New Assignment Form
Contact Us
Stay up to date with our latest insights and resources
Learn More
Stay up to date with our latest insights and resources
Learn More
Stay up to date with our latest insights and resources
Learn More
Stay up to date with our latest insights and resources
Learn More
  • There are no suggestions because the search field is empty.

Key Considerations in the Measurement of Wind Power Business Interruption Losses


Wind Turbines in Galicia, SpainWind power is one of the fastest growing energy sources in the world providing an infinite resource to generate electricity without polluting the air.  In the United States, wind turbines represent the largest source of renewable power and account for over 10% of utility-scale electricity generation (20221).

Growth in wind power is due to improvements in the cost and performance of technologies, as well as the Production Tax Credit (PTC), which continue to drive down costs. The size and power of wind turbine units have increased considerably over time.  For instance, the average nameplate capacity of wind turbines installed during 2021 is approximately three (3) MW, compared to an average of one (1) MW for installations back in 19991.  Also, offshore wind turbines are typically larger than onshore units, and the U.S. is seeing a particular increase with the number of new offshore wind farm projects.

Measuring a business interruption loss for a wind farm requires a solid working knowledge of the wind power industry.  Understanding the various industry terms and acronyms that are used is critical to allow for effective communications with the involved parties.    

Incentives Impacting Wind Power Generation

The U.S. Department of Energy’s (DOE’s) Wind Energy Technologies Office (WETO) offers various incentives to help stimulate wind power projects and production.  The types and benefit levels of the incentives are constantly changing over time.  For example, the Inflation Reduction Act (IRA) which became law on August 16, 2022, provides various increases and extensions to energy tax credits including renewable electricity production tax credits (PTCs). 

According to WETO, starting in 2025, the federal tax credits for wind (including PTCs) will be replaced with technology-neutral credits for low carbon electricity generation.  In addition, many states and individual taxing jurisdictions offer incentives to wind farm developers. These incentives include state-level tax credits and property tax abatements, both of which typically apply for a predetermined period of time following the wind farm’s development.

Wind Farm Operations

A wind farm is a group of wind turbines in the same location that is used to produce electricity. Wind farms can either be onshore or offshore and vary in size from a small number of turbines to several hundred wind turbines.  Large-scale wind projects are typically located where the environment is most favorable for greater average wind speeds.  Equally important for selecting the right location is finding areas with adequate available transfer capability (ATC), which is the measure of remaining capacity in a transmission system to allow for the integration of the wind farm’s generation onto the power grid.

The operation of a typical wind farm often involves the following key parties / entities:

  • Landowner – leases land to developer / operator (e.g., fixed $ per turbine or % of revenue)
  • Developer / Operator / Generator – operates wind farm, generates and sells electricity
  • Independent System Operator (ISO) – buys / takes the electricity generated, manages power grid
  • Original Equipment Manufacturer (OEM) – manufactures and services turbine parts / equipment

It is not unusual for multiple, separate entities to exist as part of the production chain for a wind farm operation.  When a business interruption loss occurs, the policy coverage may be specific to only one or some of the impacted entities, and not all entities may be insured. These upstream and downstream financial losses are sometimes addressed by added interdependency-type coverages.

Business Interruption Losses for Wind Farms

Damage to wind farm turbine units and other associated equipment can occur due to mechanical issues and failures as well as from extreme weather events and natural disasters. Coverage complications can arise when damage occurs to the transmission line connecting the turbine units to the grid, rather than damage to the turbine units themselves.

Lost Revenue Calculation

Where coverage is afforded under the insurance policy, it is necessary to identify the impacted revenue streams.  For a wind farm, revenue (income) often includes the sale of generated electricity, capacity income, renewable energy credits (RECs) and production tax credits (PTCs). 

