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

Author

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  • Shih-Chieh Liao

    (Department of Risk Management and Insurance, National Chengchi University, Taipei 11605, Taiwan)

  • Shih-Chieh Chang

    (Department of Risk Management and Insurance, National Chengchi University, Taipei 11605, Taiwan)

  • Tsung-Chi Cheng

    (Department of Statistics, National Chengchi University, Taipei 11605, Taiwan)

Abstract

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.

Suggested Citation

  • Shih-Chieh Liao & Shih-Chieh Chang & Tsung-Chi Cheng, 2021. "Managing the Volatility Risk of Renewable Energy: Index Insurance for Offshore Wind Farms in Taiwan," Sustainability, MDPI, vol. 13(16), pages 1-27, August.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:16:p:8985-:d:612495
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    References listed on IDEAS

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    Cited by:

    1. Shih‐Chieh Liao & Shih‐Chieh Chang & Tsung‐Chi Cheng, 2022. "Index‐based renewable energy insurance for Taiwan Solar Photovoltaic Power Plants," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 25(2), pages 145-172, June.
    2. Chin-Wen Liao & Kai-Chao Yao & Chin-Tang Tsai & Jing-Ran Xu & Wei-Lun Huang & Wei-Sho Ho & Yu-Peng Wang, 2023. "Constructing and Validating Professional Competence Indicators for Underwater Welding Technicians for Offshore Wind Power Generation in Taiwan," Sustainability, MDPI, vol. 15(14), pages 1-25, July.
    3. Huang, Hao-Hsuan & Huang, Yun-Hsun, 2024. "Applying green learning to regional wind power prediction and fluctuation risk assessment," Energy, Elsevier, vol. 295(C).
    4. Hughes, Llewelyn & Longden, Thomas, 2024. "Offshore wind power in the Asia-Pacific: Expert elicitation on costs and policies," Energy Policy, Elsevier, vol. 184(C).

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