Energy systems ‘must be smarter, not just stronger’

The energy industry needs to manage the growing threats of extreme weather, cyber attacks and the energy-water-food nexus. The World Energy Council (WEC) states emerging physical, financial and virtual risks […]

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By Priyanka Shrestha

The energy industry needs to manage the growing threats of extreme weather, cyber attacks and the energy-water-food nexus.

The World Energy Council (WEC) states emerging physical, financial and virtual risks pose an even greater threat to the security and supply of energy.

It believes the transformation of markets and business models, driven by climate change policy commitments, “are putting unprecedented strain” on the energy sector at a critical time, urging on the industry to make energy systems “smarter, not just stronger”.

Its new report finds energy is the second-most water intensive industry after agriculture, with 98% of power supply dependent on the availability of water.

For example in 2015, hydropower facilities in Brazil sustained economic losses of more than $4.3 billion (£3.2bn) due to drought-related energy-rationing and water-rationing measures, it states.

The energy-water-food nexus can impact the stability of energy supply and demand for years or decades, the report adds and the impacts of climate change are likely to increase water stress in many countries.

“This brings with it the prospect of greater competition between different uses as well as individual users of water. Such changes imply further restrictions to energy sector development and design,” the WEC states.

It suggests resilience is no longer just about returning single assets to full operation after a disruptive event as the system as a whole is at risk of being deadlocked when interdependent parts are blacked out. The same may happen after a cyber breakdown, it adds.

Last December, hackers caused a three-hour outage for around 80,000 electricity customers in Ukraine, with the WEC warning such attacks could lead to loss of control of key equipment, resulting in machinery breakdown, fire, explosion or fatality.

It estimates the oil and gas industry could be spending $1.87 billion (£1.4bn) every year on cyber security by 2018.

The report’s key recommendations include:

  • Smarter design of energy systems to withstand diverse emerging risks and be more resilient
  • Better evaluation of energy system designs
  • Better information sharing around risks
  • Policymakers developing “clear, transparent, predictable legal frameworks” to ensure resilience and stimulate finance
  • Increasing private finance in infrastructure
  • Making more use of cost-benefit analysis in financing decisions
  • Encouraging diversity within the energy sector and related industries as that increases flexibility and helps avoid and mitigate the implications of potential threats

Secretary General Christoph Frei said: “The different risks to resilience have very distinct meaning and priorities in different regions. Yet the imperative to cope with these risks is a powerful catalyst for innovation with transformative global impact: innovation in technology, system design and management, cross-country and value chain co-operation, the required policies and last but not least, financing concepts. Securing the future investments to expand and transform the sector is the critical challenge ahead.”