The drive to site renewable energy projects in the tropical regions of Australia represents a great opportunity – but also considerable exposure – for the embattled global construction insurance market
by Andrew Hodinkson, Senior Engineering and Resources Adjuster and Regional Head - Australia and New Zealand and Nigel Lloyd, Senior Engineering and Resources Adjuster, for Insurance Day, first published on 9 February 2021: Viewpoint: Design due diligence is critical to underwriting Australian renewable energy risks
Australia’s renewable energy mix is biased towards mainly onshore wind and solar panel projects at present, with minor investments in the odd concentrated solar thermal energy project and plans for a single offshore wind farm.
As at December 31, 2019, there were 101 wind farms operational in Australia, with close to 40 projects either under construction or planned. Most of these are clustered on the southern coastline and exposed to the Roaring Forties.
Wind farms accounted for 35.4% of Australia’s total renewable energy generation in 2019, with renewables accounting for 8.5% of the total energy generation in Australia that year.
Aside from wind, the most dominant form of renewable is solar power. This is driven in part by domestic roof panel uptake, but there are also a substantial number of solar farm projects built, under construction or planned. While the solar and wind farm prevalence is on the south-east coast, there is an increasing desire to build such projects, particularly solar, in northern Australia.
Australian solar power offers largely untapped potential
An extreme example of the potential scale contemplated in the north is the 10 GW Newcastle Waters cattle station solar farm, known as the Sun Cable Project. The $22bn proposal involves building a 10 GW solar farm with battery storage. Some of the electricity may be used to help power the Northern Territory capital and indigenous settlements, but most would be intended for transmission via sub-sea cables that would snake 3,800 km through the Indonesian archipelago to Singapore.
Long-distance, high-voltage direct current submarine cables are used in Europe, but this would be the world’s longest by some distance. The project’s goal is to start construction in late 2023 and to be exporting by 2027. There are similar plans for a sister project in the Pilbara region of Western Australia. Such projects are in high solar areas, but they are also in regions typically frequented by cyclones.
In general terms, the northern half of Australia is cyclone-prone and building code zones have been established for property in proximity to the coast. Impacts from cyclones include wind, rain and storm surge and, on some occasions, they can drive deep across the country and cause damage. Tropical lows can also present significant hail damage if the conditions are suitable, which is an issue in Queensland and New South Wales. The Australian Bureau of Meteorology categorises cyclones into five categories.
Australia's cyclone exposure presents problems
As most renewable energy projects are not, typically, adjacent to the sea, storm surge is unlikely. The main risks therefore are of flood, wind and hail damage to both wind and solar projects. Solar or wind projects will suffer at the hands of flood waters that attach to cyclones, regardless of the drainage design. The electrical reticulation of power and control cables when submerged can often be susceptible to electrical earthing and fault. This is particularly the case when flood waters rise over control and junction boxes.
While the cables themselves are designed to sit in moist earth, if the terminations are not sound, water ingress is possible. Water ingress to cables can exacerbate in warm conditions where capillary action can come into play and water is drawn down the cable lengths. In some cases, latent water in energised cables will “tree” through its insulation carcass to earth. Such faults are difficult to find and repair and often result in full cable replacement.
Flood issues typically revolve around water and electrical components coming together. Obviously, if the installations are to include large battery banks, high ground site selection is a must.
In the construction scenario, flood can be more devastating as earthworks are often incomplete and subject to wash away. Another issue can also be the early supply of equipment, which is stored in laydown areas at the site ahead of physical construction.
Cyclonic winds exert huge forces on structures. In places such as Fiji, for example, wind farm towers are designed to be lowered ahead of a cyclone impact because the blades and towers themselves are simply not designed to resist such winds. For this reason, wind farm size may well be curtailed in Australia as they may not be as economically attractive.
Issues of excessive wind on turbine blades can lead to delamination and there is the obvious risk of debris impact from vegetation. The columns themselves could also be subject to vortex-induced vibration due to excessive wind, which may lead to fatigue or catastrophic failure. If the loading is great, the footings also need to be large and deep.
With respect to solar farms, this is a curious situation. The success of a solar farm is tied into the amount of surface area of panel that can be deployed under the sun. The structures required to hold such panelling in place against cyclonic winds is expected to be large and the upfront construction costs will be high. This will, no doubt, put pressure on engineers to design structures to the minimum allowable limit such that costs are kept reasonable.
The large surface areas involved with solar panels also make them obvious targets for flying debris, which can cause significant impact damage to structures. Some solar panel suppliers claim to design their panels for cyclonic winds, but such bolstering is unlikely to be able to resist a flying tree.
Hail tends to occur from tropical lows when warm, moist air collides with a cold air stream. Such tropical lows, while not cyclones, can occur in the tropical regions of Australia. Both wind turbine blade and solar panel suppliers will design their products to resist hail impact, so what is the problem?
The issue is the minimum hailstone size on which the designs are based can often be smaller than some of the intense hailstorms that frequent Australia. Some storms have recorded hail in excess of 8 cm in diameter; this compares to the prevailing solar panel design requirement of withstanding hail of 2.5 cm diameter. Unfortunately, the larger the hailstone diameter, the higher the velocity on impact and subsequently the energy release and damage to assets can be extreme.
Hail can be devastating to both wind and solar farm sites as the damage tends to be widespread across all assets. Caution and careful design are required for those brave enough to construct renewable projects in the tropical regions of Australia.
Obviously, the world generally is moving to renewable energy generation which is great. There will however be areas where such projects may be cost prohibitive due to remote location and the tropical environment involved. The Australian renewable industry will, no doubt, continue to find solutions to these challenges and projects will be approved and funded. Not surprisingly, the insurance industry is also riding the wave of investment into renewable projects, and carriers are taking a close look at the impacts of tropical storms to both solar and wind projects and the implications for both their underwriting and investment activities.