insurer delegates agreed as well.
The feedback from delegates suggested that the seminar had been very useful to the majority, as we look forward to staging another similar event in the near future.
What next for European renewable Energy risk? From left to right: Nick Evans (Avivia), Roger hughes (Willis Towers Watson) Matthew Radmillo (Rushtons), GuangQuan Xu (SCOR) and Chris Ling (Willis Towers Watson). Chair: Steve Munday (Willis Towers Watson).
Robin Somerville is Editor of the Renewable Energy Market Review and Facilitator of our recent Prague seminar.