MechChem Africa November-December 2023

Offshore wind: opportunity and risk

I received a report from Allianz Commercial insur ance that highlights where we are with offshore wind across the globe. Entitled ‘A turning point for offshore wind: Global opportunities and risk trends’ , the report details the growth opportunities, technology innovations, risk trends and insurance claim patterns for the global offshore wind industry. According to Anthony Vassallo, global head of Natural Resources for Allianz Commercial, “Allianz is supporting some of the most exciting offshore developments, whether as an investor or insurer. In its lately launched Net-Zero Transition Plan, Allianz Commercial committed to revenue growth of 150% for renewable energy and low-carbon technology by 2030. In addition, Allianz has committed a further €20-billion in investments for climate and clean tech solutions. “2023 has been a historic year for the Earth’s climate. July was the hottest recorded month in hu man history and severe events, including wildfires blazing with ferocity and extreme flooding, have increasingly dominated the news as the devastating impacts are seen in Hawaii, Northern India, and São Paulo in Brazil,” writes Vassallo. “It has also been a pivotal moment for energy transition. As the threat of climate change has loomed large, renewable energy usage has ramped up, geopolitical tensions continue, and governments have implemented far reaching policies to reduce carbon emissions and diversify power sources.” He acknowledges that offshore wind farms are highly complex projects and goes on to outline les sons learned from an insurance point of view. In the wind insurance markets of Germany and Central Eastern Europe between 2014 and 2020, Allianz Commercial has seen 53% of offshore wind claims being attributed to cable damage: from loss of entire cables during transport, to bending of cables during installation. On a large offshore wind facility, multi million-dollar losses can quickly accrue because a cable failure can put the whole network of turbines out of commission. Turbine failure is emerging as the second major cause of losses (20%). “Emerging risks need to be explored, too, as developers prepare for widescale deployment of offshore wind around the globe. The size of turbines is ever increasing, wind farms are moving further out into harsher marine environ ments, and technological innovation is constantly progressing. Navigating biodiversity issues in coastal commu nities will also become more important as demand for ocean space is set to increase fivefold by 2050,” Vassallo points out. In terms of growth, the report

points out that, in 2022, 8.8 GW of new offshore wind capacity was added to the grid, with global installed capacity reaching 64.3 GW. Going forward, around 380 GW of offshore capacity is expected to be added across 32 markets over the next 10 years. And while no offshore wind farms exist in Africa and the Middle East at present, several countries including Morocco, Egypt, South Africa, and Kenya are exploring the potential of including offshore wind into their energy mix. At the recent Windaba Conference at the Cape Town International Conference centre, Sean Whittaker, principal renewable energy specialist for the International Finance Corporation (IFC), announced that the IFC was to develop a power road map for South Africa. “Offshore wind has the potential to play a huge role in the energy transition because it is clean, it is huge, and it is power close to where you need it,” he said. The IFC is currently working with 24 countries around the world to see how offshore wind can play a role in their energy mix, with all of them setting ambitious targets. According to the Global Wind Energy Council, South Africa’s high demand for energy, advanced infrastructure and progressive policies have posi tioned the country as a key player in the continent’s renewable energy scene, with huge potential for offshore wind projects along its vast coastline. This potential is highlighted in the World Bank Group’s Offshore Wind Development Programme. Potential capacity for sub-Saharan Africa for fixed foundation offshore wind is estimated to be 372 GW, while for floating wind turbines in and around the Southern Ocean, 2 463 GW could be available. And though floating wind is considered to be more complex and costly in terms of instal lation, the higher speeds and better consistency of prevailing winds raises capacity factors as high as 50%, compared to the 30% typical of onshore installations. And while the investment will also be huge, offshore wind in Europe, as Whitaker points out, is now one of the cheapest forms of new energy. When you consider the fact that South Africa’s failed and very expensive nuclear programme would have delivered 9.6 GW of power in total, offshore wind, be it fixed or floating, is clearly a huge and totally untapped resource. But what of the risks? Insurance companies such as Allianz are willing to invest in and insure offshore wind farms, which must boost confidence in its readiness for local development. And surely the existential risks of unmitigated global warming will be far greater.

Peter Middleton

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