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Solar and wind projects in Asia: How prioritising risk management can enhance project bankability for developers

Discover how Marsh can help you mitigate and manage renewable energy risks for better insurability of wind and solar farm projects in Asia.
Solar panels and wind power generation equipment

The adoption of renewable energy is accelerating in Asia, with the forecasted addition of more than 1,300GW of generation capacity between 2021 and 2027 according to the International Energy Agency’s Renewables 2022 report. Solar and wind is expected to account for almost 90% of this new capacity, representing 167% and 108% growth respectively. Financing for these projects hinges on many factors including adequate (re)insurance coverage, but (re)insurance capacity is constrained by losses attributed to more frequent and severe weather events.

Increasing cost of insurance challenges wind and solar farm developers

With reduced natural catastrophe insurance capacity in high exposure areas, risk management becomes even more crucial than ever for solar and wind farm development. Moreover, as the cost of insurance increases annually , developers are challenged to demonstrate strong risk profiles in order to position their projects to obtain sufficient and cost-effective insurance capacity. This requires them to understand and, more importantly, mitigate the various risks and challenges inherent in the development of solar and wind energy across Asia.

Key risks and challenges for solar farms

Extreme weather

Driven largely by rising temperatures, extreme weather events such as typhoons, floods, landslides and hail are becoming more frequent and can result in catastrophic damage to solar farms.

Risk mitigation considerations: Start by modelling the impact of climate change  on potential physical damage and business interruption, and identify site-specific vulnerabilities. Resilience measures can include optimising photovoltaic panel (PV) angles and improving foundation design to withstand high-speed winds, and elevating sites and improving drainage and diversion design to minimise flood damage.

Fire hazard

In the event of a fire, which may be caused by lightning strikes and welding work, PV panels will continue to generate electricity until a system failure or other intervention. The presence of live electrical currents can cause further damage. Furthermore, fires on rooftop panels can be difficult for fire departments to extinguish.

Risk mitigation considerations: Emergency scenario drills must be performed regularly to ensure timely response to incidents. In the case of rooftop panels, adequate hydrants can be installed to cover the entire area. Developers can also install automatic fire suppression systems to detect and suppress fires before they spread, and to shut down and disconnect inverters. 

Electrical equipment failure

Inverter systems can be easily damaged by overheating and short circuits. Breakdowns can also be caused by a lack of adequate maintenance of transformers and switchgears.

Risk mitigation considerations: Developers can improve the design of ventilation and cooling systems to minimise overheating, and increase the frequency of moisture ingress and corrosion checks of insulation cables to prevent short circuits.

Key risks and challenges for wind farms

Extreme weather

Wind turbines generate more electricity as wind speeds increase. However, when wind speeds exceed design limits, such as during typhoons, damage will likely be caused to rotors and drivetrains. 

Risk mitigation considerations: Start by modelling the impact of climate change on potential property damage and business interruption, and identify site-specific vulnerabilities. Developers should ensure that rotor blades can feather (i.e. adjusting the nacelle and blade angle to point into the wind) and be able to lock down during typhoons. They can also explore new typhoon-resistant turbines that can withstand higher wind speeds.

Rotor blade failure

Aside from typhoons, rotor blade failure can occur due to lightning strikes, structural defects and damage in transit.

Risk mitigation considerations: In particular, developers should focus on the design and reliability of lightning protection systems, given that the industry has observed numerous issues in such systems over the past few years. Additionally, they should install fire protection systems to minimise fire damage caused by lightning strikes and overvoltage protection systems to protect sensitive electronic system components.

Lead time for parts

Due to a significant increase in demand for manufacturing capacity in recent years, on top of increasing instances of turbine damage, defects and staff shortage, parts availability has been severely limited and can entail lead times of several years.

Risk mitigation considerations: Developers need to diversify their suppliers and establish strategic partnerships, such as developing their own spare part pools, to mitigate lead time risks and improve component availability. They should also agree on lead time limits for critical components and reasonable compensation in case of delivery delays.

Logistics

As wind farms are typically situated in remote locations, the transportation of components and specialised technicians can be complex, costly, and time-consuming.

Risk mitigation considerations: Developers should implement comprehensive logistics plans that consider transportation routes, infrastructure requirements, and potential challenges to streamline operations and reduce delays. They should build sufficient buffer into their timelines in case transportation delays occur.

Improve your project’s resilience and insurability with Marsh

Marsh Specialty’s Renewable Energy team brings experience and expertise to renewable energy projects in Asia, with a global team of more than 400 risk specialists ready to work with developers to design and implement the right risk management solutions based on in-depth local industry and insurance market knowledge.

Schedule a non-obligatory chat with a Marsh representative today.

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Martin Beck

Renewable Energy Leader, Asia