MEMBER NEWS: Proposed OFTO Mutual awarded contract from Innovate UK

January 12, 2023
MEMBER NEWS: Proposed OFTO Mutual awarded contract from Innovate UK

Renewable Risk Advisers Ltd (Renewable Risk), with support from the Offshore Renewable Energy (ORE) Catapult and Prospect Law Ltd, has been awarded a 12-month contract by Innovate UK, the UK’s innovation agency, to structure a legal entity that will improve the ‘insurability’ and ‘bankability’ of UK offshore renewable energy. The project is named ‘The Insurance-Debt Nexus: How risk policy keeps renewable energy bankable’.

This award follows a Feasibility Study also funded by Innovate UK which was recently shared with energy regulator Ofgem and the Energy Networks Association (ENA) OFTO Forum. Letters of support from Ofgem and the Offshore Transmission Owners (OFTOs) were included in the subsequent bid. Subject to satisfactory completion of a finance review by Innovate UK, the new contract will start on 01 February 2023.

The OFTOs are special purpose vehicles (SPVs) established to own and operate the high voltage transmission infrastructure which includes export cables to shore that are by statute ‘unbundled’ by the developer of an offshore wind farm before it becomes operational. These are often highly geared assets, where project finance is crucial to the 6 OFTO owning companies that are responsible for the 23 live assets that surround the UK.

The offshore renewable energy sector is undergoing rapid expansion and by 2030 it is forecast that up to 40,000km of offshore wind farm export cables will be laid worldwide compared with just over 7,500km at the end of 2020. Currently approximately 80% of the value of offshore wind farm claims have come from OFTO cabling losses.

This escalating cost of damages in the offshore wind subsea cable sector has led to a hardening insurance market, resulting in increased premiums, and more stringent terms. This sellers’ market leads in turn to a reduction in ‘bankability’ which reduces ‘investability’ since the equity internal rate of return (IRR) is less leveraged by debt.

The current reliance on the need to prove ‘physical damage’ for the insurance policy to respond means that repair campaigns are often delivered at great expense (i.e. during winter). The ability to intervene at the discretion of a mutual will reduce the cost burden of vessel hire, which alone can amount to 65% of the value of insurance claims, and collective self-insurance will enable electrical fault-finding technologies to enhance preventative maintenance of export cables in offshore wind.

A mutual solution also proposes collective equipment procurement to allow asset managers to stock cost saving equipment such as universal joints that are currently beyond their means. Also information sharing between ordinarily competing organisations will enable the development of risk management best practice that will drive improved asset performance and reduce potential claims.

Only through collective self-insurance can these solutions be delivered. And to do so is in the public interest.

Get in touch

AREG is the original energy transition organisation, working on behalf of members to empower the energy supply chain and champion its expertise. Please get in touch if you have any questions or would like to find out more about membership.

AREG has played an important role in the growth of Scotland’s renewable energy sector, engaging the supply chain and developing the European Offshore Wind Deployment Centre. However, we are only at the very beginning of the transition that AREG was established to both lead and support so there are still opportunities for companies to get into the constantly evolving renewables supply chain. We look forward to continuing our work together as renewables builds on its place as Scotland’s main source of power, and as we seek to deliver real change in the crucial areas of heat and transport.

Scottish Renewables

Aberdeen & Grampian Chamber of Commerce has worked closely with AREG since its formation. The recent progress in the developments of offshore wind projects by Equinor and Vattenfall are as a result of the work of the group over many years. The north-east is known as the oil and gas capital of Europe. At the Chamber, we believe the region must evolve its position to being recognised as the energy capital. Whilst hydrocarbons will continue to be essential in driving our economy for years to come, the generation of renewable resources will play an increasingly important role in providing cost-effective power, innovative development and economic growth.

Aberdeen & Grampian Chamber of Commerce

The enthusiasm and dedication of the early group that would become AREG was fundamental in us choosing to launch All-Energy in Aberdeen. The first tiny show was held in 2001, and AREG’s Chairman at the time, Jeremy Cresswell, played such an active role that I often describe him in terms such as All-Energy’s ‘midwife’. All-Energy is now the UK’s largest renewable and low carbon energy exhibition and conference in terms of number of attendees, space booked, and number of exhibiting companies. As AREG became firmly established, their presence and support for the event grew spectacularly over the years. We thank them most sincerely for their invaluable input.


Vattenfall has forged a strong working relationship with AREG through the development of the European Offshore Wind Deployment Centre. AREG has worked tirelessly on behalf of the North East and it can take enormous credit for the growth of sustainable energy in the region and the path it has cleared for the region to capture further investment.


Aberdeen City and Shire is emerging as a key location for renewables by successfully transferring its world-class oil and gas expertise into the sector and AREG has done much to advance this through a broad range of initiatives. It has acted as a catalyst in driving further investment in the local economy by engaging with companies, Government, public bodies and existing projects and we have been pleased to support their efforts. Scottish Enterprise will continue to engage with AREG as we increase Scotland’s use of renewable energy.

Scottish Enterprise