Dr.G.R.Balakrishnan Jun 18 2024 Marine News (Ocean and Offshore Energy)

AXIS reports climate change driving energy transition amid rising risks

Climate change is a significant driver of the energy transition, but it also presents considerable risks. Climate-related weather events threaten companies’ physical assets and overall business operations.

These risks include energy price volatility, supply chain disruptions, evolving regulations, technology disruptions, and extreme weather events. Over two-thirds (69 percent) of industrial energy buyers expect the climate crisis to impact their company’s performance, affecting revenue, costs, and investments.

The main reasons businesses are taking proactive climate measures are long-term business viability (49 percent), regulatory compliance (49 percent), and climate concern (47 percent). “The shift to a lower carbon economy is among the greatest challenges of our day and requires all of us – businesses, governments, communities, and individuals – to work together to achieve our climate goals,” said Vince Tizzio, President and CEO at AXIS.

“In publishing this report, AXIS aims to elevate understanding of the risks and challenges involved in the energy transition and to identify how energy industry stakeholders can proactively and collaboratively support businesses on their journeys,” further added Tizzio.

Investing in energy efficiency is a key strategy for climate action and is the most popular form of transition investment.  This trend is partly driven by the recent energy crisis and exposure to fossil fuel and commodity price volatility. However, preparedness to address the urgency of the energy transition is limited, with most respondents feeling only “somewhat prepared” (55 percent) or “not too prepared” (4 percent). Global economic conditions marked by rising interest rates and inflation have made financing renewable energy projects more expensive and challenging.

High capital requirements and challenging global economic conditions are significant barriers to increased investment in renewables. Nascent technologies, which need substantial capital for scaling up, often face tough financing challenges (40 percent of energy producers) and lack proven returns on investment (33 percent of energy producers). Solar technology is currently the most popular investment area (63 percent in the UK, 54 percent in the US), followed by battery storage solutions (38 percent in the US, 35 percent in the UK) and smart grid technology and modernisation (36 percent in the US, 31 percent in the UK). Energy price volatility is a major concern for industrial energy buyers, cited by 63 percent in the UK and 57 percent in the US.

Public policy has accelerated the energy transition, but further government support is essential for continued progress. An overwhelming 92 percent of energy producers surveyed believe governments and regulatory bodies play a crucial role. There is a clear call for governments to create investment incentives and provide financial protection against adverse events to bridge the financing gap in the renewable energy sector.

There is an opportunity for the insurance industry to adopt a more proactive and strategic role in the energy transition…Based on a survey of over 600 energy producers, industrial energy buyers, and specialist insurance brokers in the US and UK, the report provides insights into how insurers and other stakeholders can better facilitate the energy transition. Richard Carroll, Global Head of Energy Resilience at AXIS, said: “…The energy transition also requires an insurance industry with deep specialty knowledge of the risks associated with the transition, and of the complexities of deploying the technologies to make global net zero ambitions a reality.” “Through our Global Energy Resilience division and AXIS Energy Transition Syndicate 2050, AXIS is committed to working collaboratively with customers and partners to address challenges and seize opportunities to help to power a more resilient, lower carbon future.”