Powering progress: Collaborating to build a sustainable future in emerging markets

Powering progress: Collaborating to build a sustainable future in emerging markets
Aon Insights Series Asia

02 of 05

This insight is part 02 of 05 in this Collection.

November 12, 2024 6 mins

Powering progress: Collaborating to build a sustainable future in emerging markets

Building sustainable future in emerging markets

Looking at the energy transition through the lens of a leader in emerging markets energy supply offers critical insights into risk challenges and solutions.

The delicate balance between phasing out use of fossil fuels and ensuring a secure supply of renewable energy is well known. Global supply chain instability, rising demand, and evolving technologies add layers of complexity that require careful management by all energy sector stakeholders. For a business navigating this transition within a region that is highly susceptible to changing climate patterns adds further layers of complexity and risk.

As Chief Corporate Services Officer for AboitizPower, Carlos Aboitiz is playing a vital role in leading the energy transition in the Philippines. Being an astute business leader and a climate justice advocate, Carlos has bold ambitions for the company to embrace innovative new technologies and at the same time develop a realistic framework suited to the needs of an emerging market.

“I lead a business that is confronting challenges around how we create a sustainable energy system and at the same time lift a population out of poverty. It’s a balance between delivering energy security and affordability to our citizens and tackling this urgent global issue of climate change.”

Carlos Aboitiz
Chief Corporate Services Officer, AboitizPower

A reality check on cost and utility for renewable energy

While the falling cost of renewable technologies might suggest that it can be easily substituted for fossil fuels, this is not always the case. “Cost comparisons often ignore the utility of different energy sources,” says Carlos. “It is equivalent to comparing a bike with a car as a mode of transport. They both get to you from A to B and the bicycle has a lower cost and carbon footprint. But the bicycle does not have the same utility as a car and cannot meet all of society’s transport needs as cars, trucks, ships and aircraft do.”

“Shoring up the utility of renewable solutions with battery storage drives up costs which is a significant issue for emerging markets like the Philippines where many people are in energy poverty right now,” he adds. “We must acknowledge these full system costs to society if we are to work towards a net zero world in earnest.”

Risk solutions for a country vulnerable to extreme weather

As a result of frequent disruption from extreme weather, AboitizPower and their customers also have rising insurance costs to contend with. “We’re a windstorm vulnerable country which means our renewable infrastructure carries a high risk premium for insurance cover,” says Carlos. “We also have a global insurance market introducing penalties for coal energy infrastructure. If our company accepts these higher costs to operate, they are then passed on to consumers.”

This challenge has led the company to form a captive insurance company, so they can become more self-reliant in how they transfer risk in an increasingly uncertain market. Carlos also points out the benefits to the business of having a better understanding of risk pricing. “In creating an internal market for risk and pricing our risk rigorously and transparently we can communicate to internal stakeholders just what costs come with certain risks,” he says. “This enables them to place a higher priority on exploring new risk management and mitigation solutions.”

As one of the first companies to work with Aon on a parametric insurance solution, AboitizPower have also benefited from this new approach to risk transfer. “We were impacted by a once in 30 years storm with significant damage to poles, wires and substations,” Carlos shares. “Our parametric cover allowed for a faster, simpler process for claims settlement so that we could place our focus and resources on restoring essential services to the city.

“The insurance industry is at the forefront of understanding how the economy is going to deal with climate change. They are experiencing climate change more deeply than other capital markets and on a steeper learning curve.”

Carlos Aboitiz
Chief Corporate Services Officer, AboitizPower

Leaning into the data to cut through complexity

With the sheer number of complex trade-offs a company like AboitizPower must face as it navigates the energy transition, Carlos highlights the importance of knowing when to lean into the data to support better decision-making. “We have enormous quantities of data available to us and we can’t harness all of it,” he says. “In my experience data adds the most value in the areas of our business with the highest complexity. This is the case with our fossil fuel operations and we focus on using data to make smart choices to protect our assets from damage and deterioration. This keeps them operating more reliably which is vital for generating more value to our customers and keeping our employees safe.”

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