‘The bogeyman is AI’: How emerging tech and geopolitical challenges dominate energy sector
!['The bogeyman is AI': How emerging tech and geopolitical challenges dominate energy sector](https://www.cheapsr22.us/wp-content/uploads/2024/07/1721092865_The-bogeyman-is-AI-How-emerging-tech-and-geopolitical-challenges.png)
‘The bogeyman is AI’: How emerging tech and geopolitical challenges dominate energy sector | Insurance Business America
Environmental
‘The bogeyman is AI’: How emerging tech and geopolitical challenges dominate energy sector
Top executive on insurance’s pivotal role in ‘economic engine’
Environmental
By
Chris Davis
With an increase in power demands and emerging technologies continue to dominate, it’s a pretty intense time to be in the energy sector. Speaking to IB, Robert Battenfield (pictured), energy wholesale insurance broker at Amwins, said that with the industry evolving at an unprecedented pace, insurers need to keep their eye on future trends.
“It really is an exciting time to be in our business,” he told IB, “which is downstream energy, power, renewables. If you pay attention to the environmental and social governance – as well as political headlines – you’d believe that renewables are the only thing [set] to grow. However, if you dig down deeper and look at electrification, which is more electric cars as well as increased demands from AI and cryptocurrency mining and what that does to the demand for our power grid here in the US – [there’s] a huge, huge increase in demand.”
‘The bogeyman is AI’
Battenfield stressed that renewables alone cannot meet this growing demand.
“Gas turbine technology is on the rise,” he added. “They’re installing more gas-powered power, and they’ll have to. The US will have to do that as our power appetite grows.”
But it’s not just power that’s growing in demand – there’s a notable increase in game-changing tech, such as generative AI. With technology becoming ever more essential to organizations and their leaders, Battenfield believes we’ll see AI take centre stage this year.
“The bogeyman is AI,” said Battenfield. “If you hear about it, it’s going to take everybody’s jobs – which is yet to be seen. However, what we know about AI is it’s going to be one of the biggest energy intense technologies we’ve ever seen. AI data centres, all require standalone diesel generators. They have to have 100% available power that can’t be interrupted. Right now, all the [elements] that go into AI are produced in factories that need plastics, batteries and chips. All of this is produced by the hydrocarbon chemical and power business – those needs aren’t going away. And that’s [what] I think the political landscape right now misses in our business.”
And it’s insurance, according to Battenfield, that plays a vital role in supporting this overloaded sector.
“Insurance is exciting because we have to be there, because we’re an economic engine for growth,” he explained. “We supply the capacity that ensures these risks and, without that, they can’t get financing – they can’t build their projects.”
Regulatory challenges and changes
Addressing the evolving needs of the market, Battenfield told IB that the complexity of insurance policies for renewable technologies is an ongoing challenge.
“Wind is a more developed technology than solar,” he said, noting that solar is still in its growth phase. The broker’s role is to ensure policy language meets the specific needs of each technology. “The risk profiles are completely different, and the insurance product should be tailored in a way that makes sense for the client,” he said.
When discussing environmental challenges, Battenfield highlighted the increasing severity of verdicts against the oil and gas industry.
“Oil and gas is getting more severe verdicts from a third-party liability and environmental perspective, nuclear verdicts are certainly out there,” he said. “The world just hit 100 million barrels per day consumption, and I can’t see where that goes down in the short term because of growth in society.”
Regulatory changes are a constant in the energy sector, with Battenfield pinpointing the impact of the Inflation Reduction Act (IRA) in the US – something which has spurred growth in solar and wind energy through tax credits and investment incentives.
“Regulatory changes are always there,” he told IB. “With the IRA, you’re going to see continued regulation change where we’re able to get the power delivered to our community for the requirements that are going to exist today and in the future.” We are also starting to see appetite for additional power supply tip the scales for small modular nuclear reactors.
Geopolitical issues
Last, but by no means least, there’s geopolitical influence on the sector – something which has only grown tenser in the recent years. From the ongoing conflict in Ukraine to upcoming political elections to challenges in the Middle East, there’s a lot on insurers plates right now.
“Geopolitical issues like Russia’s invasion of the Ukraine, the conflict that we have in the Middle East, these are all real issues for the insurance world,” added Battenfield. “Ukraine getting invaded causes natural gas prices to go up dramatically. Europe has had to make huge changes in their natural gas consumption because of that. The Russian conflict with Ukraine and their pipeline issues – it’s a big deal. It’s caused some of the European Communities to turn back on their coal and restart their nuclear. These are issues that insurance has to be there, regardless of political stance, to respond to.”
Related Stories
Keep up with the latest news and events
Join our mailing list, it’s free!