‘Green’ Energy is Critical for a Secure Energy Supply

Green energy systems are essential in securing energy supply and protecting the environment, according to a new report from Lloyd’s 360 Risk Insight and UK think tank Chatham House.

The report finds that the reliance on fossil fuels combined with rising demand from developing economies is pushing the search for reserves into more risky territories, citing the oil spill in the Gulf of Mexico as an example. However, the report also indicates that this could drive the transition to more cost-efficient clean and renewable energy systems.

The report, “Sustainable Energy Security: Strategic Risks and Opportunities for Business” (PDF), indicates that energy price spikes and supply disruptions will become more frequent due to rising consumption, insufficient investment, and threats to installations and transport.

In addition, the cost and associated risks will increase the price of fuel at the pump and impact a wide range of commodities in the short to medium term. Together with political pressure to reduce greenhouse gases and protect the environment, businesses will be forced to become more energy efficient and adopt renewable energy, say report analysts.

The report also finds that businesses need to assess their vulnerability to energy volatility as there is potential for both financial and environmental risks.

But there are plenty of opportunities as well. The expected level of investment in renewables and clean energy — up to $500 billion per year by 2050 — generates plenty of opportunities for business, but the lack of a global agreement on carbon reduction is slowing commitment and investments, according to the report. Report analysts recommend that governments set clear policies and create certainty in the transition to a low carbon economy.

The report also warns that businesses need to prepare for a new set of risks as energy system changes, citing that many renewable technology systems use rare materials (China produces 97 percent of the world’s rare earth metals supply, almost 100 percent of the associated metal production, and 80 percent of the rare earth magnets.) and the increasing reliance on electricity and IT could raise vulnerability to cyber attacks. Analysts advise businesses to reassess global supply chains and increase the resilience of their operations.

Business sector risks: