Wind energy

Developing the future

The unpredictability of the wind has inspired poets and songwriters since time immemorial. If you’re a wind farmer, though, it can play havoc with your earnings. How do you take the guesswork out of trying to harness an elemental force?

For years, says Marcel-Steffen Reif, the Zurich-based Head of Weather for Munich Re, wind farm investors were offered insurance products aimed at protecting the revenues from their wind assets. But the products didn’t sell.

“Clients told us that they couldn’t use the cover because the banks didn’t understand it”, says Marcel. “And the banks are the ones that provide the financing for the farms.”

Wind farm owners are paid for what they produce and feed into the grid. Banks make financing decisions based on projected earnings. Those earnings in turn depend on wind assessments. But the wind assessments used in standard insurance products typically rely on data provided remotely by satellites and weather stations. When the assessments don’t match actual production, revenues can suffer.

What if you could close the gap between projected revenue and the actual performance of a wind farm?

The weather team at NewRe had an idea for doing exactly that. But they knew that in order to deliver a solution, they would need to combine their wind expertise with some of the engineering know-how Munich Re has in its Green Tech team. The upshot? The two teams jointly developed an insurance product that guarantees earnings stability using real-time data from sensors located around the wind farm. These sensors are a sort of “nerve system” that measures not just the quality and availability of wind but also other parameters that affect performance, such as the mechanical health and efficiency of the turbines.

“What’s exciting about it is that we’re the only insurer offering it”, says Rupert Wimmer, Senior Originator for Weather Risks at NewRe. The product covers existing wind farms as well as yet-to-be-built ones."

From idea to proof-of-concept

Coming up with the idea is the kind of innovative impulse that defines NewRe. But there was still a question of how to best to proceed to make it happen.

The teams shut themselves up for three weeks in a room in Munich, where they applied the “agile project method” – a project management technique that is focused, highly interactive and involves many feedback loops – to generate an initial proof-of-concept.

Marcel had deliberately freed up NewRe staff to participate in this phase. That was critical, he says, because normally day-to-day business has priority over other projects. “But”, he adds, “we knew that the wind production idea was an investment for the future.”

The agile project method proved its worth when the teams devised the scheme for how to analyse the production risk. Using data from Munich Re wind parks, they made predictions based on their approach and compared those predictions against what the parks actually produced. The result was a close match.

“It was the first sign that we were on the right track”, says Marcel. Further testing with larger data sets followed.

Testing the new product with customers

After three weeks, confident that they had a workable prototype, the NewRe team went out to test the “beta version” of the cover directly with clients – utilities, project developers and wind farm investors – that they knew well. The team asked for and received feedback.

“Clients told us that working with the product made them question assumptions they had previously taken for granted and generally improved their understanding of their own weather exposure”, says Rupert, who did some of the testing. “They also appreciate how NewRe’s flexibility enables them to tailor the risk transfer to their particular requirements.”

The response was sufficiently positive that, once back in Zurich, the team applied for a new product approval. The product was given the green light in summer of 2018, and officially launched in early 2019. Discussions with interested clients are ongoing.

Innovation requires agility in more ways than one. In any organisation, says Marcel, there is a tendency for people to focus on the success of their individual units rather than the overall success of a project. That kind of “silo” mentality can sink an otherwise promising idea, whereas teams that are open to bringing people together end up creating value for the client.

“Our team is pretty small and we’re pretty pragmatic”, says Rupert. “There’s hardly anything we would be doing if we didn’t think it would lead to writing profitable business. We had an idea we thought was good. We involved other people. And we focused very hard on making it work.”

New product launches are rare events. Rarer still is a product that stands out for its practicality. With the growing shift toward renewables, a well-working tool that enhances the bankability of wind power projects is just what wind farmers need to advance the energy technology of tomorrow. And as they do, NewRe will be there with them.



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