Repowering – The Asset Manager’s Dilemma

The onshore wind industry is now approaching 30 years old. WindEurope estimates that by 2030 74GW of European wind will have been in place for over 20 years, and in many cases reaching the end of operational planning consent. Repowering – the process of upgrading wind farms with new equipment to extend project lifetimes – is a huge opportunity to generate more MWh from fewer, taller turbines with larger rotors.

Markets such as Spain and the U.S. are incentivising asset owners to repower sites. Spain, which has a significant number of older wind projects, recently initiated its first auction under the ‘Circular Repowering’ program to allocate €132million in support for repowering projects.

In the US, new onshore wind approvals currently lie at less than 10%. But, under the terms of the Inflation Reduction Act, repowered wind farms can also take advantage of the 10- year extension to tax credit incentives for the production of clean energy. According to analysts Wood Mackenzie, this is likely to see repowering performed on over 30 GW, or 20%, of the existing US onshore wind energy fleet by the end of 2028.

Decisions, decisions…

But even without policy incentives, at a certain point in a wind farm’s lifespan decisions must be made around the cost of ongoing maintenance versus complete replacement. However, with recent higher power prices, taking a wind farm offline to install new turbines can be an expensive exercise. Some project owners, therefore, may choose to ‘sweat’ assets – running projects with equipment well past the intended lifetime of generators and gearboxes.

But this is not without risk – working wind turbines past their expected lifetime can increase the likelihood of multiple equipment failures and subsequently, project downtime.

The insurer’s view

If an owner is considering repowering, then working with insurance partners early in the project can support efficient cash management. An insurer must assess several key factors to determine the premium for the construction phase and set an appropriate deductible. But in many instances, there are potential savings to be made:

Owner and partner track record

Insurers look for track records. If a developer has a preferred EPC partner, then the insurer will want to understand its experience in constructing wind projects. Similarly, if a developer chooses to multi-contract for the project, insurers will look for track record in key personnel. Strong track records mean a better risk profile and a more competitive premium.

Newer equipment

While insurers have seen a surprisingly high frequency of defect issues with new turbine models; newer gearboxes, blades, generators, nacelles and towers all represent a reduced risk of failure compared to those nearing the end of their design life. This reduces the chances of insurers having to pay-out for repairs, replacement parts, labour costs and loss of revenue.

Warranties should also be in force, which means the mechanical and electrical breakdown exposure – otherwise transferred to insurers through an insurance policy – stays with manufacturers. Insurers may also look at projects more favourably if the chances of component obsolescence are mitigated, therefore minimising supply chain challenges and reducing payments to cover business interruption.

Leaving substations in place reduces exposure

Damage to transmission equipment during installation, such as a substation or export cable, can severely impact your project – and, by extension, insurers. But when repowering, asset managers may opt to replace only the turbines, foundations and array cables, leaving the high voltage substation and export cable untouched. This removes one of the higher-risk elements of any wind project, which should also unlock cheaper insurance.

Choosing optimal cover

If project owners do decide to repower their projects, then they need to set an appropriate level of cover. Given the scale of activity, insurers recommend treating repowering as a wholly new project.

The following comprise the core coverage that project owners should be considering before undertaking repowering activity:


Even before equipment arrives on a project site, it is vulnerable to damage during transit from the factory. And with the larger equipment typically associated with repowering, there may be elevated risks getting to project sites originally developed to the specifications of small equipment. A new route survey will help mitigate underwriters’ concerns over damage to blades, for example, from low bridges or streetlights.

Marine delay in start-ip (MDSU) and delay in start-up (DSU)

Developers need to decide whether they want to insure potential loss of revenues. If lenders are involved, they will require the purchase of both MDSU & DSU. Both types of DSU coverage protect owners from revenue losses incurred by missing the anticipated commercial operations date (COD) when caused by a covered physical damage claim. In the first instance, MDSU protects owners from lost revenue if a component is damaged during transit to site. DSU safeguards owners against revenue losses if a physical damage claim occurs during construction at site and delays the start-up of the project beyond anticipated COD.

Construction all risks (CAR)

Like any other renewable energy project, developers should seek protection from construction-related perils during repowering to cover the cost of remedial works, new parts and labour costs. But insurers will need to know what project owners plan to do with the old turbines to best advise how to insure those during decommissioning – or if at all. If the old turbines have residual value, coverage may be required to protect that value during the decommissioning process. The turbines will naturally incur damage as part of the process of removing them from existing foundations – but if the turbine then collapses, owners might lose all its resale value. Depending on the model, the secondary market for wind turbines can provide a reasonable guide to valuation. But if the old turbines will simply be scrapped, and have no residual value, then insuring for the cost of debris removal is sufficient.

Operational all risks and business interruption

Once the repowering process is complete, the new turbines can be insured like any other operational policy. Should new turbines suffer damage owners may be covered for not only the repair of damaged equipment, but also the revenue loss experienced while repairs or replacement work takes place.

Third-party, public or general liability

Liability insurance covers legal liability to others – the risk of being sued by a third party who experienced financial loss. Not only should liability protection cover repowering during the construction phase when a third party may suffer injury or loss relating to installation activity, but owners should also work with their brokers to ascertain any increased liability from expanding the overall size of the project. Repowering may bring the project site closer to new third parties, and new exposures should be carefully analysed to ensure the potential for harm is reduced.

A surge in repowering

Onshore wind repowering is undoubtedly set for a new surge in the coming years. But project owners will still need to assess wind farms individually and build the business case for each. Bringing insurance partners on board early in the process, however, affords an opportunity to secure savings in premiums and deductibles, consequently securing better terms with lenders. Insurance programmes coordinated with brokers for repowering construction will also ensure that, in the case of equipment damage, construction incident or issue, project deadlines remain on track and revenue losses can be minimised.

Written by: Rob Bates

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