BENJAMIN NG

Risk strategies for decommissioning traditional power plants

- By BENJAMIN NG Partner Leader, Natural Resources, Asia Aon

The global energy sector is undergoing a seismic shift. Conventional power plants—coal, gas, and oil-fired facilities—are facing mounting regulatory and economic pressures to retire or repurpose. These assets, once the backbone of our power grids, now demand a renewed focus on contractual obligations and risk management strategies. It's high time we address the evolving risks and obligations these ageing plants present.

Evolving risks and obligations

As power plants near the end of their operational life, their risk profiles change. Whilst reduced utilisation may decrease routine wear and tear, ageing infrastructure heightens the potential for significant failures. Deferred maintenance, often a financial strategy in later stages, can exacerbate these risks. Moreover, whilst the physical operations of a plant may gradually wind down, financial and contractual responsibilities persist. Challenges such as stranded asset risk, volatile fuel costs, and unforeseen regulatory obstacles can prolong a plant's operational period beyond initial expectations, necessitating extended insurance coverage.