Managing the Volatility Risk of Renewable Energy: Index Insurance for Offshore Wind Farms in Taiwan

Renewable energy is produced using renewable natural resources, including wind power. The Taiwan government aims to have renewable energy account for 20% of its total power supply by 2025, in which offshore wind power plays an important role. This paper explores the application of index insurance to...

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Bibliographic Details
Published in:Sustainability 2021-08, Vol.13 (16), p.8985
Main Authors: Liao, Shih-Chieh, Chang, Shih-Chieh, Cheng, Tsung-Chi
Format: Article
Language:English
Subjects:
Adverse selection
Aeronautics
Agricultural production
Agriculture
Alternative energy sources
Autoregressive models
Buildings and facilities
Climate change
Electric power generation
Electric power production
Electricity
Emissions
Energy industry
Farm buildings
Forecasting
France
Green technology
Greenhouse gases
Industrial plant emissions
Information management
Insurance
Insurance (contracts)
Insurance applications
Natural resources
Nuclear energy
Nuclear power plants
Offshore energy sources
Offshore operations
Paris Agreement
Petroleum in submerged lands
Policyholders
Power supply
Rain
Renewable resources
Risk management
Sustainability
Taiwan
Volatility
Wind farms
Wind power
Wind speed
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Summary:Renewable energy is produced using renewable natural resources, including wind power. The Taiwan government aims to have renewable energy account for 20% of its total power supply by 2025, in which offshore wind power plays an important role. This paper explores the application of index insurance to renewable energy for offshore wind power in Taiwan. We employ autoregressive integrated moving average models to forecast power generation on a monthly and annual basis for the Changhua Demonstration Offshore Wind Farm. These predictions are based on an analysis of 39 years of hourly wind speed data (1980–2018) from the Modern-Era Retrospective analysis for Research and Applications, Version 2, of the National Aeronautics and Space Administration. The data analysis and forecasting models describe the methodology used to design the insurance contract and its index for predicting offshore wind power generation. We apply our forecasting results to insurance contract pricing.
ISSN:2071-1050
2071-1050
DOI:10.3390/su13168985