The energy transition is the global shift from fossil fuels like coal, oil and gas to renewable sources like solar, wind, geothermal, hydropower and biomass. The current impetus behind the energy transition stems from the urgent need to reduce greenhouse gas emissions, promote cleaner air, and create a more sustainable energy system. The energy transition requires changes to energy production, distribution and consumption, as well as advances in energy efficiency, energy storage and grid management.

The energy transition plays a vital role in mitigating climate change. The chief cause of climate change is burning fossil fuels, which release carbon dioxide and other greenhouse gases into the atmosphere. Reducing our reliance on fossil fuels helps lower global emissions, slow the rate of global warming, and protect ecosystems. The transition also enhances energy security, reduces dependence on imported fuels, creates green jobs and promotes public health by reducing air pollution. A sustainable energy future will be essential to meeting global climate goals like those outlined in the Paris Agreement.

A range of different factors all play a role in driving the global energy transition. This include:

• Environmental concerns: there is growing recognition of the urgent need to combat climate change and reduce the impact of global warming

• Policy and regulation: many governments are introducing climate policies, carbon pricing and renewable energy targets to help accelerate the energy transistion

• Technological advances: innovations in the technology used in solar panels, wind turbines, batteries and smart grids have made renewable energy more efficient and more cost-effective

• Economic factors: the falling cost of renewable energy technologies makes them more competitive in comparison with fossil fuels, encouraging more widespread adoption

• Consumer demand: growing public demand for clean energy is pressuring companies and governments to transition away from fossil fuels.

Energy storage plays a crucial role in balancing supply and demand in energy systems that rely on intermittent renewable sources like solar and wind. Technologies like lithium-ion batteries, flow batteries and pumped hydro storage mean that surplus energy can be stored and released when needed. This improves energy reliability, stabilises the grid and allows for better integration of renewable energy into existing energy systems. Energy storage can also improve energy resilience during blackouts or extreme weather events.

The energy transition faces several key challenges. These include:

• Infrastructure upgrades: modernising grids, transmission lines and storage systems to handle renewable energy

• Energy storage: overcoming technological and cost barriers to large-scale energy storage

• Equitable access: ensuring that all communities - and, in particular, vulnerable populations - have affordable access to clean energy.

• Jobs transition: supporting workers’ transition from fossil fuel industries into green-energy jobs

• Supply chain issues: addressing the scarcity of critical minerals like lithium, cobalt, and rare earth elements that are needed for batteries and clean-energy technologies.

Energy Transition Insurance provides financial protection for developers, investors and other businesses involved in the shift from fossil fuels to renewable energy. It covers risks associated with the development, construction and operation of clean energy projects. Energy Transition Insurance protects you against technology failures, project delays, supply chain disruptions and regulatory changes. As the renewable energy sector grows, insurers are increasingly developing specialised products to meet the unique risks associated with the energy transition.

Several key technologies drive the energy transition:

• Solar photovoltaic (PV) systems: converting sunlight into electricity

• Wind turbines: harnessing wind energy to generate power

• Energy storage systems: lithium-ion batteries other solutions capable of storing excess renewable energy

• Green hydrogen: hydrogen produced using renewable energy can be stored and used as a clean fuel

• Carbon capture, utilisation and storage (CCUS): capturing and storing CO₂ emissions from industrial processes

• Smart grids: digital grids that optimise energy distribution and allow for the integration of renewable energy.

The energy transition creates several risks for businesses, governments and investors. These include:

• Technology risk: New technologies may underperform or fail

• Regulatory risk: changes in government policy, regulations and support can affect profitability

• Project delays: construction delays due to labour, permitting or supply chain issues

• Supply chain risk: scarcity of critical minerals or components needed for renewable technologies

• Financial risk: market volatility, investment losses or difficulty securing project financing.

• Diversified investments: spreading your investments across multiple energy technologies and projects

• Risk assessment: conducting environmental, regulatory and financial risk assessments before projects begin

• Insurance solutions: using specialised insurance products to protect you against project delays, regulatory changes and technology failures

• Supply chain resilience: sourcing critical minerals from diverse suppliers and developing local supply chains

• Adapting to regulation: Staying ahead of policy changes and ensuring adherence to new emissions standards and targets.