Abstract:

The development of offshore wind power in China is at risk of generating less power due to low wind speeds, resulting in losses for operating and investors. Based on ERA5 wind field data, this study first assesses fluctuation risk in China's offshore wind resources, and then designs an offshore wind power generation index insurance product. Results showed that: (1) the wind resources for offshore China were most abundant in the Taiwan Strait. It was more abundant in the open areas of the East China Sea and the South China Sea than in the Bohai Bay and the Beibu Gulf. Wind resources were more plentiful in the autumn and winter than in the spring and summer. (2) There was an increasing trend in the occurrence of small offshore wind resource events over time. The fluctuation rate was highest in the south of the East China Sea and the Taiwan Strait. It gradually decreased from the open sea to the land, and gradually increased from west to east in the northern part of the South China Sea. The intensity of the fluctuations was greater on the western side of the islands in the offshore region. (3) The risk of downward fluctuation in power generation was highest in the Taiwan Strait, followed by the northeastern South China Sea and the Beibu Gulf. The Yellow Sea, the northern and southern parts of East China Sea, and the northwestern part of South China Sea were at the lowest at risk. (4) The offshore wind power generation index insurance used actual monthly power generation as the index, effectively capturing the monthly differences in wind resources. It offered insurance plans with different levels of risk protection by setting different payout trigger thresholds based on the probability of default. The pricing accounts for the additional insurance cost arising from managing the risk of low−frequency, high−loss events, as well as regional risk variations. The corresponding premium rates were 7.045%, 7.384% and 8.685% when the monthly payout trigger thresholds were set at 95%, 93% and 90% of the exceedance probability level, respectively. This insurance can stabilize wind farm revenues by compensating losses and improving the revenue floor, effectively managing the risk of wind resource variability.

Key words: Offshore wind power, Fluctuation of power generation, Index insurance, Insurance product design, Insurance product pricing