The risk outlook for clean energy companies is more complex and interconnected than ever before as companies balance conflicting priorities.
The International Energy Agency (IEA) estimates that $4 trillion of clean energy investment will be needed every year from now until 2050 in order to reach net zero targets.
This means organisations exploring and investing, working out what technologies and systems work best for them, and plotting the trajectory of their own clean energy transition while keeping a firm grip on immediate commercial priorities.
Average spend on clean energy technologies is expected to increase by over a third in the next financial year, according to the latest global Clean Energy Survey released by Willis.
Against the backdrop of increased fossil fuel investment in the short and medium term, natural resources businesses have ambitious long-term investment plans in clean energy technology, the broker said.
However, Willis warned that the risk outlook is more complex and interconnected than ever before as companies balance conflicting priorities.
The survey received 450 responses from senior decision makers in leading energy and natural resources companies in Europe, North America, Asia-Pacific and Latin America, providing insights assessing the industry’s next moves in facing its evolving challenges.
Key findings:
- 100% of natural resources companies surveyed have a clean energy strategy, but with different levels of maturity. 71% of renewables companies are at the implementing or fully implemented stage, compared to 36% for oil and gas, 63% for power and 43% for mining and metals.
- 63% view clean energy as a growth opportunity: The result is similar across all sectors, indicating a widespread commitment to the energy transition. This includes oil and gas businesses, with many companies investing in clean energy alongside the recent uptick in fossil fuel activity.
- Investment will increase by over a third in 2025: 34% is the average expected increase in spending on clean energy technologies and infrastructure in the next financial year, rising from an average $185m in 2024-25 to $249m.
- Technology priorities are shifting: 51% rated solar as a top priority in the near and medium term. In the medium to long term, 61% prioritize battery storage solutions and carbon capture and storage. Geothermal and hydrogen emerged as high priorities over a 10-year horizon.
- Supply chain and geopolitics are top risks: 79% named supply chain disruption and 78% geopolitical issues among the greatest risks to their clean energy strategy, reflecting concerns over trade tensions and changes to subsidies and regulations at a time of increasing global volatility.
- Companies face challenges getting the right insurance: 53% said blanket exclusions were an obstacle to transferring their risks, followed by limited duration / inflexibility of insurance (48%), and lack of suitable products (47%), indicating a need for markets to develop new and better solutions for clean energy risks.
“The risk outlook is more complex and interconnected than ever before,” said Rupert Mackenzie, global head of natural resources, Willis.
“Navigating the clean energy transition is challenging for natural resources companies, who must balance competing regulatory, financial and operational pressures. From supply chain issues to technical and performance failures, to difficulties getting affordable project financing and right-sizing insurance cover.
Maintaining stable energy supplies and healthy revenue flows are commercial priorities, but the need to participate in the clean energy transition is unavoidable.”
Three tips to build resilience
The Willis report urges risk managers to begin by reassessing the critical issues specific to your organisation. This means answering questions such as:
- What are your short- and long-term goals?
- Which risks – both established and emerging – pose the biggest threats?
- Which solutions and capabilities can help you make decisions with confidence?
- Where might you need more support?
The broker offers three key suggestions for energy businesses looking to build resilience:
1) Make smart clean energy investments to position your company for success
Willis says: All technologies – both existing and emerging – carry risk. But inaction is not an option. As pressures to decarbonise escalate, don’t get derailed by analysis paralysis.
Renewable technologies are becoming more modular, adaptable, reliable and efficient. It’s hoped that with good operations and maintenance, companies can take advantage of potential evolutionary efficiencies in technology whilst reducing inherent risks of technology obsolescence.
Creative insurance solutions are evolving to help companies protect and grow their operations in a clean energy future. Partnering with a sector-specialist risk advisor and broker can help.
2) Build resilience into clean energy projects from the get-go
Willis says: Risk engineers can help project sponsors select technology that’s best aligned to their organisation’s clean energy goals and make sure it’s built and installed safely, while also acting as a bridge to underwriters, providing the data insurers need in order to feel comfortable with the risk.
Engaging with risk engineers early can help businesses save money in the long run by increasing both project and future operational resilience, prevent losses, reducing the cost of insurance, and enabling projects to move through all its phases in a confident and secure way.
3) Optimise your risk strategy and spend where it matters
Willis says: As natural resources companies diversify into clean energy, analytics can help them assess the impact of a wide range of external risk factors on clean energy investments.
For example, for capital-intensive renewables, if the cost of capital goes up, what level of production time do you need to break even? And can that be achieved if there are long term shifts in weather patterns, supply chain disruption or geopolitical headwinds?
Risk analytics can help you identify, quantify, and prioritise major risks, and connect risk management decisions to corporate financial performance. By looking at all of your risks across different scenarios, decision-makers can prioritize risk mitigations efforts to get the best results from your risk management spend.
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