Energy Security: Navigating the Transition to Low-Carbon Power

This blog has been written by Phillip Parrott, ESG Manager, and Simon Tucker, Managing Director: Group Commercial Services

As the world accelerates towards a low-carbon future, energy security remains a critical concern.

Climate risks, such as extreme weather events, supply chain disruptions, resource volatility, and geopolitical issues, pose significant threats to energy systems. At the same time, the shift from fossil fuels to renewables introduces new challenges in maintaining grid stability and reliability.

Let’s explore how renewable energy, storage, and smart grids can secure supply, and how advanced energy modelling has prevented system failures during extreme events.

Climate Risks and Energy Vulnerability

Energy systems face growing exposure to climate-related risks. Rising temperatures, flooding, and severe storms can damage critical infrastructure, disrupt fuel supply chains, and strain generation capacity. Global gas production and transportation networks, in particular, are highly vulnerable to hurricanes, droughts, and geopolitical instability—events that can lead to price volatility and supply shortages.

As fossil fuel dependency declines, these risks intersect with the operational complexities of renewable energy. Wind and solar power are variable by nature, and their output can be severely reduced during prolonged periods of low wind or cloud cover. Without adequate planning, these fluctuations can lead to supply gaps, especially during peak demand or extreme weather conditions.

The Role of Renewable Energy, Storage and Smart Grids

Renewable energy is central to decarbonising our society and reaching our climate goals, but its integration into power systems requires complementary technologies:

• Energy Storage: Batteries are increasingly deployed to manage frequency fluctuations and support peak demand periods. While they cannot yet replace large-scale backup generation, they provide critical short-term stability.
• Smart Grids: Digitalised grids enable real-time monitoring and automated responses to imbalances. They optimise energy flows, integrate distributed generation, and enhance resilience against outages.
• Grid Inertia Solutions: Historically, spinning turbines in coal and gas plants provided inertia, helping stabilise frequency during sudden changes in supply or demand. Many renewables lack this feature, but innovations such as flywheel stations and synchronous condensers are emerging to fill the gap.

Lessons from Spain: April 2025 Blackouts

The April 2025 blackouts in Spain highlighted the urgent need for resilience planning.

A series of near-simultaneous failures overwhelmed backup systems, far exceeding the standard assumption of two concurrent outages. Recovery was hampered by insufficient backup generation, as limited reserve capacity made it difficult for the system to respond quickly. Low grid inertia further complicated frequency stabilisation because fewer conventional plants were online. Climate stressors also played a significant role, with extreme heat and drought reducing hydroelectric output and placing additional strain on transmission infrastructure.

This incident underscores why robust energy modelling is essential. Accurate seasonal stress tests—covering derated wind and solar capacity, maximum expected imports, fossil fuel availability, and capacity market responses—are critical to preventing cascading failures in the future.

Energy Modelling: A Critical Tool for Security

Energy modelling enables operators to anticipate extreme scenarios and design robust contingency plans. Examples include:

• Winter Peak Modelling: Simulates demand spikes during cold snaps, accounting for reduced renewable output and potential import constraints.
• Capacity Market Analysis: Ensures sufficient backup generation is available when intermittent renewables underperform.
• Frequency Stability Studies: Evaluate how batteries and synthetic inertia can maintain grid stability during sudden outages.

These models inform investment decisions, guiding where to deploy storage, reinforce transmission, or incentivise flexible generation.

ESG Implications and Investor Priorities

Energy security is not just an operational issue; it is a core ESG consideration. Investors and stakeholders are increasingly viewing resilience as a key marker of long-term sustainability and financial stability.

• Environmental: Companies that integrate renewables, storage, and smart grids reduce emissions and align with net-zero commitments. Demonstrating robust climate risk planning strengthens environmental credentials.
• Social: Reliable energy supply underpins economic stability and public welfare. Blackouts during extreme events can damage reputations and erode trust, making resilience a social responsibility.
• Governance: Transparent risk management, scenario modelling, and disclosure of resilience strategies are now expected by regulators and investors. Boards must ensure climate risk is embedded in corporate governance frameworks.

Organisations that proactively address energy security through ESG strategies not only mitigate risk but also attract capital and maintain stakeholder confidence.

Building Business Resilience in a Low-Carbon Economy

Securing reliable energy supply during the transition to net zero requires a strategic, multi-faceted approach. Businesses should start by investing in on-site generation and battery storage to reduce dependence on the grid and shield operations from volatile energy prices. A well-designed storage system can provide critical backup during temporary blackouts, ensuring continuity.

Improving energy efficiency is equally important. Smart technologies can optimise consumption and shift high-demand activities to off-peak hours, lowering costs and reducing strain on the grid. Climate risk planning must also be integrated into corporate strategy.

This means incorporating climate projections into facility design, assessing flood and heat risks, and embedding these considerations into the corporate risk register. Practical measures could include flood defences, adjusted working hours during extreme heat, and resilient supply chain planning.

Finally, strengthening regional cooperation through cross-border interconnections and shared reserves can help mitigate localised disruptions.