The vast majority of wind farm owners and operators only consider fire risk after a fire event, and many make assumptions that insurers will cover all fire-related losses. A total of 75% of renewable energy companies that own or operate wind farms only begin to seriously consider fire risk after they’ve actually experienced a fire, according to statistics from Firetrace International. By addressing this issue so late, companies could run the risk of not being able to insure assets or experience significant rate increases at a location where there has already been a fire.
The fact most wind farm owners and operators only consider the installation of fire suppression systems after experiencing a fire incident shows a significant proportion of the industry rarely considers fire risk.
Impacts with insurers
Among the reasons for this oversight is that wind farm owners and operators often mistakenly believe that insurance will cover any loss. However, in the event of a fire, which occurs in 1 in 100 turbines over their 20-year lifespan, your insurance policy will likely only cover the permanent works of the site, the physical loss/damage, and revenue lost on the turbine that caught fire. Some wind farm owners and operators would be surprised to learn that their policy is unlikely to cover losses incurred as a result of interruptions due to annual energy production or damage to other assets.
Wind energy companies should also be aware that if a wind farm is shut down for an investigation following a fire, additional losses will not be covered if other turbines were not damaged. If you operate a large wind farm with many turbines, the losses could be substantial.
When and who should prioritize fire suppression?
Another false assumption is where responsibility for mitigating fire risk falls in the supply chain. The reality is that due to the time and financial constraints facing OEMs, installing fire suppression technology at the manufacturing stage is not a priority and is an optional item to install at the factory. Similarly, some wind farm operators assume fire risk has been designed out, but this is not the case. As with any asset generating electricity, there will always be some level of fire risk. That is why it is important to understand the risks and options to determine when to install fire suppression to ensure assets are protected.
Who is responsible for fire risk management?
False assumptions create a scenario in which owner-operators are deferring responsibility for fire-risk management to developers, and vice versa – consequently, fire risk is often not addressed at all. As already highlighted, it’s a mistake to believe that insurers will bear all the costs should a fire occur – in reality this is rarely the case. In fact the insurance market is hardening in response to increased losses, with the result that premiums are going up. In previous years, claims related to damaged renewable energy projects has resulted in astronomical rate increases of up to 400%, according to reports.
Could insurers abandon the renewables sector?
In recent months, there have even been concerns raised that pay-outs related to damage to renewable energy projects are a threat to the profitability, and possibly the survival, of property and casualty insurers. This could price insurance out of reach for many renewable energy companies and projects. There have even been warnings that the insurance industry may “turn its back on the renewable energy sector” if it endures another year of losses like those it experienced in 2022.
Fire safety should be a top priority for all wind farm owners and operators. The industry’s approach to fire protection shouldn’t be left to firefighters and staff to deal with after a fire breaks out. Firetrace’s report, “How to Evaluate Fire Risk,” shows why performing an effective fire risk assessment (FRA) is crucial and how to best execute it.
