A recent report by commercial property insurer FM warned that risks associated with renewable energy and emerging electricity generation technologies are growing faster than the expansion of energy infrastructure globally, raising concerns about rising construction costs and insurance premiums and declining investment returns, at a time when clean energy transformation projects are accelerating and the need for electricity is increasing due to the expansion of artificial intelligence, data centers and the electrical transformation.
And the report, published by TechNode Global on Friday, November 6, 2026, stated that the rapid expansion of energy infrastructure, driven by increasing demand for electricity and the transformation of energy systems, poses new challenges and risks at various stages of asset and project implementation, from the selection of sites and technologies, through construction and operation, to insurance and investment.
The FM Energy and Renewable Energy report covers a range of technologies, including battery energy storage systems, renewable energy projects, gas-fired power plants, and small modular nuclear reactors, highlighting the risk management difficulties associated with technologies that often do not have a long operational record at scale, which makes assessing their performance and ability to withstand actual operational conditions more complex.
New Technologies and Uncalculated Risks
The report was based on a survey of 750 risk management decision-makers in the energy sector, 150 insurance brokers, and 150 financing entities worldwide, and its results showed that 59% of energy companies consider the adoption of new technologies as one of the most prominent factors driving the rise in risk costs.
And in a sign of growing interest in emerging technologies, 39% of the energy companies surveyed said they plan to increase their production capacity from small modular nuclear reactors over the next three years, reflecting the sector’s growing trend towards diversifying generation sources and leveraging new technologies to meet growing electricity demand.
However, this expansion is hampered by the limited operational experience accumulated in a number of these technologies, as their ability to operate efficiently and stably in real-world conditions, especially when integrated into hybrid energy systems that combine more than one technology, remains questionable for industry workers.
And 46% of respondents said they were unsure how new technologies would perform when under actual operational pressure, reflecting a gap between the speed at which innovations are introduced into energy projects and the availability of sufficient data and expertise to assess associated risks.
This problem is particularly pronounced in projects that combine renewable sources of generation, battery storage systems and traditional electricity grids. Ensuring stable supplies requires a thorough understanding of the nature of the interaction between these components, and their ability to operate in an integrated manner when loads change, breakdowns, or exceptional operating conditions occur.
Higher construction and insurance costs and lower returns
And the implications of the risks are not limited to the technical and operational aspects, but extend to the economic feasibility of projects, as the report showed that uncertainty about the ability of the energy infrastructure to withstand and continue is directly reflected in the costs of implementation, insurance conditions and the attractiveness of investment.
According to the survey results, 51% of energy companies said that uncertainty about infrastructure flexibility leads to higher construction costs, 46% indicated increased insurance costs, 40% reported lower returns on investment, and 39% believed that these risks make projects less attractive to investors.
And these figures reveal a growing challenge for energy companies, which is to balance accelerating the implementation of projects to keep pace with the increasing demand for electricity, and to allocate the necessary resources to reduce potential risks, as ignoring the engineering and technical aspects in the early stages may lead to additional costs that are difficult to contain after the start of construction or operation.
And the report pointed out that the financing bodies estimated the cost of risk at higher levels than the estimates of energy companies in a number of categories, which reflects a gap in risk assessment between those who develop projects and those who provide financing for them.
This difference in estimates may lead to financiers tightening investment conditions, demanding additional guarantees, or reconsidering expected returns, especially in projects that rely on modern technologies that have not yet undergone extensive operational testing.
Selection of sites... a weak point in energy projects
And among the most prominent risks addressed in the report is the issue of choosing the sites of implementation of energy projects, with 78% of participating energy companies saying that decisions about the sites of projects often lead to the emergence of subsequent risks that were not expected when making the decision to build.
These risks include the nature of the geographical and climatic conditions of the site, its vulnerability to natural disasters, the availability of the necessary infrastructure to connect it to electricity networks, as well as the site's ability to accommodate the selected technologies and long-term operation and maintenance requirements.
This is becoming increasingly important with the expansion of renewable energy projects, which often require large areas and sites with specific natural characteristics, such as solar radiation rates and wind speed, as well as the need to assess environmental and climate risks that may affect the continuity of production.
And Doug Patterson, Senior Vice President and Director of Specialized Industries at FM, said that energy companies face significant pressure to expand their production capacity quickly, but that decisions taken in the early stages of projects may establish risks that are difficult to deal with later, and are more expensive to address.
And he added that the most important decisions related to the flexibility and resilience of assets are often taken when choosing sites, technologies and equipment, stressing the need to involve engineering expertise at this stage, allowing weaknesses to be identified and addressed before they turn into actual problems.
The role of insurance exceeds the coverage of damages
The report argues that the role of insurance companies should not be limited to providing insurance coverage after projects are completed and started, but should extend to early participation in risk assessment and providing engineering expertise that helps developers reduce them before projects are implemented.
And the survey showed that 71% of insurance brokers believe that the engineering expertise provided by insurance companies is especially valuable in projects that rely on new technologies or are implemented for the first time, while 67% indicated the importance of these expertise in construction and development projects, as well as projects in areas prone to natural disasters.
And early engineering assessments can help developers identify vulnerabilities associated with site selection, technologies and designs, enhancing assets’ risk resilience, improving their access to insurance coverage, and supporting investor confidence in their viability and sustainability.
The results also showed that 85% of respondents agree that providing engineering insight and expertise in the early stages of the project can improve asset stability and insurability and boost investor confidence.
Calvin Cowan, FM’s Regional Head for Southeast Asia, said that resilience considerations should be an essential part of infrastructure planning before construction starts, not evaluated after assets are completed, noting that the development of energy systems and the introduction of new technologies necessitate a review of risk management methods.
Energy transition to the sustainability test
And the report’s findings reflect a broader challenge facing the global energy sector, namely that the expansion of renewables and modern technologies is not only associated with increasing production capacity or accelerating the shift away from traditional energy sources, but also requires the development of infrastructure, storage systems, networks and risk management mechanisms in parallel with this expansion.
As demand for electricity grows due to the proliferation of artificial intelligence applications and data centers and the shift towards electric use in the transport and industrial sectors, pressure is increasing on governments and energy companies to provide a stable and reliable supply. However, rapid expansion, if not accompanied by careful engineering planning and comprehensive risk assessment, could raise project costs and weaken their ability to attract funding and investment.
And the report’s findings suggest that the challenge is not the adoption of new technologies per se, but the readiness of the infrastructure and institutions involved to absorb them, and their ability to manage the risks associated with their large-scale operation.
And so engineering expertise and early risk assessment become key elements in the success of the energy transition, not only to ensure the safety of facilities and the continuity of electricity production, but also to protect investments and reduce the additional costs that companies and consumers may incur in the later stages.
comments