Biden's plans for offshore wind energy projects is a boon for insurance
The property and liability markets can expect an underwriting boom should the plan for 30,000 MWs of offshore wind capacity comes to fruition.
President Joe Biden issued an executive order to install enough offshore wind capacity off the Atlantic, Pacific and Gulf coasts to produce 30,000 megawatts (MWs) of energy. This proposal will create high-paying jobs, reduce carbon emissions and make the U.S. a leader in the renewable energy industry. It will also create an opportunity in the insurance market to supply property and liability coverage for the construction and operation of offshore wind farms (OWF) and specialty wind turbine installation vessels and the construction, expansion, and operation of ports and terminals.
To reach the goal of 30,000 MWs offshore wind capacity, an estimated 2,000 of the latest, state-of-the-art, 15 MW wind turbine generators (WTG) will have to be installed. At an estimated installed value of $45 million each, that would equate to $90 billion in TIV needed in the OWF construction insurance market. If delay in completion coverage is included, that could add another $20 billion in values. A similar amount of insured values will be needed once the WTGs are operational. To support the projects, there will be a need for marine surveyors to attend during construction to complete Marine Warranty Surveys, conduct cargo surveys, and inspect associated vessels and equipment.
To construct a fixed-bottom offshore wind farm, special wind turbine installation vessels (WTIV) are required. The advent of floating offshore wind, as compared to fixed bottom foundations, is likely to be more common off California and possibly in the Gulf and will present other challenges. The U.S. currently does not have a WTIV capable of installing the new, larger offshore wind turbines. Guided by the Merchant Marine Act of 1920 “Jones Act,” vessels operating off the coast of the U.S. must be constructed in the U.S. and sail under a U.S. flag with a U.S. crew.
Currently, there is one Jones-Act compliant WTIV under construction in Brownsville, Texas, which is expected to be completed by 2023. To meet the goal of 2,000 offshore wind turbines, it is estimated that we will need at least four more WTIVs at a total cost of $2 billion. There will be a need from the marine insurance market to provide construction and operating coverage for these new vessels. There will also be a need for project cargo coverage to support the delivery of billions of dollars of WTG components manufactured in the U.S. as well as overseas.
To support the construction of OWFs, there will be a need to upgrade and expand ports and terminals to support construction vessels and provide laydown or marshaling area for WTG components. It is estimated that $16 billion in TIV will be invested, requiring construction and operating terminal coverage for these increased values.
Should the Biden Administration’s plan to install 30,000 MWs of offshore wind capacity come to fruition, there will be a tremendous underwriting opportunity for the insurance industry. In addition to a boom for jobs and the overall economy, it will be a boom for the insurance industry and will test the insurance market to supply the amount of coverage that this goal will require.
Charles Klehr (charles.klehr@charlestaylor.com), a graduate of the Kings Point Merchant Marine Academy, CPCU, and managing director of natural resources at Charles Taylor.
The article is printed here with permission.
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