The calculation of lost electricity sales should consider various factors, including the following:

  • Location of the damaged turbine unit(s) – especially for larger wind farms, wind and intermittency levels can vary from one turbine unit to the next, within the wind farm’s land area.
  • Seasonal wind patterns – depending on the location, average wind speed can differ over the course of a year due to predictable seasonal variations.
  • Unused capacity – in addition to wind conditions, other factors that cause unused capacity include the wind farm’s ability to dispatch units, timing of demand and loads, and curtailment of electricity generation. Depending on these types of factors, it is possible on a partial wind farm loss, to see non-impacted turbines offset the production lost from the impacted turbines.
  • Impact of damage to operations – if claimed damages limit the wind farm’s overall generation levels, the loss calculation should only reflect times / days when the wind farm’s generation would have otherwise surpassed the limitation point (e.g., one of two transformers is damaged, but all turbine units remain operational).
  • Sales price per MWh – pricing can fluctuate sharply from one day to the next, and there may be different purchasers with different pricing (e.g., contractual rates, market rates, etc.)


When evaluating the selling price of the lost electricity generation ($’s per MWh), it is important to fully understand the agreements that are in effect, and the time periods that each applies to.  Many purchase agreements will include favorable pricing for renewables, compared to standard electricity market rates.  However, these agreements may also cap the MWh’s that can be sold within a given period.  In such cases, a partial wind farm loss may not necessarily cause the period’s MWh sales to fall below the cap level, and so the actual loss sustained could end up reflecting a much lower selling price to a different party.  It is also important to understand the relationships between the parties to the purchase transactions.  This will help identify the actual selling price to the third party (vs. internal pricing to same insured parties).

In addition, if energy hedging investments are held by the insured, this should be considered to determine the true pricing applicable to the lost MWh generation.  For example, under a fixed hedge contract, a loss may not be incurred on most days during the covered period.  On the dates that a loss does result, the market price should apply as opposed to the hedge pricing.

Reviewing losses for the other revenue streams (besides electricity sales), such as capacity payments and RECs and PTCs, starts with gaining an understanding of how the income is typically determined and calculated, and how the claim incident may impact this calculation.  To the extent that these revenue streams are contractual, a thorough review of the applicable agreement / contract will be necessary.

Analysis of Expenses

In general, the operating expenses for a wind farm operation are largely unaffected when turbine units are offline due to a loss.  Once a wind farm is installed, most of the operating expenses incurred by the business are fixed in nature. Operating expenses that tend to show some reduction include the land lease (e.g., percentage of revenue) and certain maintenance expenses.  In many cases, maintenance services are contractual and performed by the original equipment manufacturer (OEM) or an independent service provider (ISP).  Although the contract may stipulate that these fees should continue while the turbine units are offline, there may be certain fee portions that are reduced such as performance-based amounts.


The wind power industry has seen rapid growth in recent years, and will no doubt continue to grow as the world’s major economies look to sustainable energy generation options in response to concerns about climate change. Understanding the way wind farm businesses operate and understanding the industry nomenclature is essential to accurately measuring the business interruption loss. 

Key Acronyms:

OEM – Original Equipment Manufacturer

KWh – Kilowatt hour

MWh – Megawatt hour

ISO – Independent System Operator (controls power grid)

RTO – Regional Transmission Organization (controls power grid)

REC – Renewal energy credit

PTC – Production Tax Credit


 1 U.S. Energy Information Administration (EIA) / Wind Energy Technologies Office (WETO)

*This blog was co-written by Lexi May.  Lexi has over 17 years of forensic accounting experience performing calculations and writing reports regarding business income losses, extra expense analysis, property damage, soft costs analysis, construction contract analysis, builder’s risk losses, inventory losses, lost wages, subrogation, employee dishonesty and financial motive for a variety of industries.


subscribe to forensic edge

Since joining Meaden & Moore in 2001, Tylar has dedicated his career to providing investigative (forensic) accounting services to the insurance industry and for litigation support. He has expertise with commercial insurance claims involving business interruption, extra expense, property damage, builders risk, employee dishonesty and theft. Tylar has experience throughout the Unites States and Internationally in a wide range of industries.

Search the Blog

  • There are no suggestions because the search field is empty.