GCube says underperformance biggest challenge for wind sector
Wind farm. Author: fantastklywell.
Weather risk accounts for USD 56 billion (EUR 52bn) in untapped asset values for wind energy operators and investors around the world, renewable energy underwriter GCube Underwriting Ltd has estimated.
According to GCube, deviation from expected performance has surpassed mechanical breakdown and component damage as the biggest hurdle to achieving bankable wind energy projects. It calculates that for a 50-MW onshore wind farm worth USD 80 million, successful mitigation or transfer of weather risk could lead to a total net present value (NPV) increase of USD 5.8 million.
Geoffrey Taunton-Collins, weather risk analyst at GCube Underwriting Ltd, said that "meeting the resource risk challenge has moved up the agenda as the sector wakes up to the substantial opportunities transferring weather risk effectively can provide for value creation."
"Coupled with important recent breakthroughs in the structuring of the product itself, this is creating serious momentum for the Weather Risk Transfer market," added Taunton-Collins, who is co-author of a report on the matter, released on Tuesday.
The Weather Risk Transfer mechanisms provide compensation in years of resource underperformance, mitigating the financial impact of long-term wind speed fluctuations, GCube explained. This creates certainty in revenue forecasts, which also has a positive effect on financing and refinancing.