According to a report from Swiss Re, a global reinsurance company, climate change is expected to alter global wind patterns, posing significant challenges for wind energy producers and insurers alike.
Shilpa Gahlot, Insurance Research Specialist, Swiss Re, states: “The intensity of storms is anticipated to increase, with stronger gusts and more frequent lightning strikes posing risk to wind turbine infrastructures. Producers and their insurers will need to monitor these trends closely.”
Wind power currently accounts for around 1 terawatt of global capacity, roughly equivalent to the annual electricity consumption of the Netherlands.
Projections suggest this capacity will double by 2030, although it will fall short of net-zero targets.
Wind power is already a substantial component of many regions’ energy mixes, with the UK deriving 29% of its electricity from wind in 2023 and the EU 18%. Climate change is anticipated to lead to more frequent and intense storms, which can damage wind turbines and interrupt power generation.
Additionally, higher temperatures and shifting wind patterns may reduce the efficiency and lifespan of turbines, leading to increased downtime and operational challenges.
Recent instances of “wind droughts,” such as those experienced in Northwestern Europe in late 2021 and winter 2022, highlight the vulnerability of wind power to climate variations.
Galhot added: “In December 2022, the wholesale cost of UK spot electricity rose to a record high, driven by a fall in wind power and a rise in natural gas prices.”
These droughts resulted in significant reductions in wind power generation and necessitated increased reliance on other energy sources, like coal. Looking forward, the Intergovernmental Panel on Climate Change (IPCC) predicts a potential 10% decline in global average wind speeds by 2100, with substantial regional disparities.
To mitigate these risks, wind energy producers and insurers are increasingly turning to risk transfer solutions, such as index-based wind resource volatility cover.
These financial instruments help protect investors and stakeholders against the uncertainties associated with changing wind conditions and climate impacts. In addition to wind speed changes, the resilience of wind turbines to severe weather events, including tropical cyclones and lightning strikes, remains a critical concern.
Galhot emphasised that although “wind farms have proved robust in coping with storms,” events such as Typhoons Jebi and Cimarron in Japan in 2018, which resulted in considerable damage, highlight the imperative for robust risk management strategies.
The increasing frequency and intensity of such events, coupled with projections of rising sea levels and changing weather patterns, amplify the importance of proactive planning and adaptation in the wind energy sector.
As the global wind energy sector continues to expand, producers and insurers must closely monitor and adapt to evolving climate patterns. This includes enhancing infrastructure resilience, updating risk mitigation strategies, and exploring innovative financial tools to safeguard investments amidst a changing climate landscape.
