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WIND ENERGY
Underwriting and Risk Management Considerations
March 29, 2011
Presenters
Property Issues and Considerations
Michael Fusselbaugh
Senior Vice President
Renewable Energy
The Hartford Steam Boiler Inspection
& Insurance Company
Andrea Ezerins
Assistant Vice President
Corporate Underwriting
& Insurance Company
Michael Roy
Principal Engineer
Emerging Technologies
& Insurance Company
© 2011 The Hartford Steam Boiler Inspection and Insurance Company
2
Agenda
Overview
Growth
End users
Manufacturers / Cost
Technology
Maintenance
Risk Drivers
Insurance Considerations
3
Wind Resources
Wind resource data
developed by AWS Truewind,
LLC for windNavigator®
Source: USDOE
4
Wind Energy by State
5
MICHAEL ROY
Principal Engineer, Emerging Technologies
Wind Turbine Size
301 ft
50 ft
7
Small Wind vs. Large Wind
How are wind turbines measured?
Size = Output
Small Wind is <100 kW
Large Wind is >100 kW
8
Small Wind Turbines End Users
 Homes, farms, schools, communities, and small factories – generally
in rural areas
 Owned by facility – located on site
 Supplements the electrical needs:
 Homes & battery chargers (<15 kW)
 Farms (15–30 kW)
 Office buildings (30–50 kW)
 Manufacturers, schools, municipalities (50–100 kW)
9
U.S. Small Wind Power Growth
 U.S. is world’s largest market for small wind
 9,800 small wind turbines sold in U.S. in 2009
 Two thirds (2/3) were manufactured in U.S.
Growth of U.S. Small Wind Market
20,000
15,000
10,000
5,000
0
Small Wind Units
Sold
Capacity Sold (kW)
Sales of Units Sold
($U.S. x 10,000)
Year
Units
kW
Sales
$U.S.
2001
2002
2003
2004
2005
2006
2007
2008
2009
2,100
3,100
3,200
4,671
4,324
8,329
9,092
10,386
9,800
2,100
3,100
3,200
4,878
3,285
8,565
9,737
17,374
20,300
(not avail.)
(not avail.)
(not avail.)
$1,489
$990
$3,320
$4,197
$7,266
$8,240
Source: American Wind Energy Association (AWEA)
* $U.S. x 10,000
10
What’s driving the growth?
 Fossil fuel prices
 Demand for sources of
green energy is
increasing
 DOE: 5% to be
renewable by 2020
 29 states – Renewal
Portfolio Standards
 Production Tax Credit
renewed through 2012
 Investment Tax
Credits = 30%
11
Barriers to Small Wind Growth
 Zoning
 Performance
 Supply chain
 National net metering policy
 Permitting & regulations
 Fossil fuel prices
 Intermittent power generation
 Energy storage as a solution?
 Back-up power generation?
12
Grid Integration
Small wind turbines may be installed as stand-alone or connected to the utility grid,
requiring approval of the utility. Technical & insurance requirements vary state by
state, as do metering arrangements
Grid-Connected Systems
Source: USDOE
13
Hybrid Power System – Off-Grid
A hybrid system combines a wind system with a solar and/or diesel engine-generator
and can provide reliable off-grid power around the clock.
Hybrid Power Systems
Combine multiple sources to deliver
non-intermittent electric power
Source: USDOE
14
Wind Turbine Overview
How does a wind turbine work?
 Wind across blades
 Pressure difference
 Blades rotate
 Turns generator
 Produces electricity
15
Small Wind Turbine Cost
 Cost varies by company, design type, size
(height), and kW rating
 Generally about $3–$5,000 per kW
 If tall tower – add $30–40,000 for foundation
 Residential pay back – 6 to 20 years – depends on
$$ incentives
 Estimate 20 year life span
 The majority carry a 5 yr. warranty, Bergey Wind
recently raised to 10 yr.
Image 16031 Courtesy DOE/NREL
16
Small Wind Turbine Components
10 kW Wind Turbine
Source: © Bergey Windpower
Source: © HSB
17
Advancements in Technology
Technology
Evolution and Adaptations
High efficiency airfoils
Neodymium-iron-boron “super-magnet” generators
Pultruded Fiberglass Reinforced Plastic (FRP) blades
Graphite-filled injection molded plastic blades
18
Advancements in Technology
Tilt-Down Tower Design
Tilt-up tower in the normal operating position
Tilt-up tower in the lowered position for
maintenance or hurricanes
19
Power Curve & Capacity Factor
Power Curve for the Endurance S-250 – 5 kW Wind Turbine
Power Delivered to Grid (Watts)
5,000
4,000
3,000
2,000
1,000
0
0
0
4
2
9
4
13
6
18
8
22
10
27
12
31
14
36
16
40
18
45 mph
20 m/s
Hub-Height Wind Speed
20
Small Wind Turbine Types
Horizontal Axis Wind Turbine (HAWT):
Vertical Axis Wind turbine (VAWT):

