ALICE HARRISON: Hello, welcome to The Risk Circuit. My name is Alice Harrison. And I will be your host for this episode. My role at Willis natural resources is the sales enablement director. And I'm very much a connection point between our sector-focused teams, helping us all think strategically about how we can come together and think innovatively to solve client challenges as well as sharing our insights through thought leadership and other channels.
I am joined here today by Simran and Oliver. And I'll let them introduce themselves. Simran, perhaps you want to give yourself a quick intro.
SIMRAN MINHAS: Thanks, Alice. Hi, I'm Simran, working in the power and utilities team here at Willis.
OLIVER WARREN: Hi, Oliver Warren, I'm an account director in the global renewable energy team here in London.
ALICE HARRISON: Lovely stuff. Thank you both. I'll kick us off with a little bit of context because the pressures of the energy transition are highlighting some synergies between power and renewables. But there are also intrinsic challenges for each sector that remain. And we'll be covering little parts. Obviously, we could be here forever if we went into the real depth and detail. But we'll try and cover as much as we can today.
But earlier this year, we released our global clean energy survey, where we led with the concept of a tipping point, that the natural resources industry at large is at a tipping point. And this has become clear, I think, as the years progressed. It's unavoidable to talk about the geopolitical headwinds, economic pressures, soaring demand for power. They're all creating competing push-pull pressures, affecting natural resources companies and their clean energy strategies, their investments, the timelines. It's all complex.
So before we get into the weeds a little too much, it's worth flagging that our survey, the Clean Energy Survey, that is, highlighted a 34% increase in clean energy spend across all natural resources sectors from the last financial year to the next financial year. And the IEA World Energy Investment report for 2025 is saying that electricity use grew twice the pace of overall energy demand over the last decade. But from now to 2035, 10 years, it's set to grow six times as fast. Low emission sources are set to generate more than half of the world's electricity before 2030.
So Ollie, maybe you can comment on what you're seeing with renewable energy clients. How are they adapting to these pressures? What challenges are they facing?
OLIVER WARREN: Yeah, absolutely. Thank you, Alice, for introduction. I think it's worth just talking briefly about what we're seeing in the world right now, which is a significant increase in electricity demand. And that's being driven by a number of different things.
There's a huge increase in the amount of power used for air conditioning in the world, particularly in China and India. And that's a consequence of climate change among other things. And we're seeing a huge uptake in electric vehicles as well, which does offer some interesting advantages as well, which maybe we can possibly get into around vehicle to grid technologies and load balancing.
And we're seeing electrification of industrial processes and growth in developing economies. So there is a big increase in demand for electricity. And that's coming at us at a time when there's also a lot of political will or, I guess, a varying amount of political will to decarbonize our sources of electricity.
So it's a very interesting time. It's a very complex time. And it's driving a huge amount of development in renewables, which I'm here to talk about, and also a huge amount of development in conventional power, which Simran will speak on.
And interestingly, we work more and more closely together as we see clients who are doing both of these things. And there's a great opportunity for knowledge share there as more companies move into the renewables space, where there are a lot of established players. And there's a lot of knowledge available from the last 10, 20 years, lessons learned, which new players are catching up with.
What are we seeing in renewables? Well, a huge amount of BESS coming in as our grid evolves and we're taking on these renewable technologies. They do have a varying supply. When the sun shines and the wind blows, we have more power from those sources.
But that means we lack a kind of steady source of power that we would have with fuel-based powers. And we're still going to have that with nuclear. But as we move away from coal and I guess as we gradually move away from gas, we have a need to balance our grid.
So we're seeing a huge amount of activity in BESS. There are some staggering numbers in terms of the amount that's been consented in the UK. And that's being developed in other territories as well. So that's very exciting.
And of course, we're continuing to see a huge rollout of particularly onshore wind and solar as kind of core renewable technologies but also offshore wind in some territories where that's feasible. So yeah, it's an exciting place to be working. And many of our clients have very big development pipelines, lots of different projects. And those all bring different challenges with them. So yeah, it's a good place to be right now, renewables.
ALICE HARRISON: It is. It is. And it's interesting what you were saying around the intermittency of renewable sources-- if the sun doesn't shine or the wind doesn't blow. Simran, from a power perspective, how is that impacting operating models for power clients as they connect into grids?
SIMRAN MINHAS: Yeah, absolutely. I think it's a great point. And there's definitely a major role for battery storage in power generation and grid stabilization as we move away from those predominantly baseload operating models. But if you actually look at where this demand is coming from, particularly in the US, you've got data centers and the AI drive, which is also a global phenomenon.
