Factoring in extreme weather risks in the design phase of renewable energy projects can boost returns on investment, according to a new report from consultancy K2 Management.
The report – ‘Pre-Construction Projects: The battle to reduce uncertainty and improve business case bankability’ – identifies major project development trends in the renewables sector.
It found that during the last five years, 50% of renewable energy insurance claims have been weather-related, with the cost of insurance for natural disasters on the rise, the report revealed.
In North America, in particular, the large scale of projects has resulted in an increased focus on uncertainty, the report added. Developers are being forced into more efficient and financially robust project development supported by tailored technology and high-quality data, it said.
The demand for detailed analysis and modelling early in the development phase has increased by 440% increase in the use of so-called ‘Computational Fluid Dynamics’ for projects over the last three years, K2 said.
K2 Management president Lars Andersen said: “The US Infrastructure bill has focused the renewable energy industry on issues relating to transmission and market design, but the North America-specific challenges highlighted in this report are driving important trends in support of stronger projects.
“With installed wind power capacity set to double in the US in the near term and offshore wind about to take off, it is paramount that the risk mitigation strategies outlined in the report become standard procedure.
“Wind power is set to become a key part of the USA’s energy mix, making the financial and operational strength of pre-construction projects of utmost importance to the county’s energy infrastructure going forward.”