Potential Quantification Issues for Losses Involving Wind Farms Under Construction

  • Date03 April, 2022
  • Author Maria Geyer

Quantifying the financial impact stemming from the failure of an already commissioned single stand-alone wind turbine generator presents challenges, but these challenges increase exponentially when the failure occurs at a wind farm under construction. Additional complexities surface to the extent only a portion ofm the farm is impacted yet commissioning and construction continues on the remaining undamaged sections of the contract works. Undoubtedly, project owners will seek to recover their financial losses by potentially submitting a claim against its Construction All Risks policies or by pursuing others responsible for the event, if any.

Depending on the size of the farm, date within the construction critical path the event occurs, and the nature and extent of damage, among other, financial losses can easily begin to eclipse tens of millions of dollars or more. MDD works collaboratively with all interested parties to objectively isolate the damages solely related to the event. While certain costs are easily identifiable, other costs and financial losses require thorough investigation.

General Contractor / Material Damages

Often it is most expeditious to utilize the existing contractors already onsite to carry out repairs following an event. This can present special challenges that might not otherwise manifest themselves in already commissioned projects, particularly in those situations involving a partial loss, as the contractor will be working on completing the base contract works as well as effecting repairs related to the event.

Based on our experience, inserting MDD immediately after the event can prove very beneficial, as we can work with all parties involved at the outset to create a keep cost system that will easily separate costs related to the event versus costs involving the ongoing contract works. MDD can easily monitor the costs under this keep cost system to validate the costs being incurred.

Without an accurate keep cost system, the situation often becomes murky, as the costs related to ongoing base contract works get muddled with the costs being incurred to effect repairs. MDD is regularly engaged to thoroughly analyze the underlying source documents [e.g., contracts, timecards, invoices, etc.] to isolate the repair costs that relate solely to the event.

Following are just a few examples of the services MDD regularly performs:

  • Segregate direct costs related to the ongoing construction of the windfarm, particularly those areas not impacted by the event. For example, MDD will thoroughly analyze invoices and timecards to isolate charges and ensure that ongoing construction costs in other areas of the farm are not considered.
  • Identify incremental indirect costs versus normal ongoing costs. For sake of ease, contractors will merely apply a percentage loading to certain base costs to cover its indirect supervision and overhead. This approach, however, does not truly reflect the additional cost incurred applicable to the event as many of their personnel would have already been on-site as part of the base contract works, thereby creating a potential windfall. MDD undertakes detailed analyses to identify the true incremental project supervision and administrative labor and overhead costs incurred by the general contractor, including those incurred due to extended construction schedules.

Revenue Loss and Mitigation

Delay in the construction schedule may also result in a loss of revenue, which again presents many complexities, particularly to the extent the project owner is able to use undamaged equipment during the delay period.

Expected Revenue

Prior to the first shovel going into the ground, a pre-construction assessment will be prepared for investors and used to submit bids in the wholesale power market, which contain assumptions regarding the expected capacity and market pricing. However, this initial assessment prepared many months or years prior may not be indicative of what would have been realized but for the event.

Amongst other things, MDD is engaged to test the underlying assumptions such as the following:

  • Validate installed real capacity versus initial theoretical capacity
  • Compare pre-event commissioning schedule “but for” the event to the revised commissioning schedule
  • Identify key assumptions including wholesale market operator’s variable transmission cost
  • Analyze actual spot market pricing in specific wholesale markets and renewable energy credits (RECs) until Power Purchase Agreement (PPA) start date

In some cases, the actual installed capacity and market pricing can be more than 20% different than originally anticipated.


For example, assume that the damage was to a transformer that only serviced a portion of the overall farm’s wind turbine generators, MDD will assist in evaluating mitigation strategies involving:

  • Cost / benefit associated with installation of a temporary transformer
  • Assessing to what extent, if any, bonuses paid to the vendors to accelerate commissioning might seek to avoid a delay with the PPA start date
  • Revenues earned in non-affected portions of the farm during the delay period

Key Takeaways

The following are not intended to be all-inclusive and will depend on the nature of the circumstances but hopefully will assist the parties involved:

  • Establish a keep cost system immediately following the event to isolate costs related to the event versus ongoing contract works;
  • Identify mitigation strategies and cost-effectiveness related to shortening the delay period [e.g., temporary equipment, bonus for accelerated delivery, etc.]; and
  • Test and validate generation and model assumptions, which can be significantly different than preconstruction expectations.


The statements or comments contained within this article are based on the author’s own knowledge and experience and do not necessarily represent those of the firm, other partners, our clients, or other business partners.

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