Risk and Insurance – Issues for the Tidal Energy Sector

Wave and tidal energy production has taken on a whole new lease of life in the last few years. In Europe, the exploitability of this energy is approximately 75 GW. There is the potential for tidal energy to make a significant contribution to the future UK electricity mix, with the UK marine industry target set at 1–2 GW of installed capacity by 2020. To meet these predictions, the industry will require exponential growth in research and development and increased investment by local governments and big business to sustain wave and tidal energy as a competitive alternative energy source.

Current State of the Industry
Currently, the state of the industry is similar to the wind power industry in the early 1990s, where limited projects were in commercial operation and prototypical technology was used. Many lenders and insurers were uncertain of the possible and unidentified risks facing the industry. This lead to high premium rates and limited cover. In 2009, the UK had limited wave and tidal energy installed, with 0.5 MW from wave energy and 1.45 MW from tidal stream. Currently, 57.5 MW of commercial-scale wave and tidal energy projects are being developed in UK waters, with 27 MW already having obtained planning consent. It is estimated that the UK has 29 GW of wave and tidal capacity. The UK is perfectly placed to utilise the technology, with testing centres such as the European Marine Equipment Council and the National Renewable Energy Centre. This forecast will generate innovation and push the UK to become the market-leader in wave and tidal technology.

Environmental Challenges and Viability
Despite this, the targets will pose difficulties and risks for future developers and stakeholders. Developers must overcome the harsh environmental conditions offshore and successfully execute cost-effective operations and maintenance strategies. The challenge for the industry is well demonstrated by the considerable time lag between the advent of wind farms and their commercial viability offshore. The risk is largely unknown and the experience gained by offshore wind just goes to reinforce that developers need to be ready for all risks when it comes to commercial deployment.

The technology used to harness the energy from waves and tides is best located in some of the harshest of marine environments. Tidal designs are often quite complex, with many oscillating parts increasing the risk of mechanical breakdown. Simple designs, for example with only one oscillating part, will reduce the chances of malfunction and increase reliability.

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