Key findings
- 44% of onshore wind market participants surveyed in France, Germany and Spain have insured against permit challenges at least once.
- 34% of those surveyed have no standard process in place for resolving permit challenges.
- Price and low awareness are the main hurdles of a higher insurance penetration.
- 60% of all legal challenges to wind farm permits are filed by environmental and ecological pressure groups.
Wind energy market participants in France, Germany and Spain are likely to be incurring huge costs in delays and disruption from failing to insure their projects against permit challenges, a new market study has found. High expectations rest on Europe’s wind energy sector as a key pillar to meet its carbon emission targets, but the lengthy and complex approval process for projects increases the risk of challenges. Appeals and lawsuits against wind farm permits cause uncertainty, prolong installations and threaten to derail Europe’s wind energy targets.
MX Underwritings, an insurance provider, Fieldfisher, a European law firm and WindEurope have today released the results of a survey of wind farm developers and investors operating in France, Germany and Spain that investigates the impact of permit risks on wind farm projects. The survey report sets out the EU and respective national policy, market and legal contexts for onshore wind projects in France, Germany and Spain and delves into the most common causes of delay and how market participants mitigate and respond to these risks.
“Our study found that most wind farm developers and investors would insure against the risk of permit challenges, as they expect the rate of challenges to increase further”, said Jean-Claude Domaingue, Underwriting Director at MX Underwriting. “However, depending on the market, often developers are not aware that insurance removes some of the risks and uncertainties that permit challenges present and that the security of an insurance policy will improve the bankability of a project and strengthen its quality as a precondition to its insurability.”
The findings of this report are based on in-depth research with data from WindEurope and interviews by MX Underwriting with their distribution partner, LERIA, and Fieldfisher, to assess the risk management strategies that wind farm developers, investors, law firms and associations operating in France, Germany and Spain deploy to defend or protect against permit challenges.
In these countries, the permitting of wind farms can take at least two-to-six years, assuming there are no complications. Judicial reviews or permit challenges, which are typically launched when the approval process is well advanced, can add another two-to-seven years to this timeline. During the permit challenge, construction might be paused and continued only once the judicial review has been resolved. Meanwhile, developers may find it difficult to access debt financing as banks only commit to projects that are not subject to a judicial review.
However, permit challenge insurance is still new to the European wind energy market. There is a substantial lack of awareness about the insurability of the risk, the coverage and the pay-out. Developers typically use the cover to protect their financial downside, access financing and continue with their construction. To the majority of our interviewees, insurance forms part of a broad spectrum of measures, which may include entering into a dialogue with claimants, adjusting planning proposals, settling out of court and insuring the residual risk.
The legal resolution of a permit challenge is also a key component of every judicial review. Legal frameworks for challenging wind farm permits vary from country to country, as do grounds on which challenges can be mounted and who can file them. Pro-renewable energy policies by national and local administrations and general public approval for cleaner forms of energy in France, Germany and Spain have prompted governments to simplify and shorten the legal process for wind farm permit challenges. Despite these improvements, the perception of the legal process as being complicated, slow, expensive and risky remains.
About MX Underwriting
MX Underwriting is a European agent and part of the Specialist Risks Group, which was founded in London in 2009. Since then the company has expanded into nine businesses operating from five offices. In Europe the company operates through the fully regulated MX Underwriting, licenced in 2017. With a team of underwriters, MX Underwriting supports clients in Ireland, Spain, France, Germany, Benelux, Denmark and Sweden, providing insurance cover utilising its carriers’ insurance capacity for financial and legal risk in real estate, infrastructure, renewable energy development projects and transactions.
About Fieldfisher
Fieldfisher is a European law firm with market-leading practices in many of the world’s most dynamic sectors with a particular focus on energy and natural resources, technology, financial services and life sciences.
The firm’s international renewables and sustainability practice offers one of the strongest networks of skilled legal advisers in Europe’s renewable energy industry. Fieldfisher acts for various clients across the low-carbon sector, including project developers, financial institutions, investors and suppliers. Its specialist lawyers understand and can pre-empt the issues that often arise in developing wind, solar, geothermal, energy from waste (EfW), storage, energy efficiency and biomass projects. Fieldfisher has 25 offices across 11 countries.
About LERIA
Created by experts in the field of insurance of litigation, legal and environmental risk, LERIA assists its clients by offering a quality insurance solution to enable and facilitate the development and financing of projects under recourse. After having spent several years developing a solution specific to the Renewable Energy market (mainly wind power), LERIA is now a leading player in legal risk insurance field in France.
About WindEurope
WindEurope is the voice of the wind industry, actively promoting wind energy across Europe. They have over 400 members, active in over 35 countries from across the whole value chain of wind energy: wind turbine manufacturers, component suppliers, power utilities and wind farm developers, financial institutions, research institutes and national wind energy associations.
