The Wind Farms Are Coming - Offshore

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September 19, 2011
The Windmills are Coming Offshore
Steven Harris Vice President EQECAT,
Inc. 510.817.3105
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Americas First Offshore Wind FarmWill it be
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Americas First Offshore Wind FarmOr
"This is Texas. We don't have Walter Cronkite
and Ted Kennedy whining about their back yards,"
Texas State General Land Office Jerry Patterson
- Commissioner
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What are Offshore Wind Farms?

• Wind turbines and foundation structures
• Underwater high voltage cables
• Offshore substations and operations
• Onshore substations
• Onshore high voltage transmission

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Why are they Coming?Projected Energy Use
Global energy use by fuel type 1990-2035
From US DOE
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The United States has Ambitious regional growth
targets

• State and Federal incentives
• Green energy renewable portfolio standards
• Texas 7 by 2025
• New Jersey 20 by 2021
• California 33 by 2020
• Hawaii 40 by 2030 !!

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Offshore Wind Farm Siting and Economics

• Siting Requires
• Good wind resource
• Close to load demands
• Onshore transmission capacity
• Total Cost of Energy
• Cost of generation should be around 0.10 / kWh
• Most wind farms are financed and require adequate
  insurance

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U.S. Offshore Wind Resource andTransmission
Grids to U.S. cities
Cape Wind
Others?
Galveston-Offshore
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What are theCatastrophic exposures?

• Gulf of Mexico and Caribbean hurricane
• West Pacific Typhoon
• European winter windstorm
• Earthquake in Japan, Western US and Canada,
  Caribbean, South America, and others

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What is the OnshoreCatastrophic Loss Experience?
Typhoon Maemi Okinawa Japan 2003
Tropical Cyclone 03/A India 1998
(Ishihara et al., 2005a)
(Winter-Jensen et al., 1999)
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Hurricane Risks to Offshore Farms

• Hurricanes have damaging wind speeds for wind
  farms located offshore and near the coast.
• Hurricanes have wind speeds more than 76 mph over
  widths of 60 to 120 miles
• Hurricanes are also accompanied by large wave
  loadings on structural foundations

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Wind is the Source of Power
Power Generated by Turbine
Turbine PowerOperating Range
Cut-out Speed
Cut-inSpeed
Wind Speed
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Technology Trend for Wind TurbinesEach
generation is a bigger prototype
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Direction in Offshore Wind Technology

• Capital and Energy Costs are declining
• Higher capital costs than land based
  installations are dropping rapidly
• Installed capital costs, reliability, and energy
  capture are all improving
• Technical and Infrastructure Challenges
• Transmission from windy areas to the load centers
  are being built
• Specialized vessels, purpose built portside
  infrastructure, robust undersea electricity
  transmission lines will come with development
• Resource characterization is improving

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Challenges Facing Offshore Wind Deployment (Cont.)

• Permitting Challenges or NIMBY Not In My Back
  Yard
• New and untested permitting processes
• Uncertainty and risk faced by potential project
  developers and financiers
• State and federal entities have authority over
  siting, permitting, and installation of offshore
  wind facilities

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Emerging technology Risk

• Rapid paradigm shifts with growing technologies
  like wind turbines
• Larger wind turbines and blades
• Identical installations and new technologies
• Highly correlated loss potential
• Limited cat loss damageability data makes
  engineering expertise critical to rate these
  exposures
• Potentially expensive coverage

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Onshore Insurance StructuresTypical Retentions /
Limits Structure

• Common deductible structures
• 2-5 for CAT
• 15 45 days Business Interruption (BI)
• Limits driven by lenders, corporate or
  partnership property program, (MFL, PML studies)
• CAT exposures and limits can drive the overall
  premium
• Manufacturers warranty period for defects (2 -
  5 years)
• Contingent business interruption
• Hedges can provide some BI/CBI protection

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Insurance Questions

• Who will insure this new technology?
• How will the infrastructure be insured?
• Offshore wind turbines
• Offshore substations
• Submarine cables
• Onshore Transmission lines
• What will the insurance cost be?

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Business Interruption Risks

• Potential impact of transformers and transmission
  cable losses with long lead times
• Limited numbers of available marine vessels and
  cranes
• Damage to onshore transmission and distribution,
  without damage to turbines, poses contingent BI
  issues
• Rapid obsolescence of turbines results in spare
  parts and extended BI issues

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Future technology Insurance Issues

• Wind farms will go further offshore and into
  deeper waters
• New and technically challenging design concepts
• Floating structures
• Cable moored structures
• And others

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EQECATs Approach to Offshore Wind Farm Risk

• EQECAT and ABS Consulting are sister companies of
  the ABS Group headquartered in Houston
• EQECAT is a catastrophe modeling company that
  provides cutting edge natural hazard models to
  the insurance industry
• ABS Consulting is a global risk, safety, and
  integrity management firm
• ABS Consulting provides full life cycle
  engineering, operations and maintenance, and
  in-service inspection services to the wind energy
  industry

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ABS Group Wind Energy Services

• Technology Development/Qualification
• Offshore Expertise
• Structure
• Stability
• Mooring/soils
• Certification Authority
• Certified Verification Agent (CVA) Services

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Wind Energy Life Cycle Services

• VII. IN-SERVICE
• Operational Data Management(Wind Speed,
  Turbulence, Wake, Power Performance)
• Maintenance Management
• Mechanical Integrity Management Systems (MMS)
• Inspection Planning including RBI(Wind Turbines
  and Foundations)
• Gear Box Condition Monitoring and Inspections
• Rotor Blade Condition Monitoring and Inspections
• Coating and Corrosion Protection Monitoring
• End of Warranty Consultancy and Inspections
• HSE Consultancy

• I. CONCEPTUAL PHASE
• Technical Due Diligence (Energy Yield, Permits,
  Technology Grid)
• Consultancy and Project Management

• VI. COMMISSIONING
• Monitoring and Supervision
• Functional Safety and Safety Tests
• Commissioning Supervision
• HSE Consultancy

• II. DESIGN BASIS SITE ASSESSMENTS
• Owners Representative
• Tender Support and Consultancy
• Project Management

• V. INSTALLATION
• Monitoring and Supervision
• HSE
• Project Management

• III. SITE SPECIFIC DESIGN WIND TURBINE
  FOUNDATION
• Owners Representative
• Technical Consultancy
• HSE Design and Consultancy
• Project Management

• IV. MANUFACTURING
• Manufacturing Quality Audits
• Supervision
• HSE
• Project Management

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EQECAT Vulnerability Models Developed by
Engineering Studies

• EQECAT uses a ground up engineering approach
  in the development of vulnerabilities.
• Claims data incorporated into vulnerabilities
• Failure modes of power system components, support
  and foundations
• Manufacturing processes, and control systems
  effects
• Extreme natural hazard performance measures

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EQECAT Hazard Models
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Key EQECAT Model Attributes

• Fully Probabilistic results
• Scenario loss simulations
• Underwritting and Portfolio aggregation
• Extra-Tropical Wind Storm Surge
• Gulf of Mexico hurricane wind, and wave models
• Earthquake models including time dependency in
  California

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Examples of EQECAT Projects

• Offshore wind farm portfolio for European winter
  storm
• Onshore wind farms analyses for earthquake peril
• Hurricane and earthquake risk models for onshore
  transmission grids
• Hurricane risk models for offshore oil gas
  platforms
• Hurricane risk models for Gulf of Mexico oil and
  gas pipelines
• And more

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Questions?