marsh isights: green energy news
TRANSCRIPT
Renewable Energy Practice
Marsh InsIghts:Green enerGy newsseptember 2013 risk manaGement proGrams must evolve with renewable enerGy industry
As demand for renewable energy projects continues to increase, organizations that manufacture, distribute, supply, or finance renewable energy resources will need more comprehensive risk management solutions for the exposures they face.
As the renewable energy industry in the
United States continues to grow, many
producers are beginning to see lower
renewable energy costs. Renewable energy
is becoming more cost efficient in the solar
and wind sectors as the cost of raw materials
declines and industry stakeholders are
able to quantify the previously unknown
economic benefit of renewable projects.
LoweR CoStS FUeL GRowth
the expanding infrastructure in renewable
energy can be attributed to many cost
reduction trends, including:
• the price of polysilicon, the key
ingredient in solar cells, has dropped 64%
since December 2010 (Bloomberg).
• over the past year, the average cost of
residential photovoltaic (PV) systems has
declined 15.8% and non-residential PV
system costs fell 15.6% (Solar energy
Industries Association).
• the price of operating and maintaining
wind projects has fallen 38% over the
past four years (American Council on
Renewable energy (ACoRe)).
• turbine prices and capital costs continue
to decline as technology has made
turbines more efficient and low interest
rates have kept capital costs low.
• the cost of electricity from wind power
is expected to decline 12% over the next
five years.
these trends have led to an increase in
renewable power capacity. In the wind
sector, construction activity during 2012
exceeded any prior year’s construction
with 13,131 megawatts of wind power
constructed, a 28% increase in wind
capacity. In the first quarter of 2013, PV
installations generated 723 megawatts in
new solar capacity, a 33% percent increase
over the first quarter of 2012. the increased
capacity is a direct result of favorable project
economics. Although these increases
highlight the growing marketplace, they
carry with them inherent risks.
Contents
Risk Management Programs Must evolve with Renewable energy Industry .......... 1
Understanding the Inherent Risks of Battery Storage .................................... 2
how to Maintain wind-Farm Reliability ........................... 3
2 • Green Energy News September 2013
How GrowtH AffEctS riSk MANAGEMENt
the competitive landscape has resulted in diminishing project cost.
For example, there is an abundance of solar panel manufacturers
worldwide, general construction contractors are expanding their
business into solar, and production tax credits prevail in wind.
As reduced project costs enable developers to invest in renewable
infrastructure, industry stakeholders need to understand how this
growth will affect their risk management needs and their total cost
of risk, which includes the cost of insurance premiums, loss control,
projected retained losses, and claims administration expenses.
As the dynamic continues and there is significant interest in
renewable project development, insurance capacity is expected
to be plentiful with increased rate stability. Although insurers still
believe there is some degree of the unknown in this space, we are
seeing a new commitment as the insurance community forms new
renewable industry practices.
while insurers try to fully understand these changes, it is even more
necessary for firms to consult with their brokers and risk advisors
to ensure they can take advantage of the renewable project cost
reductions from a risk management perspective.
DIMItRIoS [email protected]
rENEE [email protected]
MArtiN [email protected]
SoURCeS
Drajem, Mark. wingfield, Brian. U.S., EU Said to be in Talks with
China to End Solar Spat. Bloomberg. May 20, 2013.
energy Fact Check. American Council on Renewable energy. May
28, 2013. http://www.acore.org/news/3410-energy-facts-solar-
energy-s-massive-price-drop
U.S. Solar Market Insight Q1 2013. Solar energy Industries Association.
understandinG the inherent risks of battery storaGe Improved efficiency and performance of renewable energy technologies continues to develop at a rapid pace. the cost competitiveness of renewable energy is changing the power generation landscape as rates for production continue to decline and renewables account for more electric power to the US grid. Battery storage is a critical component in renewable growth to support supply demands and offset coal plant retirements.
Battery storage can expand the horizon for the renewable sector
as it allows stakeholders to maximize the use of their renewable
resources by offering flexibility through an abundant selection of
storage technology. In addition, the technology allows for power
producers to store energy for later use. Ultimately this technology
can expand the opportunities for the renewable energy industry.
From a risk transfer standpoint, the insurance market is in the
early stages of understanding the inherent risks of battery storage.
Despite uncertainty and a major battery storage related loss last
year, insurers still believe in the opportunities this technology
brings to the marketplace. Although insurers have confidence
in battery storage’s role in the industry, it appears that they are
advocating stricter loss control requirements with insureds.
Firms with battery storage facilities should:
• Understand and implement adequate loss control procedures
and techniques.
• ensure adequate fire protection within the facility.
• Confirm that local fire departments have a clear understanding of
their battery storage facilities (Meaney).
