Energy Concentration Risk

Definition

Energy Concentration Risk denotes a condition where an entity has excess Concentration in particular aspects of an Energy System with the result of increased exposure to Energy Risk.

Managing energy concentration risk in its various manifestations is one of the key objectives of Energy Risk Management.

Manifestations

• Revenue Risk (from Market Risk or Cost Risk) resulting from excessive reliance on particular forms of energy (or energy transformation processes) for the entity's Business Model
• Operational Risk Concentration from dependence on particular forms of energy infrastructure

Mitigation

• Diversification of energy provision arrangements