While Canadian renewable energy operators do focus on preventing damage, they often underestimate how long it takes to get a facility running again, according to Bryan Kent (pictured), executive underwriter, technical risk at Northbridge Insurance.
In an interview with Insurance Business, Kent said a contained loss can turn into a long outage when a critical component has a long lead time or no like-for-like replacement, and that the resulting business interruption can match or exceed the cost of the repair.
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He said the risk is highest during construction and commissioning, when a project can start generating revenue in phases while building and testing continue, and that underwriters look at spare parts, manufacturer support and equipment redundancy when they assess it.
Kent identified the duration and complexity of downtime after a loss as the risk operators most underestimate. He said operators often focus on preventing physical damage to assets, while restoring operations once an incident occurs can be the greater challenge.
Renewable facilities increasingly rely on specialized equipment, proprietary technology, support from original equipment manufacturers (OEMs) and components with lengthy replacement timelines, he said.
"Even a relatively contained physical loss can lead to significant business interruption if a critical transformer, inverter, turbine component, or control system is damaged and cannot be replaced quickly," Kent noted.
Evolving technology adds a further problem, he said. Older equipment may no longer have like-for-like replacements available, meaning parts that match the original specification, and operators may face aging technology constraints, redesign requirements or system upgrades before an asset can return to service. Each extends downtime and raises costs, he said.
Kent said a supply chain delay affects a project well beyond the cost of the replacement component. If a critical piece of equipment or a control system is unavailable and has a long lead time, operators may have to run the facility at reduced capacity or take it offline while they wait for equipment, specialized contractors or support from the original equipment manufacturer. The disruption can last significantly longer than the physical repair work, he said.
The cost of that downtime varies by project, he said, and depends on the facility's generating capacity, the length of the outage, power purchase agreements, grid-service or capacity commitments, seasonal energy demand and whether unaffected parts of the facility can keep operating.
"The business interruption component of a loss can sometimes be as significant as, or even greater than, the cost of repairing or replacing the damaged equipment itself," Kent said.
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From an underwriting perspective, this is why the focus goes beyond replacement values alone, Kent noted. Underwriters examine the strength of OEM support arrangements, equipment redundancy and expected replacement lead times, he said, along with the availability of critical spare parts.
Kent said operators can improve resilience by maintaining critical spare parts inventories, building relationships with equipment manufacturers, understanding replacement lead times and establishing realistic business continuity plans.
"Operators that have planned for these challenges and built resilience into their operations are generally better positioned to minimize downtime and reduce the financial impact of a loss," he added.
Kent described the construction and commissioning phase as the highest-risk period for renewable projects because it brings together multiple exposures at the same time. Equipment is transported, installed, tested and energized, he said, while multiple contractors and vendors may be working on site at once. Operating procedures, protection systems and controls are tested under real-world conditions for the first time.
"This combination of activity creates a level of complexity that is not typically present once a facility reaches steady-state operations," Kent said.
One challenge operators do not always fully anticipate is the transition from construction to operation, he said. Many projects begin generating electricity in phases before the entire project has formally been completed, so construction, testing and commissioning can run alongside revenue-generating operations.
If a physical loss, equipment failure, or commissioning issue arises during this period, the impact can extend beyond construction delays and repair costs to include lost revenue from interrupted power generation, Kent said.
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Effective risk management begins well before energization, he said. The experience and capabilities of contractors, the quality of commissioning documentation, the thoroughness of testing procedures and readiness for grid interconnection all play critical roles, and accountability needs to be clear as the asset moves from construction to operational ownership.
"When these elements are not carefully planned and coordinated, issues that emerge during commissioning can lead to costly delays, operational disruptions, and challenges that persist long after the project enters service," Kent said.