I think I read somewhere that data centers could consume up to 12% of the US' electricity by 2030, which is crazy to think. That obviously not only changes the way people are consuming energy and how much power is required to meet that uptick in demand, but it brings a shift in power operator models, opening up the conversation about what is profitable and not from their perspectives. I'm going to pick on the UK and the US just because they're somewhat similar and what they're experiencing.
So if you take a look at the National Grid and the different ISOs and how the dispatch orders change within the last 5 to 10 years, it's substantial. And I think it's a clear indicator of the transition with conventional power and renewables working together as renewable energy production increases, as Ollie mentioned earlier. Previously, coal and gas was used as baseload power, meaning it was always on. And that's true for most territories. However, that's not necessarily the case anymore. The last coal station actually shut in September last year in the UK.
Now, occupancies have fallen down, the pecking order of dispatch. And a lot of that has to do with the marginal cost of these units. And two, is it sustainable? And does it meet the needs of the transition and policies?
And so naturally, renewables begins to rise in that dispatch order because of the near to zero marginal cost. That's not to say, of course, that conventional power is not needed anymore. But in fact, gas has a significant role to play. And it's important to remember that when the sun doesn't shine and the wind doesn't blow, that conventional power is there to provide that reliability and inherent inertia that renewables doesn't necessarily do. And what we're seeing more of is emerging technologies and a shift in peaking power. But it would be interesting to hear Ollie's take on some of these things.
ALICE HARRISON: And that's quite impressive how you managed to share the mega change going on in the power sector so succinctly. But yeah, Ollie, what's your take on the direction of travel?
OLIVER WARREN: So there's obviously a huge drive to build things. And we're kind of starting to understand what the grid is going to look like in the future. I always think it's interesting to look at what's going on in the UK.
You can always look online at what is forming our grid at any given time. And at the moment, it's a lot of gas. We've got 36% of our power in the country is coming from gas as we speak. And that's because it's a bit of an overcast day today. And maybe the wind's not blowing too much.
And that gas is setting the price of our grid. It's setting the price of power. But we're moving into a world where we need to acknowledge. We do need those baseload power sources. We probably do need some element of gas or similar.
However, we probably don't want the pricing in our grid to be set by gas. So there's a lot of interesting things going on in the UK around how are we going to evolve our allocation of cost in the grid. And there's a huge drive to build out more renewables and more BESS and more nuclear, obviously, which we're seeing at Hinkley Point.
And I guess the nice thing is we do now have a government that's very supportive of that in the UK. And obviously, that differs by territory. And renewables has always been like that as governments change. It is kind of unfortunately fairly political. And therefore, we do see different territories coming into the spotlight.
And then administrations change. And pipelines in other territories, development pipelines, spring up instead. There was a bit of a de facto ban on onshore wind in the UK for a long period of time. But we're now starting to see those projects coming through.
And actually, the biggest challenge now is in the grid. And I had a few chats with some of our clients. And they all said the same thing. All of the UK developers that we work with, the main challenge they have is securing grid connection spots.
As we move into these new technologies, the grid needs a significant amount of investment. But it's not an easy thing to upgrade. These are national infrastructure projects.
There's a long lead in time to upgrade them. And a lot of work needs to be done. A huge amount of grid needs to be built. And we also need to build interconnectors, both internationally but also within territories.
I think it's often reported in the UK news that we're having to pay Scottish wind farms a lot of money, that a lot of wind is being generated in one part of the country. But it can't be transferred to the South of England where demand is. So that investment takes time. And it's possibly limiting the speed of our rollout. But it is happening. And there are now a huge amount of exciting projects in the UK, very significant BESS projects.
Now, there are more onshore wind farms coming. You will start to see a lot more wind turbines popping up in the UK in certain parts and possibly bigger wind turbines than those that we're used to seeing. The technology has moved on. And we do now have much larger or much more powerful wind turbines available to us.
So yeah, it's a very interesting time to operate. And it's interesting kind of helping support our clients and guide them through that development process, which can be long. And it can take to five years or more to work through the processes of consenting, getting land, doing your feasibility studies, getting your planning permission, getting your grid connection. And all of that does come with some kind of inherent risk that needs to be managed.
And yeah, it's a bit of a pleasure at the moment actually in the UK to support our clients with that and bring them some of the expertise that we've gained. We're a global team in natural resources. So we've been working on onshore wind and these technologies for a long time in other territories. And the UK has been ticking away. And now, it's kind of coming to the fore with a lot of very exciting projects.
