The Growing Liability Gap and Why Traditional Wind Service Agreements No Longer Provide Complete Protection

Modern turbines are outpacing contract coverage, creating hidden financial risks for wind farm operators

The wind industry is experiencing a fundamental shift that most operators haven't fully recognized yet. While onshore turbines have grown from under 0.5MW to 7MW+ over the past two decades, the liability structures in Full Service Agreements haven't kept pace. This disconnect is creating a growing financial exposure that threatens project economics and balance sheet stability.

When FSAs Worked: The Foundation Years

Full Service Agreements emerged as a response to the growing complexity, scale, and financial demands of the wind energy sector. Their development was shaped by industry needs for risk mitigation, predictable costs, and reliable long-term performance. Initially offering only short-term maintenance contracts, OEMs recognized that investors and lenders needed predictable operational costs and performance guarantees to secure project financing. By the late 2000s, major western OEMs made FSAs standard offerings, transferring operational risk from owners to service providers with performance guarantees spanning up to 20 years.

For smaller turbines, this model provided comprehensive coverage that matched the economic scale. The liability structures and performance guarantees were designed around the operational realities of that era, creating a balanced risk allocation that worked for all stakeholders.

The Modern Reality: When Economics Outpace Coverage

Today's wind landscape tells a different story. Modern onshore turbines can generate revenue at unprecedented scales, fundamentally changing the risk equation, especially for smaller wind parks (1-6 wind turbines). Let's break it down into an example calculation:

The liability gap equation:

• Modern turbine avg. revenue loss: €4,000+ per day

• Average FSA liability cap: €100,000 - €140,000* per year

• Time to exhaust coverage: 25 days of downtime on a wind turbine level and 150 days on a park level (assuming six wind turbines).

*Liability caps need to be read carefully and are sometimes not easy to understand and differ across OEMs and over time. We recommend reading every clause carefully and building a simple Excel model to understand the caps. For example, a liability cap can be 200% of the annual FSA costs on a turbine level, but 100% on a park level. At first read, 200% feels substantial. But the 200% is calculated on the fixed part of the FSA costs and not on the variable annual costs that are based on production. Assuming 30% additional variable costs, the real liability cap is at 140% on a wind turbine level.

When major component failures occur, operators can face extended downtime periods. Ongoing supply chain disruptions have significantly increased lead times from pre-COVID levels, with emergency component replacements now taking much longer compared to planned maintenance.

Why the Gap Keeps Widening

Three forces are driving actual risks beyond traditional contract coverage:

Turbine Economics: Each new turbine model generates exponentially more revenue per day of operation. The industry has progressed from 0.5MW turbines in 2000 to 7MW+ turbines in 2025, a 14-fold increase in capacity.

Component Complexity: Larger turbines require crane permits and cranes, specialized components with extended replacement timelines and higher costs. Several factors have increased maintenance costs in Europe in the last few years.

Aging Fleet Risk: Older turbines in the fleet pose growing technical risks due to wear and obsolescence. These risks increase downtime potential not due to liability cap limitations, but due to age-related component failures. Full Service Agreement costs tend to rise significantly when these contracts are renegotiated for aging turbines, compounding the financial strain.

The Hidden Costs of Contractual Risk Shifting

Beyond direct revenue losses, coverage gaps create cascading effects:

• Insurance Premiums: Traditional policies have seen premium increases, despite excluding damages under the scope of the Full Service Agreement, as every fire and lightning strike damage becomes more expensive too.

• Cash Flow Planning: When damages occur, cash flow projections are disrupted in the worst-case scenario. In such instances, banks may need to stop revenue distributions to meet the minimum DSCR (Debt Service Coverage Ratio) for wind parks.

The Strategic Imperative

The existing portfolio and the newly built portfolio has more risk due to limited liabilities. Most owners are facing rising risk in the portfolio.

The liability gap isn't just creating financial risks, it's a competitive disadvantage. Owners who address this proactively will have stronger balance sheets, more predictable cash flows, and better access to growth capital.

Traditional FSA structures served the industry well in its early decades, but they require evolution for today's operational realities. As turbines continue scaling to 7MW+ capacities now in development, this challenge will only intensify.

Outlook

Next to technical risks, commercial risks are rising. Solar, combined with battery storage, starts to compete with wind, pressuring energy prices. The economics of wind energy will continue to evolve. Will you adapt your risk management approach to keep up with it?

If you're ready to eliminate FSA liability exposure while optimizing operational performance, Turbit Blue's risk infrastructure combines AI monitoring with comprehensive insurance coverage, transforming unpredictable operational risks into manageable, insurable outcomes.

Contact our Team