Marsh • 3
• ensure that staff is properly trained and adequately
understands how the battery storage process works.
• Analyze the battery storage system and understand
the factors that could make the system fail (Cioni).
Risk managers of wind farms should:
• Understand the wind regime, as wind speeds are
always changing and the local energy capabilities
vary across the US and could affect battery storage
systems (Cioni).
• Use natural catastrophe modeling to expand their
understanding of potential catastrophic, high
severity losses. CAt modeling can also help in
contingency planning and reduce the likelihood and
severity of battery storage related losses.
As the renewable energy market continues to evolve,
battery storage technology has the capability to expedite
this evolution by reducing the reliance on other sources of
energy. As a pillar for growth in the industry, it is important
for producers to evaluate their risk appetites so they can
effectively manage their inherent risks from both a loss
control and risk transfer standpoint.
DIMItRIoS [email protected]
rENEE [email protected]
MArtiN [email protected]
SoURCeS
Bayar, tildy. Batteries for Energy Storage: New
Developments Promise Grid Flexibility and Stability.
Renewable energy world. August 30, 2011
Cioni, Chris. Understanding the Practicalities of Battery
Energy Storage. GCube Renewable energy Insight.
May 9, 2013.
Meaney, Joe. GCube Advisory Council Protecting Battery
Storage Projects. AeS. March 6, 2013.
how to maintain wind-farm reliability As American electric utilities increasingly turn to wind energy, we will likely see 120,000 turbines by 2030. Many new firms and technicians will begin working on operation and maintenance of wind turbines to ensure they continue to produce clean, reliable, affordable electric power. to keep up with the demand, property risk and asset managers need to be aware that turbine components require monitoring, control, reporting, routine maintenance, and testing to adequately manage their risk.
there are several standards, recommended
practices, best practices, etc. to supplement original
equipment manufacturer (oeM) guidelines that offer
excellent supporting information for effective wind
farm operations and maintenance. operations and
maintenance personnel as well as risk insurers use
several sources to develop and execute reliability
engineering strategies, including:
• Institute of electrical and electronic engineers (Ieee).
• international Electrical testing Association (NEtA).
• Society for Maintenance and Reliability Professionals
(SMRP).
• American Gear Manufacturer’s Association (AGMA).
4 • Green Energy News September 2013
coStS ANd coNtrolliNG loSS ExpoSurE
the average onshore wind turbine cost is $US 2 million per
megawatt (Mw) of capacity. US commercial wind predominately
comprises on-shore installations in the 1.5 Mw to 2.0 Mw class.
coMpoNENt % rEplAcEMENt coSt
tower 26
Blades 22
Gearbox 13
Power converter 5
Generator 4
wind industry practice shows that for onshore wind turbines,
75% of faults cause 5% of downtime, and 25% of faults cause 95%
of downtime. the majority of those 25% of faults are due to the
failures of electrical and electronic components of wind turbines.
therefore, the reliability and availability of wind turbine electrical
and electronic components are critical to minimize life-cycle energy
cost and benefit project financials. Annual maintenance costs are
typically 1.5% to 2% of the replacement cost of the turbine.
According to the International Machinery Insurance Association, a
15-year loss history on insurance claims is outlined below. Some
major components and failure modes are identified:
tyPe oF CLAIM CoSt oF CLAIMS
Mechanical 40%
Lightening 25%
Fire 9%
Storm 2%
Liability .2%
Business Loss 24%
• Gearbox: the majority of the wind turbine gearbox problems
that cause outages are due to bearing spall and/or gear pitting.
Annual oil sampling of gearbox oil and bearing grease can be
employed. Installing an oil debris sensor in the gearbox lube oil
system makes detecting bearing and gear damage at the early
stage easier and serves as a warning that additional borescope
inspections are necessary. Borescopes are commonly used to
document the condition of gear teeth and bearings within the
gearbox and should be used to inspect all gearboxes.
• Blades: there are common failure modes and four consistent
areas where cracks may occur: the root, leading edge, trailing
edge, and tip. these can be monitored by checking blade
conditions, through inspection programs, and through visual
inspections, which should be done at least annually.
• Generator: electrical and mechanical components subject
to failure may include bearings, rotor winding, stator, core
insulation, slip ring, or commutator, to name a few. Root causes
are various and include poor design, improper installation,
inadequate maintenance, overload, over speed, excessive
temperature, or excessive dielectric stress. electrical current,
flux, and power monitoring techniques have been well developed
and are now successfully used to monitor wind turbine
generators.
• Substation Transformers: Using dissolved gas analysis to check
the breakdown of the insulation system is the most cost-effective
way to monitor transformer health. Various concentrations
of gases such as acetylene, methane, and ethane will indicate
fault[s]. Analyzing the gases is effective for identifying the root
causes of problems and enables technicians to take corrective
actions before catastrophic failure.
