London, UK, June 23, 2009 – Ahead of the eighth annual British Wind Energy Association (BWEA) offshore wind event that starts in London tomorrow, the European-based Renewables team of Willis Group Holdings (NYSE:WSH), the global insurance broker, say that insurers are increasingly seeing offshore wind as an attractive investment area with considerable growth potential.
The UK is a world leader in offshore wind energy. With nine offshore projects operational and a further seven currently under construction, the UK will have doubled its wind capacity to 1,500 megawatts by the end of 2009. The UK government’s target is to generate up to 20 percent of Britain’s electricity from renewables by 2020, 33,000 megawatts of which will come from offshore wind energy.
“Offshore wind is a significant opportunity for the insurance industry, with the market expected to grow nearly 30-fold between now and 2020,” said Michael Buckle, Executive Director of the Willis Renewables team, part of Willis Global Markets International. “That growth will be driven by some 40 to 50 new wind projects, each with multi-million pound construction premiums. So it is no wonder that insurers are seeing offshore wind as the next big growth area.”
Despite the growth potential of offshore wind energy, the sector has received a lot of negative press, painting it as risky, overly expensive and technologically unreliable. The Willis Renewables team, however, sees five positive developments in the sector which they believe will help offshore wind projects meet the challenging targets set by the government. These include:
A new era of partnership: The Crown Estate, a property portfolio owned by the Sovereign of the UK, has received 40 bids for the nine development licences available in the competitive tender process for round three of the offshore wind opportunity. While most of these bids come from utility companies, strategic alliances between operators, constructors and the organisations that make up the supply chain are becoming more common. This cooperation will add value, experience and expertise to the projects, spreading and reducing risks.
New technology: Increasingly efficient technologies and better economies of scale will reduce the currently high unit cost per megawatt.
Less financial risk: With the Crown Estate shouldering half of the development costs for each of the nine licenses, the barriers for entry are diminished. Costs will also be lowered due to the £525 million that the UK government has pledged in support of all offshore wind projects completed by 2011.
Innovation to reduce project delays: New vessels like jack-up barges and floating substructures are being built to withstand rougher, deeper waters.
Offshore “supergrid” in North Western Europe: This exciting new proposal could overcome single-point failures that lead to considerable revenue uncertainty.
“We are aware that the offshore wind industry faces many daunting infrastructural and economic challenges, but the long-term benefit of a decarbonised community will only be achieved through sheer persistence, leaps in technology and the realignment of interests into strategic alliances,” said Buckle. “The insurance industry is increasingly interested in this arena and Willis is coming to the fore to facilitate and support the capital markets and insurance product innovation necessary for offshore wind pioneers to push boundaries and meet the 2020 goals.”
Willis Renewables is the insurance adviser and broker to some of Europe’s leading utilities in their build-up to 33,000 megawatts of renewable energy sources, supporting them with insurance and risk management solutions to meet their evolving needs in this sector. Visit Willis Renewables at stand six in the Queen Elizabeth II Hall, Westminster at this week’s BWEA conference to find out more.
Willis Group Holdings Limited is a leading global insurance broker, developing and delivering professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations, public entities and institutions around the world. Willis has more than 400 offices in nearly 120 countries, with a global team of approximately 20,000 Associates serving clients in some 190 countries. Additional information on Willis may be found at www.willis.com.
Kerry K. Calaiaro
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