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Wind Energy Part 2 - Wind Developers Protection from Risk

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 CHOOSING THE BEST COVERAGE

 A wide range of insurance products and services are available to wind farm developers.  Here are some guidelines that developers can follow to help when making insurance purchases for their unique needs:

  • Lifecycle coverage: Can your insurer provide coverage as the farm evolves through each stage?

Having one insurer who can cover all aspects of wind farm development can help simplify and strengthen the insurance process.  Using different insurers could leave some grey areas or even gaps in coverage.

  • Growing with the business: Wind farm developers may seek new opportunities to expand their business operations, whether it is to increase power output at a given location or start new construction projects.  Will your insurer cover wind farms of all sizes so that the relationship can grow as the business expands?

  • Reliable experts: Working with an insurer with expertise in the renewable energy industry can have significant pay-offs for wind farm developers.

This encompasses having underwriters who can assess risk accurately based on their extensive industry knowledge and provide appropriate coverage for competitive premiums, risk control advisors who can deliver guidance on best practices and claim professionals who understand the contractual language and industry processes to help mitigate losses.

As the shift to renewable energy and wind farms continues to gain momentum, those looking to join the growing industry will be faced with many decisions.

Among the most important is the plan a new developer creates to minimize exposure and ensure that they are well protected from unexpected loss by having the right contracts and insurance coverages in place.  Working with an informed insurance agent and insurance carrier with deep knowledge of the renewable energy market can help their business grow and prosper. 

CONSTRUCTION CONTRACTING

One of the most difficult and dangerous elements of wind farm development is the installation of the towers and turbines.  Developers should work closely with construction contractors at the outset to make sure the appropriate risk management processes and procedures are in place.  The relationship with an experienced general contractor with a positive reputation for safety and management and education of employees and sub-contractors is critical.

As construction starts to move ahead, this is another good point in the process for developers to again renew their insurance, contractual and bonding requirements, and work closely with an agent who understands the best coverages, risk management, and claims services to meet the needs of the project.  Complex projects like this may need additional coverages for builder's risk, workers compensation, general liability, auto liability, and an umbrella policy, among others, as the farm is being built.  Reviewing insurance protection throughout wind farm construction will serve to help mitigate and protect against multitude of potential risks.

As the site is being assessed for wind energy potential, a developer should also consider other factors in site selection: 

  • An environmental analysis of the proposed location helps determine how the development and operation of a wind farm may impact the environment such as noise, wildlife, plants and soil, endangered species, and the flying patterns for migratory birds.
  • Flood and earthquake potential should be analyzed for the site under consideration.  Building a farm in a designated flood zone or an area prone to earthquakes can have a long-term significant effect on turbines.
  • The accessibility of the site should be considered.  Farms are often located in remote areas or even mountainous terrain, so owners and operators need to ensure that adequate roadway infrastructure is in place to get heavy equipment and supplies to the project site, and to provide accessibility for workers and emergency responders.

Contractual Requirements After site selection and land assessment has occurred - a myriad of contracts should be in place before construction begins, starting with the construction contract.  Another document important to consider is the Power Purchase Agreement, or PPA, which is the agreement between the developer / owner and an energy buyer, such as a public utility.  The PPA outlines expectations about the price and production for the energy being sold.

In addition to detailing what the buyer will pay for the promised production, the contract also contains other important information such as insurance coverage requirements, and may have clauses limiting the liability of both parties or even waiver of subrogation.  Assignment of financial responsibility for differing types of required insurance coverage and other clauses are important to consider, as each contract is unique.  How the contract is structured may impact long-term revenue.

Developers should be aware of other contracts as well, such as an Interconnection Agreement, which specifies the terms and conditions under which the wind farm's system can be connected to the utility grid.

Financing agreements are often contingent upon the successful placement of insurance and bonds, so management oversight in this area is critical.  It's also important to involve your legal counsel in all your contract matters. 

Back to Part 1 

 

 

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