Why the sustainable energy transition demands greater risk awareness

Growing concerns around the risks of the transition to a sustainable energy future will necessitate businesses beginning the conversations around their exposures sooner rather than later one exert has warned.

Speaking in Madrid at the FERMA Forum 2024, Andy Rice, managing director, Property, Casualty, Technical & Special Risks at Charles Taylor explained the scale of the investments needed and the impact on the environment will become an ever-increasing part of the debate over a sustainable energy future.

“The issue we have is that the country has to recognise and accept that there will be a price to pay for a sustainable energy future,” he added. “For instance, when you consider biogas power it comes with a contamination risk.

“For insurers and risk managers the thing to consider is the gap between events and coverage.”

He continued: “A conventional property policy will offer a breadth of coverage but is environmental risk and environmental liability covered? The cost of restoration is so extreme in many cases.”

Rice added the UK is facing a fundamental challenge in its efforts to transition to a sustainable energy future and both insurers and risk managers will need to understand the threats that come with it, if they are to create workable solutions.

“The National Grid has said it requires an investment of £58 billion to be in a position to meet the targets set for 2035 in terms of power generation capacity,” he explained. “At present there are 11,500 wind turbines in and off the coast of the UK and that number will need to double.”

Rice explained that the infrastructure required will come with a new breed of risks.

“The infrastructure will come at a cost to the environment,” he continued. “There will be an impact on biodiversity. Many of the sites are remote and will come with particular biodiversity interests. The turbines themselves are already impacting migration routes for birds and the cable that will be used to transfer the electricity into the grid will need to be laid and that will cause further impact.”

Rice added that the cable will be oil lined to limit the risk of overheating and there will also be EMF risks.

“We understand the rising demand for energy and electricity. Take the use of electric vehicles. What will the UK’s roads look like in 10 years? Electric vehicles come with risks and at present the country is struggling to meet personal and commercial energy demand.

“If there is a significant increase in the use of electric vehicles the infrastructure will be needed to meet those demands and with it new risks will be created.

“Currently there are concerns around the impact electric cars may have. They are considerably heavier than internal combustion engine powered vehicles and therefore the level of rubber which is being left on the road is greater due to the additional weight.

“This rubber will get into the water course and the food chain. Again, it is a risk that will need to be addressed.

“Risk managers and insurers will have a number of challenges as the country looks to transition its energy supply and they need to be having the conversations now.”