New approaches are required for the management and financing of energy infrastructure as companies and governments seek to meet the challenges of increased extreme weather risks. This is the key conclusion of a new report from the World Energy Council.
‘The road to resilience – managing and financing extreme weather risks’ highlights the need for a move from ‘Fail-Safe’ systems that only look at single assets to ‘Safe-Fail’ systems which take a systemic overview of the energy value chain and a more strategic approach to identifying vulnerabilities.
Concluding, the report notes that along with more modular designs and decentralised solutions, local empowerment is becoming a key issue in the proposal, construction, and operation phases. Sharing information on the impact of an event, design recommendations and emergency response strategies among the various stakeholders can help improve energy infrastructure resilience in an increasingly uncertain and complex world.
To manage and finance resilience against extreme weather risks, the World Energy Council report recommends new financial instruments such as weather derivatives, catastrophe bonds and adaption bonds which ensure funds go towards resilience measures, particularly in vulnerable areas.
Christoph Frei, Secretary General of the World Energy Council says: ‘This new approach is essential if we are to cope with new weather patterns and phenomena such as the more powerful El Niño currently experienced in many parts of the world.‘
Frei adds: ‘Our report has highlighted that current estimates for the cost of energy system adaptation do not fully account for the additional financing required to accommodate these new emerging risks. We need to ensure that resilience can turn these risks into rewards.‘