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Category: Insight

How the Energy Industry Succeeds with Risk Management

The need for effective risk management in the power industry is more relevant than ever before. We require new knowledge, methods, and tools to understand and address risks.

This is the clear message from Jens Thomas Sagør, leader of business development and energy expert at Proactima.

– The power industry is one of the most crucial pillars of our modern society and has a crucial significance for societal safety. After all, its main task is to supply Norway with electrical power—an essential part of our infrastructure.

Sagør believes that the entities best at identifying and managing risks and vulnerabilities secure clear competitive advantages.

-Norway has an energy deficit, and the production of renewable energy is necessary to meet future energy demands. We may transition from a situation of surplus to deficit in power within a few years, meaning we’ll become reliant on significant imports during dry years, along with external unrest and energy scarcity abroad. The industry is amidst significant technological shifts while undergoing restructuring and consolidation. Norway’s experience in energy production and our long coastline mean we have the world’s best prerequisites for success. However, it requires new knowledge, methods, and tools for us to succeed,” Sagør explains.

Energy Companies in Transition

In Eastern Norway, many businesses, especially industries, lack the ability to connect to the power grid. Supply security and grid capacity are not just matters of national security but also affect society’s ability to transition to green energy.

What are the challenges for the energy industry today?

-Energy companies are undergoing drastic changes. Actors must adapt to expanded operations in their business models, and risk management and corporate governance are aspects that must be mastered at both operational and strategic levels. Additionally, most actors are at the stage where they must define how the future power system will operate—and the industry is closely linked to digitization. Moreover, the number of grid companies will significantly decrease, leading to larger and fewer entities. Mergers of power companies and restructuring will be a focus in the industry for a long time,” says Sagør.

Norway is Unprepared for Energy Rationing

Earlier this fall, the Directorate for Civil Protection and Emergency Planning (DSB) published the report “Risk Analysis of Energy Rationing,” indicating that Norwegian society is largely unprepared for power rationing due to Norway’s historically ample access to electricity and high supply security.

-The consequence of power rationing affects us all and can lead to unrest and reduced welfare. Everything from limited access to groceries, delays in health services, unstable data and telecommunications, to limitations in water supply. It is also conceivable that there may be requirements to reduce power consumption at home, Sagør elaborates.

How should industry players navigate in this complex landscape?

-The whole point is to find the right balance between developing and creating value and avoiding accidents, damages, and losses. The combination of regulatory understanding and a holistic approach to risk management is the best recipe when facing the unknown.

Sagør adds that the current trends show that society as a whole is directing more focus, expectations, and demands towards the government, but he emphasizes that the public sector cannot handle the task alone and that the business sector must be aware of its responsibilities.

-Uncertain times with economic challenges, climate change, security unrest, and energy scarcity create expectations that the public sector must act and be in control. But we must not forget that the business sector has a responsibility to contribute to developing and sharing knowledge, methods, and tools that enable society to handle growing uncertainty and complexity. Therefore, our social responsibility at Proactima is to ensure that everyone has the structure, culture, competence, and leadership required to prevent risks and effectively manage incident.