Ocean energy professional network Ocean Energy Europe (OEE) has appointed risk and insurance consultancy Renewable Risk Advisers to carry out the design of a brand new European- and European Union-funded insurance fund for the ocean energy sector as part of the OceanSET project.
The project is expected to cut the costs of the first commercial projects and accelerate the roll-out of this new industry.
According to OEE, a well-designed insurance fund will mitigate the early risks of innovative ocean energy projects, for which investors typically demand returns of 10% to 12%.
Access to project finance is a significant obstacle for wave and tidal developers looking to leverage equity and tap into a €53-billion-a-year global market.
De-risking projects through an insurance fund can act as a “golden ticket” for the scale-up of ocean energy, states OEE. By enabling more projects to reach financial close, this will generate the operational data and experience necessary to meet the needs of insurers, lenders and equity investors.
The OEE claims that the wave and tidal energy sector is set for a significant jump in installed capacity.
In this vein, the European Commission will coordinate with national governments to fund 100 MW of ocean energy by 2025, and 1 GW by 2030.
In the UK, the government has signalled a strong interest in ring-fencing 100 MW exclusively for ocean energy, in its forthcoming Contracts for Difference auctions.
Further, European developers continue to build out new projects in Canada, Indonesia, Japan and elsewhere.
Renewable Risk has consulted with the ocean energy industry and is now in discussions with insurers, lenders and equity investors. The final report, detailing the fund’s design, is expected to be published during the first half of the year.
OEE and Renewable Risk will then work with financial stakeholders and funders to make the fund a reality.
OEE policy director Donagh Cagney says the report is arriving at “just the right moment”.
He adds that the sector’s scale-up has already begun, and instruments such as the insurance fund will be crucial to further accelerate this growth. “Ocean energy will play a key role in decarbonisation, and so speed is of the essence.”
Renewable Risk director and project manager for the work Joe Hulm says the fund will help bridge the gap between insurance and project finance, the end goal being scale-up through a cheaper cost of capital. “Ocean energy can pioneer this approach to reaching net zero, where insurance is enabling innovation.”
OceanSET project lead Patricia Comiskey says the report is one of the key financial actions identified in the SET plan for Ocean Energy and will be a significant step to help remove hurdles for the ocean energy industry.