As the global energy sector undergoes a rapid transformation toward low-carbon economies, executive leaders must navigate an increasingly volatile energy landscape. The complexity of energy risks, from infrastructure failures to price volatility and cyberattacks, poses significant threats to an organisation’s digital operations.
Over the next five years, executive leaders must be aware of 10 energy risks to implement appropriate local mitigation measures and consider investing in on-site energy generation or microgrids.
Figure: Top 10 energy risks and their interdependencies
Adopting a proactive risk mindset will help executive leaders understand the interdependencies of energy risks and implementing mitigation actions across operations, including IT and manufacturing, and the value chain.
Brittle infrastructure and changing energy consumption patterns
One of the most critical risks for IT infrastructure is the fragility of energy infrastructure. The digital economy relies heavily on uninterrupted power supply, but ageing grids and undermaintained energy systems are increasingly susceptible to outages.
The rise in rolling blackouts, such as those seen in South Africa, has demonstrated how brittle infrastructure can cripple both energy supply and digital operations.
Prolonged power outages have catastrophic consequences for IT systems, causing downtime for critical services, potential data loss, and disrupted communications.
For businesses operating in regions with outdated grids, consider investing in alternative energy solutions such as microgrids or backup generators to avoid downtime during blackouts, minimising the impact on datacentres and ensuring the continuity of cloud-based services.
Energy consumption patterns are also rapidly evolving, particularly in industries dependent on datacentres and artificial intelligence(AI)-driven services. As companies adopt AI and machine learning, the demand for data processing and storage is growing exponentially.
This shift in consumption is placing unprecedented pressure on energy supply, particularly during peak demand periods.
This presents a significant challenge: how to manage skyrocketing energy consumption without overloading existing infrastructure or inflating operational costs.
Therefore, look to forecast future power needs based on AI and other advanced computing workloads, ensuring their energy strategies are aligned with anticipated growth. Exploring energy-efficient technologies and alternative energy sources such as solar or wind power could help reduce dependency on an increasingly strained energy grid.
Mitigating climate risks in the IT sector
Price volatility is another concern. Geopolitical tensions and disruptions to global energy supplies can lead to fluctuating energy costs, creating uncertainty for long-term IT budgets. For example, Europe’s response to the Russian invasion of Ukraine caused significant spikes in fossil fuel prices, which directly impacted the operational costs of datacentres and IT services.
Price volatility makes it difficult to predict and manage expenses associated with running energy-intensive facilities. To mitigate this risk, explore fixed-price energy contracts or long-term power purchase agreements for renewable energy sources.
These options provide a level of cost stability, enabling IT departments to manage their budgets more effectively while also contributing to sustainability goals.
Beyond these immediate concerns, physical risks driven by climate change pose a growing threat to IT infrastructure. Extreme weather events such as floods, hurricanes, and wildfires are becoming more frequent and severe, putting datacentres, server farms, and critical communications infrastructure at risk.
Rising temperatures, in particular, increase the strain on cooling systems in datacentres, which are already high-energy consumers. As temperatures rise, cooling costs escalate, potentially leading to shutdowns if cooling systems fail.
Consider investing in climate-resilient infrastructure that can withstand extreme weather and heat, ensuring that datacentres remain operational even under adverse conditions. This may involve incorporating renewable energy solutions like solar panels or battery storage into datacentres to provide backup power during outages.
Cyberattacks are also an increasingly serious concern, especially as energy infrastructure becomes more interconnected and reliant on digital systems. State-sponsored cybercriminals frequently target critical energy infrastructure, causing widespread disruptions. In 2023, 90% of the world’s largest energy companies experienced cyberattacks, many of which directly impacted IT systems and critical services.
As the energy landscape continues to evolve, be proactive in understanding and mitigating these risks. By investing in resilient infrastructure, securing reliable energy contracts, and strengthening cybersecurity measures, businesses can safeguard their digital operations against the growing uncertainties of the energy market.
