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As power demand rises, outdated supply assumptions may create greater operational risk

As power demand rises, outdated supply assumptions can increase operational, financial, and reputational risk for energy and power companies.

The operating landscape for energy and power companies is becoming more difficult to navigate as interconnected pressures build across the sector. And organizations that do not adapt to the realities of today’s environment may face significant operational, financial, and reputational consequences.

Demand growth tied to digital infrastructure is intensifying pressure on energy storage and power providers. At the same time, aging equipment fleets, broader generation and transmission upgrade needs, constrained repair capacity, raw material pressures, more volatile natural catastrophes, changing and emerging technologies, and geopolitical factors are all contributing to a constrained supply environment.

For many organizations, this is no longer just a procurement issue — it is becoming a planning, resilience, and risk management challenge. And yet, many organizations are still relying on replacement and repair assumptions shaped by a very different supply environment.

As supply chain constraints persist, that gap can leave resilience planning, business continuity measures, and financial protections misaligned with the realities of recovery.

Misaligned assumptions intensify risks

The changing conditions are creating a market in which most equipment can be more expensive and harder to procure, repair-shop access can be limited, and replacement timelines may be materially longer than many organizations have historically experienced. For power operators still planning around older assumptions, the elevated risk landscape may only become visible after a loss, when critical equipment cannot be repaired or replaced on anything close to historical timelines.

These pressures are being amplified by structural labor constraints across the power and grid value chain, with Goldman Sachs Global Investment Research indicating that approximately 500,000 additional workers will be needed by 2030, all in roles that require three to four years of training.

For power operators, these pressures are reshaping assumptions around traditional risk management approaches to operations and maintenance. For developers, owners, operators, lenders, and investors of data centers using either grid-connected or behind-the-meter power, this can introduce a set of risks that may not be fully reflected in existing project, operations, or business interruption planning.

A more demanding operating environment

In many parts of the market, original equipment manufacturers and repair facilities are managing significant backlogs. Energy equipment manufacturer GE Vernova, for example, announced that its gas turbine order backlog ended the second quarter of 2026 at 116 GW, up from 100 GW in the prior quarter, pushing expected deliveries out to 2031.

Lead times for critical equipment, replacement parts, and overhauls have stretched. In some cases, even organizations willing to pay a premium may have limited ability to accelerate repairs due to constrained shop capacity and specialist support.

The challenge is especially acute in gas-fired generation, where the 10 GW annual global turbine production allocated to the US falls short of the 64 GW of committed utility capacity, which is contributing to challenges accessing key equipment.

That may create a different operating reality from the one many companies are used to planning around, even two years ago. A loss that might once have been resolved within three to six months may now take a year or even longer to repair, potentially extending operational and financial impacts well beyond what organizations have planned for.

Supply chain constraints, reduced spare inventory, and limited repair capacity can also magnify the consequences of deferred maintenance decisions. Extending maintenance cycles to minimize outages and maximize revenue may once have been considered manageable if replacement parts were accessible and repair turnaround was predictable. In the current environment, the same decision can create materially greater exposure if a component fails and cannot be replaced for months.

These conditions can also influence procurement behavior. Some companies are pre-ordering equipment months or years in advance of project completion. Others are sourcing second-hand units to avoid long waits for new equipment. Those decisions can create meaningful insurance questions about achievable coverage scope, especially when purchasing used or refurbished equipment, or if reported values or limits no longer reflect the cost to reinstate damaged equipment in today’s market.

Business interruption assumptions may also need updating

Longer equipment lead times, constrained repair shop availability, and limited access to specialist labor can significantly extend recovery periods following a loss. Business interruption assumptions based on historical repair patterns may no longer be reliable.

For many organizations, the more pressing question is how long the business can absorb the disruption while waiting for an asset to be repaired or replaced.

This is where business continuity planning, indemnity periods, and recovery modeling may need closer scrutiny. If a company relies on past restart timelines, it may underestimate the duration and cost of a major outage as well as its broader financial and operational exposure.

Behind-the-meter or other dedicated-power arrangements can provide greater control over power supply, but they can also concentrate operational responsibility. In cases of limited or no practical grid backup, the failure of a key generating asset may create a more severe continuity challenge. And if equipment cannot be repaired or replaced within a reasonable timeframe, the power asset may effectively become stranded for the duration of the outage, with direct implications for the facility it is meant to support.

What organizations should be doing now

The scale of potential consequences means more attention may be given to holistic risk management strategies now. This includes revisiting contracts, financing structures, and performance expectations to determine whether these remain realistic in today’s market.

In order to more effectively protect themselves, organizations may wish to consider these actions:

Risk engineering can help organizations better understand their exposure, evaluate resilience, and make more informed decisions about which risks to transfer and which to retain and what contingencies to put in place. That includes early design review, construction-phase technical oversight, operational readiness, and scenario testing for real-world loss conditions.

Stress-test recovery timelines against current market conditions, including overhaul lead times, repair-shop access, contractor availability, logistics constraints, and restart complexity. Consider how multiple delays might compound a single loss event.

Reassess statements of values and program limits to determine whether they still align with current replacement conditions. In a market where equipment costs and reinstatement timelines have changed materially, relying on older values, routine indexing, or original purchase prices may leave your organization underinsured.

Review whether maintenance intervals still make sense given longer replacement timelines. Preventive and predictive maintenance may become even more important when a missed interval or deferred outage could lead to a much longer disruption.

For critical equipment, just-in-time assumptions may no longer be enough. Organizations should evaluate which consumables and capital spares are most important to hold based on lead time, failure mode, and operational consequence.

Not every risk created by this environment can be addressed through traditional insurance alone. It is important to think through how to manage functional obsolescence or the availability of the next generation of equipment when your current equipment has no replacement. Organizations may also need to consider business continuity planning, contractual protections, supply alternatives, capital allocation decisions, and, in some cases, alternative risk strategies.

A more realistic basis for resilience

The energy and power sector is operating in a market shaped by overlapping pressures. Navigating this environment may call for revisiting assumptions to determine whether they still align with today’s reality.

For risk managers, executives, and investors alike, that can mean looking beyond speed to market and focusing more closely on what it will take to operate reliably over time. In an environment where recovery may take longer and consequences may escalate faster, organizations that do not adjust early may find themselves having to navigate a much more serious financial and operational event.

Marsh works with energy and power companies like yours to help assess these exposures and assist you in your effort to design a risk management and transfer strategy to more effectively address fast-changing exposures. Contact us for more information.

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