The Hidden Risk in the Energy-Water-Food Nexus

By Christoph Frei, World Energy Council's fifth Secretary General

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As the infrastructure for energy supply and demand continues to develop around the world, it will be critical to strengthen its resilience in order to withstand and mitigate risks to ensure supply to support economic growth. Extreme weather events have increased by a factor of four over the past 30 years. Cyber threats keep energy leaders in Europe and North America awake at night. Ninety-eight percent of power supply depends on the availability of water in an increasingly water-stressed world. With accelerating energy systems integration, resilience is no longer just about returning single assets to full operation after a disruptive event.

These emerging risks are posing ever greater threats to the energy sector. Unless we have a solid understanding of the nature of these risks and adapt energy financing mechanisms and infrastructure design, we may well see an investment impasse that could cripple global energy systems.

This is why the World Energy Council's latest report, "The Road to Resilience: Financing Resilient Energy Infrastructure", focuses on three critical emerging risks: extreme weather events; energy-water-food nexus; and cyber threats. The report provides an overview of the Road to Resilience series and provides seven recommendations that aim to improve the financing of resilient energy structures.

When interdependent parts of a system go down, the system as a whole is at risk. As Hurricane Sandy or Typhoon Haiyan and many other extreme weather events have illustrated, restarting the energy system can be delayed by days, possibly weeks, if critical system parts cannot be restarted autonomously.

Increasing competition for water and water stress, as experienced in parts of Latin America, North Africa, the Middle East and other world regions expose the sector — which, in terms of its water intensity, is exceeded only by agriculture — to a multitude of operational vulnerabilities across the entire value chain. In 2016, water-strained Algeria is unable to access its domestic shale gas reserves — the largest in the world — due to the arid desert landscape where 95 percent of the nation’s shale plays are located.

The same may happen after a cyber breakdown with “black-brained” system components. Black-starting capability, decentralized decision autonomy and local empowerment have become key words for system operators.

The increasing interconnection and digitization of the energy sector, ranging from smart grids or digital oil fields to the Internet of Things, along with the sector’s critical role in the functioning of a modern economy, makes the energy sector a highly attractive target for cyber attacks geared to disrupt operations.

As experienced in Ukraine at the end of 2015, an attack on a supervisory control and data acquisition system used to operate the power grid can affect the power supply of a country. A lot is at stake and new risks have become the focal point of boardroom and cabinet discussions.

The different risks to resilience have distinct meaning and priorities in different regions. Yet the imperative to cope with these risks is a powerful catalyst for innovation with transformative global impact: innovation in technology; system design and management; cross-country and cross-value-chain cooperation; the required policies; and last but not least, financing concepts. Securing the future investments to expand and transform the sector is the critical challenge ahead.

The road to resilience series is just the beginning of a long journey of adaptation and innovation. It is a process of aligning interests, informing debate and encouraging new thinking, and will form the basis of many high-level discussions at the 23rd World Energy Congress in Istanbul next month.

Increasing the resilience of energy infrastructure to extreme weather events is not an option — it is a must. Energy systems must be smarter, not just stronger, to withstand diverse emerging risks and be more resilient. Successfully managing these risks has become crucial for energy leaders globally, bringing the need for resilience to the fore.

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