MANAGING RISKS IN ENERGY TRANSITION PROJECTS

The global shift from fossil fuels to renewable energy presents substantial opportunities but also significant risks. Without effective risk management, organisations may face major losses arising from stranded assets, volatile renewable power prices, supply chain disruption, extreme weather and evolving regulatory frameworks.

For innovative green power projects in particular, unclear contractual terms can leave parties exposed if technical or legislative requirements change during development. Companies must also confront transition risks associated with financing uncertainty, reputational exposure, allegations of greenwashing and the need to establish robust new business models that support both established and emerging energy operations.

Managing these challenges requires diversified investment portfolios, carefully structured contracts, credible scenario based risk assessment and strong governance. Without these elements, the financial and operational costs of decarbonisation could exceed its benefits.

A transforming world of energy supply and use

The energy transition is progressing rapidly, even if it continues to provoke resistance in some quarters, and clean technologies remain dominant in new power capacity additions. According to IRENA, more than 90 percent of new global electricity capacity in 2024 originated from renewable sources including solar, wind, hydro and geothermal.

This expansion is occurring at a pivotal moment as global energy demand continues to rise. Demand increased by 2.2 percent in 2024, surpassing the average annual growth rate of 1.3 percent recorded between 2013 and 2023, according to the Institute of Economic Affairs. Electricity demand is growing even faster. BloombergNEF projects a 4.5 percent increase in 2025 over 2024, with growth expected to remain at a minimum of 2.8 percent annually through to 2030. Electrification of transport, industrial expansion and rising cooling needs in developing economies are major contributors.

Apr-Jun 2026 Issue

Richard Summerfield