It’s hard not to be excited by the potential that Floating Offshore Wind holds. Buoyed by the ability to harness stronger, more consistent winds in deeper waters, there is a now large project pipeline, estimated at 6.2GW by 2030 and up to 19GW should cost reduction be accelerated.1 We at Willis Towers Watson are proud to have been involved in the development, risk advisory and placement of multiple projects to date, including what will be the world’s largest operational Floating Offshore Wind farm when it reaches energisation in 2021 utilising MHI-Vestas 9.5MW technology. Based on our experience, we’ve outlined some points which should be helpful for developers.
The nuances associated with maritime rules and regulations are a critical piece of the jigsaw to bear in mind when developing a Floating Offshore Wind project. An example of this is the Nairobi International Convention on the Removal of Wrecks (the Wrecks Convention) which ‘requires the registered owner of any seagoing vessel of 300 GT and over to maintain insurance or other financial security to cover the costs of locating, marking and removing of wrecks’2.
Let’s take an example from the UK. In UK waters, if you do not have approval from the Department of Transport and the associated relevant NRWC certificate, any movement of the floating structure will be vetoed by the Maritime and Coastguard Agency, potentially leading to delays in your project. Additionally, if your project’s insurers are not verified by the UK government for wreck removal conventions, then an approval process is necessary before the project can be granted the required certificate to proceed. This approval process focuses both on the insurers’ financial standing and on certain requirements as to the level of project specific cover offered.
With the Nairobi Wreck Removal Convention applying across 47 states around the world, including early movers in Floating Offshore Wind, it is an important topic to engage with earlier rather than later in development3.
Careful attention must be given to weather patterns and associated activities. Where possible, long towing routes should be avoided, due to the unpredictability and inability to forward project weather patterns. For example, should a storm descend during a tow, it is important to have prior-identified stopping points which can be used for safe shelter/stand-by while the storm passes. Insurers and their appointed Marine Warranty Surveyors will not allow a tow to commence without their prior certification of the route, so this should be a primary concern.
Something which can be overlooked during the tow of the fully erected turbines from port to site is the requirement for auxiliary power on board the semi-submersible structure on which the wind turbine is housed during any tow. Wind turbines in their assembled state during towage operation would not normally have access to a primary power source. As the wind direction can constantly change, turbines need a power source during towing so that they can override their pitch and rotor system and bring the rotor to face into the prevailing wind during towage operations. Without a power supply, there is a very real possibility that the offline turbines will not be facing into the wind, creating additional loads on the structure by subjecting them to physical stresses and levels of vibration for which they are not designed; it can also have an adverse effect on the stability of the whole structure during a tow operation. As a contingency measure, it is therefore recommended to have auxiliary power connected to the system, which is inexpensive and, importantly, will help mitigate the possibility of serious damage to the wind turbine genorators (WTGs) during towing.
When it comes to the selected turbine technology being utilised on Floating Offshore Wind projects, there has been clear desire to go straight for the larger models. These wind farms are being built to take advantage of the world’s best wind resources, so using the biggest turbines to harvest more wind and enhance your power production is understandable. Given their size, the interface between the foundations and the WTGs is vital. A collaborative approach to integrated design between the turbine manufacturer and semi-submersible designer and fabricator is essential to allow a suitable length of time to be allocated to load iterations. The overall optimisation of the combined structure (WTG and floating system) should be given priority over the size of the WTG.
Additionally, given the size, scale and innovation associated with this nascent technology (in respect of both the foundations and the WTGs), operational track records are closely scrutinised. Positive operating experiences and classification society approvals are vital to help secure financing and commercially reasonable insurance coverage.
The port infrastructure requirements for Floating Offshore Wind are different to those for fixed bottom structures. While much of fixed bottom construction is completed at sea utilising jack-up vessels, for floating projects much of the assembly and construction can be done at a port. This has the advantage of avoiding costly and dangerous labour at sea but does often require upgrades or amendments to port infrastructure. These might consist of adapting navigation channels and wet storage, particularly if the foundation to be used has a high draft (e.g. spar) rather than semi-submersibles, which are easily towed out thanks to their low draft.
Equally, ports will require substantial yards for laydown and cranes that are suitable both in terms of heavy lift ability but also the height they can lift to, given the size and weight of the turbines being deployed. Should changes to port infrastructure be required, it’s important to notify your broker of these works and the associated values to ensure they are built into your coverage and agreed with insurers. Furthermore, there is a high possibility that the works will interact contractually with the rules and regulations of the associated port; early engagement with your broker will help to ensure all contractual and insurance requirements are aligned.
While there is a substantial pipeline of potential Floating Offshore Wind projects, state sponsored economic support is required to accelerate their development. You only have to look at how state subsidies encouraged the rapid growth and deployment of large scale, fixed-bottom offshore units to understand how important it will be for Floating Offshore Wind. This support will help drive innovation, speed up large scale commercialisation and help drive down the Levelised Cost of Energy (LCOE) in the longer term.
Traditional Delay in Start-Up (DSU) insurance does not cater for the long term impact of lost subsidies, or failure to meet the relevant subsidy allocation rules (which vary but might require energisation or delivery by a specified date). So bearing in mind the potential financial importance of subsidies over the life of the project, the potential for losing them is a serious issue.
Fortunately, there are solutions available to mitigate this risk. Parametric insurance can be used with a single date trigger which pay a fixed amount, which is based on the net present value of the expected subsidy values.
In the complex and evolving risk landscape of Floating Offshore Wind, it is important for developers to consult with their brokers early in the development stage. By doing this, the various risk considerations can be worked through in a methodical manner, helping to contribute to the project’s success; indeed, you might be surprised what risks can be insured despite today’s challenging insurance market.
Freddie Cox is Lead Associate, Downstream Natural Resources at Willis Towers Watson in London. Freddie.Cox@WillisTowersWatson.com
1 https://www.offshorewind.biz/2020/07/07/gwec-launches-floating-offshore-wind-task-force/ 2 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/440547/MIN_499.pdf 3 https://safety4sea.com/imo-continues-supporting-the-nairobi-convention/#:~:text=Name%3A,%2C%20Japan%2C%20and%20Saudi%20Arabia
