Ocean Energy Europe (OEE) has kicked off design of a European insurance fund for the ocean energy sector, with the aim of cutting the cost of early commercial projects and accelerating the roll-out. It has appointed risk and insurance consultancy Renewable Risk Advisers to design the fund as part of the EU-funded OceanSET project.
OEE says investors typically demand returns of 10-12% for risky innovative ocean energy projects, but insurance can mitigate the early risks, reducing the cost of project. In a ‘virtuous circle’, if more projects reach financial close, they will generate operational data for insurers, lenders, and equity investors.
The UK government is planning to ring-fence CfDs for 100MW of ocean energy, in its forthcoming auction. The European Commission says it will coordinate with national governments to fund 100MW of ocean energy by 2025, and 1GW by 2030.
Renewable Risk has consulted with the ocean energy industry, and are now discussing with insurers, lenders and equity investors. The final report, detailing the fund’s design, is due in Spring 2021. OEE and Renewable Risk will then work with financial stakeholders and funders to make the fund a reality.
Joe Hulm Renewable Risk director, who is project managing the work, said, “This fund will help bridge the gap between insurance and project finance, the end goal being scale-up through a cheaper cost of capital.”
Patricia Comiskey, OceanSET project lead, said: “This 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.”