The rapid expansion of power infrastructure, driven by the integration of new technologies, is outpacing the ability of traditional systems to manage associated risks, according to a new report by FM, a commercial property insurer. This report highlights the urgent need for engineering to play a more significant role from the earliest stages of energy infrastructure projects.
What Happened
The FM Power & Renewables Report provides a detailed examination of the challenges facing energy infrastructure as it expands to include technologies like AI, data centers, electrification, and renewable energy sources. The report emphasizes that 85% of surveyed energy sector professionals agree that early engineering insight can significantly enhance the stability, insurability, and investor confidence of energy projects. Doug Patterson, Senior Vice President at FM, warns that the pressure to quickly add power capacity could embed risks into assets before construction begins. The report surveyed 750 energy sector risk decision-makers, 150 insurance brokers, and 150 financiers globally, revealing that 59% of energy companies view new-technology adoption as a primary cost-of-risk driver. Moreover, 39% plan to increase small modular nuclear reactor (SMR) capacity in the next three years, despite uncertainties about the performance of emerging technologies under real-world conditions.
Resilience concerns are becoming a financial burden, with 51% of energy providers citing increased construction costs, 46% noting higher insurance costs, and 40% reporting reduced ROI due to these uncertainties. Financiers perceive the risks to be even higher than the developers, indicating a gap in risk assessment.
What This Means for Your Business
For AECM professionals and government contractors, the FM report underscores the critical importance of integrating engineering expertise early in the project lifecycle. This approach not only mitigates risks but also enhances the insurability and attractiveness of projects to investors. Companies must consider the broader implications of site-selection decisions, as 78% of energy companies report unforeseen downstream exposures. Engineering input can help identify potential vulnerabilities and reduce risks associated with adopting new technologies, especially in regions prone to natural disasters or where historical loss data is unreliable.
Furthermore, the report suggests that the value of an insurer extends beyond risk transfer. Insurers can provide essential engineering expertise to help quantify and mitigate risks before key decisions are finalized, particularly for innovative technologies and construction projects.
What US Operators Should Watch
US operators should be aware of key timelines and opportunities related to federal funding and compliance requirements. As the energy sector continues to evolve, staying informed about regulatory changes, CMMC audit dates, and upcoming bid opportunities will be crucial. The integration of engineering insights early in the project lifecycle can be a differentiator in securing contracts and optimizing project outcomes.
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Source: https://www.powermag.com/fm-report-with-power-and-renewables-risks-evolving-engineering-must-move-upstream/. Read the original story ->
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