Zurich highlights ‘significant’ climate risk to energy sector
A new report from Zurich Australia and Mandala Partners estimates that nearly 40% of Australia’s energy generation assets will face increased risks from climate impacts in the coming decades.
The Climate Risk Index, which analyses the location of all energy assets across the country to formulate potential climate dangers, says currently more than 25% of energy generators face a high risk of climate-caused impact, with the number expected to rise.
Zurich says it expects 35% of energy grids to be at high risk by 2050, based on a likely scenario of a 2°C rise in global average temperatures. It says that under a more severe temperature rise, such as 4°C, nearly 43% of businesses would be at significant risk, with about 11% at the highest risk level.
The report found that NT and WA are the areas most likely to be affected, with 96% and 70% of grids placed among the three highest risk categories, respectively.
Solar and gas energy generators face the highest level of risk, with about 95% of solar panels placed in high risk due to the impact of natural hazards such as storms and hail. Other energy sources, such as coal, wind, and biomass, reported notably lower risk levels.
Zurich Australia and NZ CEO Justin Delaney says the report provides valuable insights on the underreported risks posed by worsening climate impacts, including for insurers who he identifies as being on the “front line of risks relating to climate change”.
“Australia’s energy generation assets underpin almost every aspect of economic and social interaction in the 21st century, however, much of the focus to date has centered on the risk of the energy grid to climate change, rather than on the risk of climate change to the grid,” Mr Delaney said.
“This analysis hopefully represents a constructive input into achieving an appropriate and resilient energy transition.
“More broadly, it also serves to highlight the quantum of data and quality of insights that are now available to understand the prevailing risk environment so we can shape and prepare our collective response.”
Mandela Partners Partner Adam Triggs says the report highlights “that there is no part of our economy or society not impacted by the effects of climate change”.
“As our report shows, our energy grid needs to be more resilient to climate events,” Mr Triggs said.
“Proper site selection and planning for new generation is critical given variability in hazard type and severity is significantly impacted by geography and topography.
“Beyond this, adaptation measures are also important for building resilience, particularly for existing sites.”
Click here for the full report.