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 June 08, 2010
Green energy no longer just nice but necessary

  Green energy systems are no longer just a 'nice to have' but are essential in securing our energy supply and protecting the environment, according to a new report from Lloyd's 360 Risk Insight and UK think tank Chatham House.  

Reliance on fossil fuels is pushing the search for reserves into more difficult and risky territories as declining production from 'easy' oil reserves combines with rising demand from developing economies; an example being the current oil spill in the Gulf of Mexico. However, this could spur on the transition to more cost-efficient clean and renewable energy systems. 

Richard Ward, Lloyd's Chief Executive, said: "The current generation of business leaders need to rethink their approach to energy risks or be left behind as energy becomes less reliable and more expensive. The environmental and economic cost of our reliance on fossil fuels is too high. We need a long-term plan to reduce consumption and diversify our energy sources." 

A report by Lloyd's 360 Risk Insight and UK think tank Chatham House: Sustainable Energy Security: Strategic Risks and Opportunities for Business shows we face an era of uncertainty and volatility in our energy supply. Price spikes and supply disruptions will become more frequent due to rising consumption, insufficient investment, and threats to installations and transport. 

The cost and associated risks will push up the price of fuel at the pump and have a knock on effect on a wide range of commodities in the short to medium term such as wheat and steel. Combined with political pressure to reduce greenhouse gases and protect our environment this will force businesses to be more efficient consumers of energy and adopt clean and renewable technology. 

The report's Executive Summary notes:

1. Businesses which are able to adapt to and take advantage of the new energy reality will prosper.

2. Market dynamics and environmental factors mean business and society can no longer rely on access to affordable and easy to use energy.

3. We are heading towards an oil supply crunch and global price spike.

4. Investment in renewable energy and 'intelligent' infrastructure is booming. this presents huge opportunities for new partnerships between energy suppliers, manufacturers and users.

5. Energy infrastructure will become vulnerable as a result of increasingly variable and severe weather patterns

6. Asia will be central to global energy security.

7. Businesses must reduce energy consumption.

8. Lack of global regulation on climate change is creating an environment of uncertainty for business, which is damaging investment plans.

9. Business must address supply chains.

10. The 'just in time' business model increases vulnerability to energy supply disruption.

Bernice Lee, Research Director at Chatham House said: "Businesses across the board need to make a serious assessment of their vulnerability to change and volatility on the energy scene. There are huge opportunities as energy systems evolve to include users and increase resilience and efficiency. There is also the potential for heavy or even catastrophic financial and environmental losses." 

The expected level of investment in renewables and clean energy - up to $500 billion per year by 2050 - holds tremendous opportunities for business, but the lack of global agreement on carbon reduction is inhibiting commitment and investments. Ultimately, this will make catching up or adapting to energy shortages much more expensive for all. The report calls on governments set clear policies and create certainty in the transition to a low carbon economy. 

The report also warns we need to prepare for a new set of risks as our energy system changes. Many renewable technology systems use rare materials and the increasing reliance on electricity and IT could raise vulnerability to cyber attacks. Businesses are advised to reassess global supply chains and increase the resilience of their operations.

Source: www.lloyds.com