ALICE HARRISON: It's a good point on grid stability. Simran, what do you think? Are you seeing any measures being taken to address it?
SIMRAN MINHAS: I think the grid stability point is a great one and the projects that you've mentioned as well. Obviously, with increasing amount of renewables in UK and globally, there are. There's obviously challenges that come with that, one of those being grid stability.
And I think more recent events, like Spain and Portugal, really highlight that and the kind of need to really invest and take a look at actually what does it take to transition. And it's not a quick overnight kind of job, as you said. It takes time. It takes investment. And it takes kind of forward planning and thinking from national grids, from governments, from clients.
So grid stability is maintaining same frequencies of electricity throughout the grid networks. So if you've got a mismatch when it comes to wind, solar, and then gas as well, it's obviously going to cause some reliability problems, I suppose. I think it's important to note some of the projects. Especially in the UK, there's plenty of projects that the National Grid have underway at the moment to tackle that at the moment.
Just to name a few of those, I suppose, the National Grid has the Demand Flexibility Services program, which essentially is paying customers to reduce their electricity consumption at peak hours to at least in the short term be able to stabilize that. Whilst these kind of upgrades that you mentioned are happening, there is the Grid Upgrade, which is a great name, I would say, where essentially they're taking a look at 17 major infrastructure projects that are, like you said previously, both to scale up the grid and upgrade the networks to be able to deal with the increase in demand and make sure that there is that stability and reliability throughout from January to December.
Obviously, summer is very hot. People are turning on those fans and AC. And like you said, there's a lot more electrification of buildings. So there's a lot more of a need for that as well. And likewise in winter, heating is on, especially in those peak times, where everyone's gets a cup of tea after work and sits down to watch TV. That's when grids are going to suffer the most. So it's important that everyone is taking a look at that and we're all invested in it and work together to be able to find a happy medium to make that happen.
OLIVER WARREN: Absolutely, yeah. And I think there's a lot of goodwill, particularly in the insurance space, to support developers. And I sometimes think one thing we could do better and insurers could do better is to connect more closely with the people who are actually developing these projects and share with them all of the lessons learned, lessons learned in other territories.
In renewables, we've got quite modular technology. So turbines and battery units being deployed in the UK have been deployed elsewhere. There may have been losses on them. There may have been lessons learned.
And there is a lot of goodwill in the insurance market to share those lessons. And the good news is there's also a lot of goodwill to underwrite those projects. So we do have a very healthy marketplace right now in power.
Well, in renewables, Simran, if you would agree on power. But there's a big desire to support developers and to underwrite these projects. But there's also a big opportunity to support them in more than just offering them some insurance paperwork but actually to engage with them around their decisions and their timelines and their natural catastrophe exposures and the mitigation and the technology decisions. There's obviously a huge number of factors that go into these project designs, which will impact insurance, either the cost of insurance or, worst case scenario, things go wrong.
ALICE HARRISON: Is this the same for power, Simran?
SIMRAN MINHAS: Yeah, absolutely. I think the same can be said of power. Of course, I think it's probably a different degree. We're getting to a point where there is much more of a need to have those open-ended conversations to really figure out a fit for purpose insurance product or even if it's to inform clients or the other way around.
I mean, we see it on a daily basis at this point. We've got clients who are looking at their futures. And they're all going through that transition process, like I say. And so they're going from either looking at life extension plans or looking at what they can do from shifting away from being utilized for [INAUDIBLE] to peaker.
And obviously, kind of doing that is modifying your plants. Whilst it's possible, it does obviously have some impacts to look at what does that actually mean for us. There's more flexibility. And while constructing peaker plants is actually cheaper, it might not actually be cheaper to operate them because obviously there's a different degree of maintenance that's needed and a different, to some degree, skill sets, et cetera.
And there's a shift. So there's, of course, going to be a cost that's underpinned to that as well. And there's a massive impact on clients buys, exposure, and their revenue streams as well. So I think that's an important point to take a look at. Actually, with this transition, how can we help you to understand that a lot better? And how can we make sure that what you're buying is fit for purpose and it's not just a blanket policy that you've always been used to and it's the only thing that's been offered?
So I think there's a lot of work being done. To give you an example as well, with more peakers being built, I suppose we've got a client this last year, I believe, obviously, kind of building peaker plants. And with that, generally, the power market will look to have some of certification to say, you've been through 72 hours of continuous testing to make sure everything runs as it should do at a new plant.
