A recent joint report by Lloyd’s 360º Risk Insight and UK think tank Chatham House entitled Sustainable Energy Security: Strategic Risks and Opportunities for Business, finds that worldwide we face an era of ambiguity and volatility in our energy supply.  Mounting prices and supply interruptions will become more recurrent due to growing consumption, insufficient investment, and threats to IT systems and transportation.  For a complete copy of the Report please click here.

Dependence on coal, natural gas, and petroleum is propelling the exploration for reserves into more complex and precarious terrains as waning production from “easy” oil reserves combines with rising demand from developing economies; the most recent example being the current Deepwater Horizon oil spill in the Gulf of Mexico.  However, this type of disaster could spark the transition to more efficient, clean and renewable energy systems.  “Green” energy systems are no longer just nice to have, but are essential in securing our energy supply and protecting and promoting a sustainable environment, according to the new Report.  In the face of mounting political and social pressure to decrease greenhouse gases and protect our environment, businesses will likely be persuaded to become more efficient consumers of energy and adopt green technologies.

The Report states that the expected level of investment in renewables and green energy – up to $500 billion per year by 2050 – provides remarkable prospects for business, but the lack of international consensus on carbon reduction is inhibiting commitment and investments.  Ultimately, the reliance on a voluntary commitment to deal with energy shortages points to a more expensive undertaking globally as greener practices require retooling existing business strategies, and in the absence of set standards is sure to result in an arbitrary process.  To this end, the Report calls on governments to set clear policies and create certainty in the transformation to a low carbon economy.

The Report also cautions that businesses need to plan for a fresh set of risks as our energy system changes.  Various renewable technology systems use uncommon materials and the mounting dependence on electrical energy and IT may well increase susceptibility to cyber attacks.  Accordingly, the global business community is advised to re-evaluate international supply chains and boost the protections of their operations as we move into this new era.