The systems used to design, operate, manage and insure energy infrastructure are struggling to keep pace with the rapid buildout of new power capacity.
According to a new report by FM, titled ‘The FM Power and Renewables Report’, the rapid expansion of power infrastructure, driven by AI, data centres, electrification and the energy transition, can create risk across the full lifecycle of energy assets.
Taken together, the results underscore the need for strong engineering insight from the very earliest stages of a project: 85% of respondents agree that this insight can improve stability, insurability and investor confidence.
“Energy companies are under enormous pressure to add capacity quickly, but speed can lock risk into an asset before construction even begins,” said FM Senior Vice President, Division Manager, Specialty Industries, Doug Patterson.
“The biggest resilience decisions are often made when sites, technologies and equipment are selected. Engineering should be part of those decisions early, while there is still time to identify vulnerabilities and engineer out risk.”
FM Regional Head of Southeast Asia Calvin Kuan added, “In Singapore, every infrastructure decision carries weight. As energy systems evolve and technologies change, resilience cannot be something we assess only once an asset is built.
“The opportunity is to bring engineering into the conversation while there is still time to change the outcome.”
Power buildout moving faster than risk playbook
The research found that 59% of energy companies identify new-technology adoption as a leading cost-of risk driver. At the same time, 39% plan to increase small modular nuclear reactor (SMR) capacity over the next three years.
Many emerging technologies have limited operating history at scale, creating uncertainty about how they will perform under operating conditions, and 46% of energy companies surveyed are uncertain how new technologies will perform under real-world stress, particularly in hybrid applications.
Resilience gap becoming a financial problem
Uncertainty about resilience is affecting project economics. Energy providers say it results in increased construction costs (51%), increased insurance costs (46%) and reduced return on investment (40%), while 39% say it makes projects less attractive to investors.
Notably, financiers also estimate the cost of risk higher than energy providers across a range of categories, suggesting that those financing the power buildout perceive greater risk than those developing it.
Engineering needs to move upstream
Many of the decisions that determine an asset’s resilience are made before traditional insurance placement. The survey found that 78% of energy companies say site-selection decisions frequently create downstream exposures that were not anticipated at the time. These findings point to a broader role for engineering as power systems change.
For brokers and their clients, the value of an insurer increasingly extends beyond transferring risk after a project has been designed. Engineering expertise can help identify, quantify and reduce risk while critical site, technology and design decisions can still be changed.
Brokers see particular value where uncertainty is greatest, noting that insurer-provided engineering expertise is most valuable for new or first-of-kind technologies (71%), construction projects (67%) and projects in catastrophe hazard regions (67%), areas where historical loss data and established risk models may be least reliable.
FM surveyed 750 energy sector risk decisionmakers, 150 insurance brokers and 150 financiers globally.
The report can be accessed here.