What happens when a failure in independently owned transmission infrastructure causes an offshore wind farm power generation to halt? As offshore wind development has grown, the industry has seen cases of Contingent Business Interruption (CBI) losses increase in step. Ellen Kimber, Director at Lloyd Warwick and member of the Renewable Energy Claims Conference Steering Committee, recently spoke to us about why offshore CBI claims are challenging to handle and what lessons the industry is learning from growing claims experience.

Alongside James McCallum, Director of Insurance at SSE; Myles Sunley, Global Head of Natural Resources Claims at Allianz; Marianne Anton, Partner at Clyde&Co.; and Rebecca Jones, Senior Claims Specialist, Renewable Energy at AXIS Capital, Ellen will be taking to the stage at the inaugural Renewable Energy Claims Conference (RECC) in October as they deliver a panel discussion on ‘coping with CBI challenges in offshore wind’.

1. Contingent Business Interruption (CBI) losses originating from independently owned transmission assets have become more frequent in recent years, what are the common causes and what challenges does the UK offshore wind industry face?

In offshore wind, CBI losses can arise following the failure of an export cable owned by the Offshore Transmission Owner (OFTO), resulting in an interruption to generation for the wind farm owner. Subsea cable failures have been a recurring source of significant losses for many years, and as the number and scale of offshore wind farms continues to grow, the exposure remains significant.

Over the course of my career, I have seen export cable failures arising from a wide range of causes, including manufacturing defects, third-party damage such as anchor drags or trawler activity, installation issues, weather events and damage associated with workmanship or installation equipment.

One of the wider challenges is the industry’s “race to scale”. Larger turbines help reduce the levelized cost of energy (LCOE), but the supporting infrastructure has to keep pace. As turbines become larger and projects move to higher voltage systems, the performance and reliability of components such as subsea cables become increasingly important.

There is also an opportunity for the industry to share lessons learned from failures more effectively. Claims investigations and cable dissections can generate valuable technical insight into both the cause of a failure and how recurrence might be prevented. Ensuring those lessons make their way back into future design, manufacture, installation and operational decisions is something I think the industry can continue to improve.

2. What is the responsibility of the UK OFTO and how are CBI claims typically handled?
 
From an insurance perspective, OFTOs and developers are responsible for arranging insurance for their respective interests. Following an export cable failure, the OFTO, as owner of the transmission asset, is generally responsible for undertaking the repair.

One of the interesting challenges from a CBI perspective is that there often isn’t a conventional contractual relationship between the OFTO and developer beyond the arrangements associated with the transfer of the transmission assets.

We’ve seen circumstances where it can make commercial sense for CBI insurers to assist with early funding to secure vessels and other critical resources, helping to mitigate what could otherwise become a much longer outage. However, existing policy structures can make that process challenging.

The market has been considering how this could be better addressed, and it’s something we’re looking forward to exploring further during the panel discussion.

3. How can the industry and insurers respond to the growing number and severity of contingent risks?

Preparedness is key.

Over the past year, we’ve been involved with three operational assets requiring subsea cable repairs. Although there were differences between the projects, all three repairs involved an inline joint and omega splice.

The repair periods were approximately 90, 120 and 180 days.

That difference is particularly significant from a claims perspective. We’ve looked closely at what enabled the faster projects to progress as quickly as they did, from contingency planning and access to spares through to vessel availability, stakeholder collaboration and the ability to make decisions quickly.

This is a good example of where the industry can learn lessons from experience to draw helpful conclusions from what distinguished the 90-day repair from the longer outages, and this is something we’re keen to discuss at the conference.

4. What key takeaway do you want the RECC audience to absorb to improve understanding around OFTO claims and ensure better claims outcomes in future?

From a claims perspective, understanding the contractual relationships between the parties is extremely important, but so is understanding the different perspectives each party brings to a claim.

Differences of opinion are inevitable during complex losses. However, if the parties understand where each other is coming from and maintain a collaborative approach, there is usually a much better prospect of reaching a reasonable outcome.

I hope our panel helps explain some of the relationships within the OFTO structure and gives the audience a better understanding of how these claims play out in practice.

5. What are you most looking forward to getting out of the conference?

I’m looking forward to being in the same room as so many people with experience across the renewable energy claims industry, sharing insights and, importantly, the lessons they have learned.

It feels like a dedicated renewable energy claims conference has been a long time coming, so I’m looking forward to being part of it and hope it’s the first of many.