In this chapter of our Annual Insurance Review 2019, we look at the main developments in 2018 and expected issues in 2019 for power.
Key developments in 2018
The growth of renewables around the world
The power industry’s transition from hydrocarbons to a more diverse energy mix continued during 2018. Increased use of renewable energy continued unabated – a trend that is set to increase over the next five years, covering 40% of global energy consumption growth according to the International Energy Agency. While the growth in solar photovoltaic and wind continued in the electricity sector, bioenergy remains the largest source of renewable energy due to its widespread use in transport and heat.
China led the global growth in renewable energy in 2018 as a result of policies to decarbonise all sectors and reduce harmful local air pollution, and is now set to become the world’s largest consumer of renewable energy by 2023. Brazil retained the title of having the greenest energy mix. Despite uncertainty about policies under the current presidency, the United States was the second-largest growth market for renewables last year.
In many jurisdictions around the world, prices for energy derived from the renewable sectors continued to decrease in 2018. In the UK, for example, offshore wind energy moved from being one of the most expensive forms of renewable energy to being cheaper than nuclear in some cases.
Another catalyst for the continued renewables boom last year was further significant advances in technology, such as improvements in battery energy storage systems. The issue with wind and solar has historically been the inability to store the energy from these forms of generation and ensure a stable supply. However, developments in Li-ion technologies have significantly reduced implementation costs. In addition, wind turbines of up to 8MW are now also being installed across Europe.
What to look out for in 2019
The importance of cyber security in a connected and digitised grid
Cyber security is a fundamental challenge for the power sector and a top priority for industry leaders. Malicious hacking, ransomware attacks, data leaks and electronic fraud are occurring on a global basis, with motives varying from financial to political, or simply a desire to cause disruption.
The uptake of smart devices for real-time operations management and remote operations, and the adoption of cloud services are likely to continue to drive significant change in 2019. The increased reliance on technology does not come without increased risk – as systems become more interconnected and processes more digitised, energy companies will need to contend with an increased number of network-born security threats in 2019 and beyond.
Regulation relating to cyber and information security has historically been focused on data privacy and data protection issues. However, regulatory scope is expanding to encompass infrastructure and providers/operators of essential services. As with any regulation, this will drive the behaviour of organisations to achieve compliance, because the potential financial and reputational consequences of not doing so can be significant.
To manage cyber risk effectively across enterprises and ensure resilience, organisations will need to develop fully integrated, comprehensive plans and frameworks.
Authored by Gary Walkling.
Download our full Annual Insurance Review 2019 for more insights.