Requires smooth wind

Functions in shifty wind

Requires a tail or yaw control

Functions in gusty wind

Quiet & bird friendly

Current limited capacity
21
Small Wind Turbine Examples
Horizontal Axis
Wind Turbine
(HAWT)
Vertical Axis
Wind Turbine
(VAWT)
Bergley 10 kW BWC
Excel America's best
selling residential
wind turbine
(3-bladed)
Helix 1 kW D361
residential wind
turbine
Horizontal Axis
Wind Turbine
(HAWT)
Vertical Axis
Wind Turbine
(VAWT)
Home Energy Ball
0.50 kW V100
residential turbine
Mariah 1.2 kW
Windspire residential
turbine
22
Towers, Turbulence & Durability
Short towers result in:
 Reduced wind speeds, and less electricity
 Compromised reliability – more wear and tear from turbulence
 30’ Rule – rotor should be 30’ above any obstacles to get above turbulent
wind shear
Wind Turbulence
Turbulence slows and degrades the wind resource, both upwind and
downwind of obstructions. Note the height (H) and distance of turbulence
behind an obstruction—an unsuitable area for a wind turbine.
Wind Direction
2H
H
2H
20H
Source: Home Power magazine
23
Small Wind Turbine Maintenance
 Follow OEM maintenance guidelines
 Tilt down towers = easier maintenance
 Periodic inspection & maintenance (owner vs. OEM certified contract):
 Blade cracks
 Dings & dents
 Cleaning debris off the blades
 Re-tightening all bolts
 Lubrication/greasing/oiling
24
ANDREA EZERINS
Assistant Vice President, Corporate Underwriting
Wind Turbine Risk Drivers
 Rapid technology
change
 Turnover in
manufacturers
 Parts no longer
available?
 Weather
 Property concerns
 Site layout
construction/repair
issues
 Operational risk
26
Wind Turbine Property Exposures
 Weather
 Icing/Hail
 High Winds
 Lightning
 Earth Movement
and Flood
 Property Concerns
 Fire
 Vandalism
 Theft
 Tower Collapse
27
Wind Turbine Equipment Breakdown
Exposures
3.5 kW
 Blade damage
 Foreign object impact
 Erosion of leading edge
 Blade tip deflection hitting tower
 Cracks and fatigue failure
 Tower collapse – structural fatigue
 Overspeed damage
 Rotor / generator bearing failures
 Gearbox – lubrication viscosity and cleanliness
 Miscellaneous electrical apparatus: slip rings,
brushes, inverter, controls
Image Source: Photo by J.D. Redinger
28
Wind Turbine – Loss Experience
Cause of Loss, Percent
25
20
15
10
25
16
13
5
5
0
Lightning
Breakdown
Wind Damage
Unknown
Cause by Component, Percent
28
24
20
16
12
8
4
0
27
22
12
Gearbox
Blade
Generator
5
4
MEA
Transformer
Image 16177 Courtesy DOE/NREL
29
Keys to Reducing Exposure
 Experienced installers
 Established manufacturers
 No experimental, prototype
 New equipment under warranty
 Some sort of service agreement, regular
inspection
 Turbine is visible and accessible
 Properly designed for climate (temperature,
lightning, wind)
30
How Do You Identify Risks with Renewable
Energy Exposures?
 Homeowners
 BOP
 Commercial Package
 Farmowners
31
How Do You Identify Risks with Renewable
Energy?
Do you generate power for your own use or to sell to others?
32
Insurance & Underwriting Considerations
Manufacturer &
model
Size (kW output)
Warranty
Loss history
(serial loss
issues)
Service &
maintenance
agreement
Tower height
Age
(retrofit date?)
# of units
Monitoring
agreement
TIV & value
per unit
Business Income
& Extra Expense
Annual power
production
Value
per unit
33
Coverage in the Marketplace
 Customized Renewable Energy Forms
 All risk forms
 Renewable experts
 Designed to address exposures associated with larger renewable risks
 Standard Commercial Property
 Non customized, standard forms
 Most address smaller renewable exposures that are ancillary to a
commercial risk
34
Players in the Renewable Market
Dedicated Team/Product Approach
 Travelers
 Chubb
 GCube
 The Hartford
 Chartis
 New companies every day
 Many brokers including Marsh, Willis and Holmes Murphy
35
Loss Example
36
More Information
Andrea Ezerins
[email protected]
860.722.5308
Michael Roy
[email protected]
860.722.5055
Contact your Munich Re Client Manager or
HSB Client Company Manager for additional information.
37
THANK YOU FOR ATTENDING.
© Copyright 2011 Munich Reinsurance America, Inc. All rights reserved. "Munich Re" and the Munich Re logo are
internationally protected registered trademarks. The Hartford Steam Boiler name is a mark owned by The Hartford Steam
Boiler Inspection and Insurance Company.
The material in this presentation is provided for your information only, and is not permitted to be further distributed without the
express written permission of Munich Reinsurance America, Inc., Munich Re or Hartford Steam Boiler.
This material is not intended to be legal, underwriting, financial, or any other type of professional advice. Examples given are
for illustrative purposes only. Each reader should consult an attorney and other appropriate advisors to determine the
applicability of any particular contract language to the reader's specific circumstances.

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