WEF Agenda Blog – China 2017
Insurance – China's path to advancing a clean energy future, food security and city resilience
By Jayne Plunkett, CEO Reinsurance Asia, Swiss Re
Offshore wind power is an emerging and fast-growing high-tech industry with enormous development potential. In addition to clean energy generation, wind farms are the venue for wind power technology applications and represent the latest development in wind power management and services as well as advances in multiple disciplines relevant to the wind power industry.
China has a vast territory and its long coastlines abound in offshore wind resources. According to data released by China Meteorological Administration in December 2009, at the altitude of 50m in China’s offshore areas, the potential capacity for developing grade-3 or above wind energy is 200 million kilowatts, a goldmine of clean energy resources.
As well as safeguarding energy security for China and offering sustainable supplies, offshore wind power projects are the ultimate solution to energy conservation. Since 2005, the Chinese government has been building offshore wind farms in Daishan (Zhejiang), Huanghua (Hebei), Shanghai and Rudong and Dongtai (Jiangsu). The National Development and Reform Commission (NDRC) issued the Notice on Offshore Wind Power Tariff Policy in June 2014, and the feed-in tariff was established for offshore wind power projects. In August 2014, the National Energy Administration (NEA) released the National Offshore Wind Power Development and Construction Plan (2014-2016), involving 44 offshore wind power projects with the combined installed capacity exceeding 10 million kilowatts. In the foreseeable future, more and more windmills will be erected along the Chinese coastlines.
However, the unprecedented development opportunities for Chinese offshore wind power industry come along with severe challenges. Offshore wind farm construction is an extremely complex and difficult undertaking with challenges mainly in terms of demanding technical requirements, substantial construction risks, high construction cost, a serious shortage of construction capacity and development bottlenecks as a result of the intermittent and unreliable nature of wind power and its impact on the grid and users.
The construction environment for offshore projects is particularly complex and demanding, and varies drastically from one project to the other, e.g. beach and coastal areas, open ocean, Bohai Sea, Yellow Sea, East China Sea and South China Sea. Extreme weather conditions (e.g. complex seabed geological conditions, high winds/typhoon, waves, ocean currents and even sea ice and other natural disasters) pose a severe threat to offshore geological surveys, parts suppliers, transportation structure, foundation construction, tower construction, blade/cabin lifting, hoisting offshore substation and submarine cable laying and many more operations involved in offshore wind power projects. The resulting short “weather windows” make all offshore operations difficult to complete. As the unit capacity of offshore wind turbines continues to increase, so will the dimensions and weight of various parts and components, rendering offshore lifting operations increasingly difficult.
Despite growing capacities of workboats, experienced operators are lacking, which is further compounded by the dilution of existing experienced staff resources as a result of the proliferation of offshore wind power projects. In addition, most locations of offshore wind power projects have been laid with submarine cables and close to existing sea-routes, making construction even more challenging. Proper handling of such risks is critical to the success of offshore wind power projects, and risk management has therefore become the absolute priority.
Swiss Re's Engineering reinsurance team (Global Engineering) together with the extended global specialist teams have been closely monitoring and analyzing offshore wind power projects in China as well as relevant risk factors. With over ten years professional risk management experience in complicated construction projects, we are willing to work side by side with primary insurers and related parties to provide high standard risk management for offshore wind power projects, leveraging our global technical resources to contribute to the development of the offshore wind power industry and to the successful completion of offshore wind power projects in China.
Offshore wind power is still fledgling in China and has enormous growth potential. Reducing the risks involved in offshore wind power projects has significant socioeconomic implications. In order to help mitigate the risks involved, Swiss Re Global Engineering is providing the market with the Chinese version of the Offshore Code of Practice (OCoP), which was officially debuted at a Swiss Re seminar for Greater China region insurance companies in Xiamen on 9 -10 April. The purpose of this code is to help insurers and all project participants reduce risk exposure and ensure project quality.
The OCoP proposal was first initiated by Swiss Re, who then led a task force made up of other German Insurance Association (GDV) members and a team of wind power manufacturers and contractors in developing the OCoP. After the official release of German version in September 2014. Swiss Re Global Engineering immediately set up another task force to translate the 300 pages document for China market and invited GDV Risk Engineer to explain the purpose and implementation of OCoP during the Xiamen Seminar.
The OCoP contains a set of risk management guidelines for offshore wind power projects, and a detailed list of all risks involved covering all aspects of offshore wind power projects: from transportation and geological survey to civil construction, installation and commissioning. Furthermore, the code proposes measures to reduce - even eliminate - possible risks. Such measures serve to cut material losses or delays in construction progress to an acceptable level, as well as optimizing project reliability. The OCoP was developed to enable insurance companies and all project parties to effectively reduce project related risks, ensuring successful completion of projects on schedule, while keeping project cost within budget, another significant risk management contribution to the Chinese insurance market by Swiss Re. For questions on the China offshore wind farms projects and the Chinese OCoP, please contact Jay Li or Jimmy Lim.
Published 18 June 2015