Smarter energy systems crucial to combatting diverse new climate risks

An overhaul of financing mechanisms and policy framework is necessary to develop "smarter, not just stronger" energy markets, which will need to combat "unprecedented strains" arising from new climate commitments, a new report from the World Energy Council (WEC) has found.

The Road to Resilience: Financing resilient energy infrastructure report, released today (13 September), has warned that extreme weather events, the energy-water-food nexus and cyber threats are emerging as the critical risks that global and regional energy markets must mitigate.

The report notes that these threats will impact both the physical structures and the revenue streams of the markets that are already in need of advancement to build a more sustainable future. The report outlines what methods should be adopted to manage risks and create resilient energy systems.

WEC’s secretary-general Christoph Frei said: “With accelerating energy systems integration, resilience is no longer just about returning single assets to full operation after a disruptive event. When interdependent parts of a system are blacked out, the system as a whole is at risk of being deadlocked.

“The different risks to resilience have very distinct meaning and priorities in different regions. Yet the imperative to cope with these risks is a powerful catalyst for innovation with transformative global impact: innovation in technology, system design and management, cross-country and value chain cooperation, the required policies and, last but not least, financing concepts. Securing the future investments to expand and transform the sector is the critical challenge ahead.”

Monoculture risks

The report notes that extreme weather events have more than quadrupled over the past 40 years. The impact that this is having on energy systems is leading to blackouts, the closure of nuclear plants due to heatwaves and hydropower generation being stifled by droughts.

The adoption of new systems and financing solutions, which the report notes would consider the cost-benefits of models that can account for weather extremities, will enhance the project risk profile and keep investment strong.

According to the report, 98% of the world’s power supply is at the mercy of water availability. With water stress quickly becoming a global issue, the report notes that both water and food production – which requires large amounts of energy – could impact the stability of the energy sector.

In order to combat water scarcity, the report urges global leaders to diversify food supplies, IT services and grid infrastructure to mitigate “monoculture risks”. The uptake of off-grid energy systems and distributed generation, increased supply of low-carbon energy and improved demand management are all ways to improve energy resiliency in this regard.

By diversifying the market, energy companies will also be more prepared to deal with cyber-attacks due to improved access to a greater array of IT solutions. The digitisation of the energy sector has enhanced operator’s ability to store and share both data and energy, but this has also led to increased vulnerabilities which could be mitigated by pooling from a variety of suppliers.

The report also calls on companies to increase specialised communications with supply chains as a means to spread information and harmonise cross-border activities. Policymakers also have a role to play, and should create a legal framework that defines what level of resiliency should be required for infrastructure.

Smarter and stronger

A previous blog post from Ashridge Business School highlighted what practices and processes will be needed to allow leaders and organisations to develop businesses, products, services and an economy that will be resilient into the future.

Independent body Smart Energy GB has also underlined the necessity to adapt to rising energy demands, claiming that urban expansion, economic growth and the integration of new technology will lead to cities embracing renewable energy as part of a smart city transition that its equipped to deal with energy demand.

Matt Mace

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