Installed global-wind-power capacity is expected to more thandouble by 2016 from 2010 levels.

Such massive and global expansion of demand for wind turbines isgood news for manufacturers. But naturally these manufacturers,whether large original-equipment manufacturers (OEMs) or smallercomponent-parts producers, also face a number of risks which cancripple a company lacking the proper coverage, says Amy Ingram, theTampa, Fla.-based vice president and worldwide clean tech segmentmanager for the Chubb Group of Insurance Cos.

A key measure manufacturers can take to mitigate those risks:detailed design specifications, including a clear understanding ofwhich party is responsible for developing them, Ingram says.

“With thousands of component parts in each turbine needingto work seamlessly with one another, manufacturing processes mustbe precise, or manufacturers may find themselves facing a liabilitylawsuit,” she says.

To protect itself from liability, the component-partsmanufacturer should thoroughly document and contractually agreeupon all of the OEM's product specifications and performancerequirements. Purchase orders alone likely would be insufficient,Ingram says

Ingram also maintains that a component manufacturer musthave a robust quality control/quality assurance program in place.“Quality certifications such as ISO 9001 should be considered astarting point.”

In addition, a component-parts manufacturer's core competencyshould align with the work the OEM wants it to perform, Ingramsays. “For example, a large metal worker that traditionallyfabricates parts for ships may have the appropriate skill set andfacility to build the large flanges that bolt wind-tower sectionstogether.”

Ingram also recommends a business-contingency plan in case adisaster prevents it from fulfilling its contractobligations.

One of the biggest risks that large, utility-scale windturbines face is susceptibility to damage from wind and otherweather.

“This is why it's so important to understand who is responsiblefor what when it comes to the design specifications,” Ingram says.“Contracts that rely on the component manufacturers to makeengineering decisions on issues like safety factors place far moreaccountability on the little guy. This is why the properindemnifications must be spelled out and component manufacturershould obtain signoff from the OEM before parts are produced.”

The wind-turbine innovator is expected to assume theresponsibility for design work, unless spelled out otherwisecontractually with suppliers, she says.

OEMs, though, have significantly reduced the frequency andseverity of weather-related and structural-fatigue losses that hadbeen associated with utility-scale turbines and now policethemselves with proven industry standards and use real-worldtesting facilities such as the Wind Turbine Testing Center inBoston, she says.

At the same time, improvements in the turbine's system controland data-acquisition intelligence can help prevent the damagebefore it occurs. “These improvements, coupled with vigilancearound maintenance and inspections, will continue to help reducethe frequency and severity of claims,” Ingram says.

Small, Site-Specific Wind Turbines

Meanwhile, an increasing number of smaller, site-specific,turnkey wind turbines also are being developed, and these posedifferent risks for turbine manufacturers, according to Ingram.

These units could be located onsite, for example, at afarm or a school, which could create safety and liability issues.“To help minimize the risk, the overall turbine design, as well asthe specific component parts should go through a robust testing andquality-auditing process before they are commercialized and sold,”Ingram asserts.

Skipping that “prototype phase” and rushing to marketmisses an opportunity to catch potential problems before a systemgoes into operation, when a failure could prompt customers todemand the removal of the turbine and a refund, Ingram says.

Wind-turbine manufacturers also should be protecting themselveswhen providing installation advice or acting as the so-called“paper general” contractor while the installation is performed by ahands-on general contractor or sub-contractors under themanufacturer's control, Ingram says.

“For instance, the wind-turbine manufacturer should considerhaving certificates of insurance with adequate limits for theproject engineer, the hands-on general contractor, all subsunderneath the GC and the project/asset owner/landlord,” Ingramsays.

The manufacturer also should insist on being named as anadditional insured by the hands-on general contractor or allsub-contractors if the manufacturer acts as the direct GC, shesays.

“And, we can't emphasize enough the importance ofindemnification agreements that contractually spell out who isresponsible for what activities,” Ingram says.

The availability of insurance for both OEMs and smallercomponent-parts producers is driven by those companiess' experience, quality control, testing and contract management,Ingram says.

“Specifically for turnkey wind-turbine companies, there isalways the risk that the turbine does not meet the planned electricproduction outlined by the company. This pure business risk ischallenging to insure and may not be available in the standardinsurance market,” Ingram says.

Ingram observes that the question is not whether these companies can obtain insurance. Instead, she says,it's whether these global operations are being “servicedappropriately and protected adequately” by theirinsurers.