But however, that's not always the case. It's not as easy as to do that. One, from a perspective of actually these plants, these new plants aren't built to be run 72 hours consecutively, I suppose, because they are built as peakers. And they're made to be turned off and on. And if anything, they could have some detrimental effects on the actual plant and maintenance regimes as well.
So there's that element to it. And then there's also the element of actually it's not economical to be running them for 72 hours because that's not what they're made to do. So some of those previous requirements from underwriters need to change.
And I think that's something that we did together with our engineer, together with the client, to make sure that our insurers were comfortable in a place where that requirement was no longer necessary. And that only comes with obviously understanding what it is the client is insuring, why it's not as easy as that to provide the information or the necessary requirements, and being able to relay that to insurers and make them comfortable enough to get over those hurdles initially.
ALICE HARRISON: If I could just jump in here because I think you're raising a really important point, Simran, the need to regularly look at your insurance program and test it against new assets and operations.
OLIVER WARREN: Yeah, absolutely. Technology is at the core of insurance, beyond environmental risk. To use batteries as an example, battery designs continually evolve. And the products which are available to our clients are changing. We've worked on some battery portfolios with multiple sites being built.
And even between those sites, even though one was built six months after the last one, it had a different battery technology from the same manufacturer but a complete overhaul of the actual battery container and all the equipment within it. So yeah, I think the nice thing about renewables is we're used to that. It's been like that for years.
There's always been a race to bigger power in wind turbines, bigger blades. There are bigger heights. And the same thing kind of is happening with BESS as well. So it's very important to get into the nitty gritty sometimes. And I think the nice thing is that manufacturers are relatively willing. And there is some good standardization, particularly in the bed space, around thermal runaway tests, which kind of allows insurers to get a good understanding of technology.
But it's still a very engineering-based underwriting process. The rates are very much dependent on the quality of the project and the technology and the information that's available around the technology. And you have got to dig a little bit, as you did in that case, to ask the questions to satisfy the underwriters. And if you don't do that, underwriters-- they tend to be pretty cautious at times. So you're definitely not going to get the best deal.
SIMRAN MINHAS: I would say that this is a clear example when it comes to placing risks in the market for power and renewable energy companies, that there are some very clear synergies in the direction of travel and the pressures facing power and renewable energy companies-- electrification, geopolitical headwinds, macroeconomic volatility. You name it. They're facing very similar battles. And grid instability, stability, aging assets, availability to plug into the grid-- they are all shared challenges.
But when it comes to risk, it's very clear from the conversation that you guys have been having is that having sector specialist brokers in your corner that can truly get into that detail of what the technology is, what the risks are, how that affects your risk profile, and actually using risk engineering data and risk information to articulate a very clear story to underwriters, to help them understand their risk, that is really an integral part.
So I suppose power renewables-- they are coming closer together. There are a lot of synergies. They have very similar shared goals and challenges. But the need for sector specialist broking remains. Would you agree?
ALICE HARRISON: Yeah, definitely. I mean, as you say, there are, of course, synergies and blurring between the two sectors. And we have the ability to lean into each other for that experience sharing piece, which is pivotal. But whilst there's a crossover, and that will continue to be, in order to have that tailored product that you mentioned earlier, it's important to have people at the forefront of it who truly understand the ins and outs of these complex risks, particularly as this is enhanced by the changing environment that our clients operate in.
OLIVER WARREN: Yeah, I definitely feel that renewables has been around for a long time. And there are some very experienced players in this space. And it is important these do remain engineering-focused processes.
And one thing I often find is that when we actually get the chance to engage closely with the development teams at our clients, we often find out that there's a lot of positive things happening in these projects to manage risk and to make them safer and more resilient. And actually, it's a case of knowing the right questions to ask and knowing how to follow up with the engineers who are-- they're putting a lot of pride into these projects.
They are thinking about what could go wrong and how to deal with it and incorporating that into their procurement process and their hydrology and their kind of landscaping of these projects. So I do think it remains important to know the right questions to ask and to be active in our respective spaces in terms of placing different projects with insurers regularly so that we remain at the forefront of what's important and what actually has an impact on the pricing of coverage.
ALICE HARRISON: Yeah. Well, both of you, you barely needed me. Thank you very much for all your insights and pulling everything together in such a clear way. It's definitely been an interesting conversation. Plenty of insights, thoughts, challenges, recommendations, and suggestions thrown around the room. So thank you very much for that.
And I think all that's left to say is thank you to our listeners for joining us today. There will be further episodes in the podcast series from The Risk Circuit. So if you've enjoyed today, please do check those out. And come back for more.
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