NARDAC addresses questions regarding the impact of damaged cable protection systems (CPS)
To understand the main problem with cable protection systems (CPS) it’s important to know the subsea power cables are an increasingly critical infrastructure. These subsea cables connect offshore wind turbines to each other and the wider transmission network. This has a large impact as, around 13% of the UK’s electricity is now generated by the offshore wind sector, and those numbers are set to rise to a third by 2030. These cables are designed to be static and, for the most part, buried, so when they become exposed to dynamic conditions, they need protection. But the cable protection systems designed to safeguard these vital connections are failing. The CPS sits on top of scour protection – rocks – and the CPS is abrading over these rocks at a much faster rate than expected, damaging not just the CPS, but potentially the cable inside it too. Movement and natural surroundings are the main culprits of CPS irritation, making it almost impossible to control or calculate the damage that can be done to the cables. The costs involved in remedying issues that arise from CPS damage could be staggering. A handful of specific CPS designs, around 90% of projects selected over an asset undetermined period, is believed to be the main problem. Some developers have run into costly CPS damage repair bills. The world’s largest offshore wind developer, Ørsted, recently disclosed CPS faults at 10 of its offshore wind farms and said the repair costs could hit €403m. Another major developer, Vattenfall discovered CPS damage to their DanTysk wind farm in Spring 2020. RWE has also identified CPS issues at a limited number of recently installed offshore wind assets, including the Galloper wind farm commissioned in 2018. Insurance claims relating to subsea cables have long been an issue for the offshore wind sector. Cables represent up to 80% of claim payments during construction, but only 10 to 20% of CAPEX (GCube). During operations, cable losses represent 75% of claim payments. That is why many companies and developers are apprehensive about potential damage to their cable protection systems.
What is the cause of damage?
Determining the cause is hard considering there’s only been a short time to investigate these issues. Initial indications point towards defective design. This theory has several contributory causes. To explain the conjecture properly, it may help to describe older CPS designs. In earlier CPS designs, the system would sit between two layers of scour protection. This meant the CPS didn’t move much. However, that design raised questions concerning what would happen if the cable inside the CPS failed, how would you access that cable? Removing the rocks would have been complicated and expensive. Burying the cable with additional rocks can introduce new risks, such as pinching the cable and damaging it. If we take the rocks out of the design then we get the most popular scour protection design, which is made of hard polyurethane, which has multiple issues of its own. With the hard polyurethane, there is a large area for the water current to hit. Thus, it causes more frequent movement, and the hardness causes abrasion acceleration. That brings us back to our initial point of “defective design”. Scour protection is the main reason that developers are enduring damage to their cable protection systems. It is believed that scour protection is being pursued due to it being more cost-effective rather than functional.
Will it be covered by insurance?
We can’t say with certainty whether and how insurance policies will respond. An outcome like that heavily relies on a completed investigation. What we can do is sketch out some possible results based on our understanding of publicly available information. It is likely precautionary notifications have already been filed under several different types of insurance. The professional indemnity policies of the designers, or product liability of the sellers, of the CPS at issue may be notified. But these are likely capped at relatively low limits. The policies with the biggest limits will be the CAR and OAR packages taken out by the developer. If physical damage to insured property is demonstrated, it’s likely there will be some coverage, somewhere. An important question immediately presents itself: which policy should we respond to? Does construction, under the maintenance clause, or operations deserve the reply – or both? It was reportedly common for CAR policies in offshore wind to be sold with broad maintenance coverage – many with guaranteed maintenance, which would cover physical damage due to defects ‘put into’ the project during construction, but not manifesting in damage until after handover. It is feasible, therefore, that some of the property damage elements are picked up under the maintenance provisions of the CAR policies, while lost revenue may be picked up under the OAR. Series Loss Clauses may also be relevant, depending on what property is included within its scope. One thing we can say for certain is that coverage for similar issues on new projects is likely to be withdrawn, at least until causation is clearer and clauses drafted appropriately.