Onshore Energy Conference — London Onshore Energy Conference — London | Page 35

ENERGY MATTERS

POWER, ENERGY
& CONSTRUCTION
The three divisions of JLT explained.

POWER DIVISiON

A

The potential impact of Brexit on the UK power market
s the UK starts to come to terms
with the uncertainty over what its
future relationship with Europe
will look like, there are many
questions to be answered - not least the
impact this could have on the energy market.
Here we explore what possible impact
certain investment decisions related
to Brexit could have on the UK energy
risk profile and how this might affect
current insurance arrangements.
Investment confidence in UK infrastructure
could experience its first post Brexit test
when the decision is made on whether or
not to support financial go-ahead of the
already behind Hinkley Point nuclear
power station or the UK could be facing
potential power shortages in the future.
There was reportedly more than €2
billion of EU funding to be invested in UK
energy infrastructure projects, in particular
increasing the interconnector capacity between
the UK and its neighbours. The increased
interconnector capacity is expected to improve
the security of supply and efficiency of
electrical systems, whilst decreasing cost and
volatility. Will this investment still go ahead?
There is a growing need for investment
in the new generation of flexible and
reliable power plants to fill the gap in
the UK’s future energy portfolio. These
plants are needed to complement the
ever growing renewable presence on the
grid, which was highlighted by the recent

milestone of solar power output surpassing
that of coal for the month of May 2016.
The absence of planned interconnections,
potential underutilization of existing
interconnect capacity, together with the
increased presence of renewable plants
and aging infrastructure could further
destabilise the market. This would increase
volatility, making it more challenging for
thermal power providers to operate.
Thermal energy providers of the future
are expected to experience a further shift
towards peaking operation. Conventional
business interruption policies that
cover continuous operation could prove
expensive when in fact dispatch will be
sporadic, with plants relying on higher
market prices to remain profitable.
New Approaches to protecting expected
income can support power providers’
risk transfer options, whilst helping the
energy infrastructure of the future secure
funding for the new energy market.
If new power plants are not built due to
lack of investment into our market, electricity
capacity margins could be reached rapidly.
This could result in business interruption
insurance becoming more expensive. A good
broker will explain how your company’s
exposure to a different asset footprint and
changing use of the assets could increase
the risk to your business interruption
insurance and will get you the most suitable
cover and price for this exposure.
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