• Cables: electric cable systems can fail for a number of reasons.
Low-voltage (less than 1kV ) cable systems, commonly fail at the
connectors due to overheating. one of the most effective tests for
low-voltage cable systems is the infrared assessment. A common
practice is to minimize the number of underground joints and use
above-ground junction boxes. the junction boxes are a common
failure point and can be monitored using an infrared (IR) camera.
In addition, junction boxes are perfect points for fault indicators
and predictive off-line insulation testing.
coNditioN MoNitoriNG ANd tEStiNG
All machines will deteriorate over time and fail. It is just a question
of when and to what degree the failure impacts operations and/or
project financials. Condition monitoring of wind turbines should
be comprehensive and include drive trains, electrical, and power
electronic components.
Monitoring systems can play a vital role in highly reliable
maintenance forecasting, which is essential for improving turbine
reliability and availability. A supervisory control and data acquisition
(SCADA) system can be used to monitor systems and provide
data for all the parameters measured within the nacelle. the unit’s
Marsh • 5
operational variables, operating parameters, and safety protection
are connected to this system, enabling the operator to dial in via
modem and connect to the system for remote operation.
the following items can be routinely subject to condition
monitoring and testing:
Temperature Monitoring: temperature is and age-old indicator
of equipment health and can be used to diagnose component wear
prior to unexpected failure.
Vibration Monitoring: Sensors are mounted on a turbine’s main
shaft bearings, generator, and gearbox. A gearbox with a planetary
first stage and parallel shaft second and third stages, requires a
minimum of four accelerometers.
Oil & Grease Analysis: oil analysis is effective for measuring
gearbox health and provides evidence of moisture, viscosity
breakdown, or presence of metallic particles in the lubricate that
will cause bearing or gear wear. Proper grease sampling methods
are crucial for comparing samples from one turbine to another or
for trending samples from the same turbine.
Generator: electrical testing of the generator will detect problems
in the winding insulation. the condition of generator cable
terminations may also be inspected and signs of previous arcing
identified during testing.
Electronic controllers: Monitor voltage and frequency of AC
current in the grid. Any changes outside set variables will allow the
turbine to trip offline by functioning of protective electrical devices
for over/under current and over/under voltage.
ENd-of-wArrANty iNSpEctioNS
A typical wind turbine warranty covers the first two to five years
of the turbine’s 20-year useful design life. Final inspection reports
should be planned in advance to address issues well before the
warranty expires. A visual inspection of the complete turbine is
recommended to document safety issues, the general turbine
condition, and component failures. A common checklist should be
developed with input from the operations and maintenance staff.
Checklists provided by the oeM for regular maintenance can be a
useful start.
HEctor [email protected]
rEfErENcES
[1] P.J. tavner, offshore wind turbines: Reliability, Availability & Maintenance, iEt press, 2012, iSBN: 978-1-84919-229-3.
[2] wenxian yang, P.J. tavner, C. Crabtree, y. Fen, y. Qiu, wind turbine conditionmonitoring: technical and commercial challenges, wind energy, 2012, DoI: 10.1002/we.1508.
[3] P.J. tavner, L. Ran, J. Penman and h. Sedding, Condition monitoring of rotatingelectrical machines, Iet, Stevenage, 2008
[4] IMIA-wGP5 Insurance of wind turbines
[5] http://www.windpowerengineering.com/
[6] http://www.eere.energy.gov/
Marsh is one of the Marsh & McLennan Companies, together with Guy Carpenter, Mercer, and Oliver Wyman.
This document and any recommendations, analysis, or advice provided by Marsh (collectively, the “Marsh Analysis”) are not intended to be taken as advice regarding any individual situation and should not be relied upon as such. This document contains proprietary, confidential information of Marsh and may not be shared with any third party, including other insurance producers, without Marsh’s prior written consent. Any statements concerning actuarial, tax, accounting, or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as actuarial, accounting, tax, or legal advice, for which you should consult your own professional advisors. Any modeling, analytics, or projections are subject to inherent uncertainty, and the Marsh Analysis could be materially affected if any underlying assumptions, conditions, information, or factors are inaccurate or incomplete or should change. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy. Except as may be set forth in an agreement between you and Marsh, Marsh shall have no obligation to update the Marsh Analysis and shall have no liability to you or any other party with regard to the Marsh Analysis or to any services provided by a third party to you or Marsh. Marsh makes no representation or warranty concerning the application of policy wordings or the financial condition or solvency of insurers or re-insurers. Marsh makes no assurances regarding the availability, cost, or terms of insurance coverage.
Copyright 2013 Marsh Inc. All rights reserved. Compliance MA13-12631
For more information about renewable energy and other solutions from Marsh, visit marsh.com, or contact your local Marsh representative.