Power systems must prepare for more extreme weather events says report

Power producers around the world need new strategies to manage and finance their installations in the face of increased risk from extreme weather events, a report released this week says.

According to the World Energy Council’s (WEC) The road to resilience – managing and financing extreme weather risks, today’s ‘fail-safe’ systems, which focus on ensuring that single assets can withstand sudden impacts and return to full performance, must be replaced by ‘safe-fail’ systems which look at the entire energy value chain and take a more strategic approach to identifying vulnerabilities.

Christoph Frei, WEC secretary general, said: “We are on a path where today’s unlikely events will be tomorrow’s reality. We need to be smarter and imagine the unlikely.” Power systems which fail, he said, “need smarter, not stronger, solutions”.

“This new approach is essential if we are to cope with new weather patterns and phenomena such as the more powerful El Niño currently experienced in many parts of the world,” he added. The report cited recent natural disasters such as 2012’s Hurricane Sandy in the US, which brought down regional power systems for three days; 2013’s Philippine typhoon, where “the cost of recovery was estimated at more than double the GDP of the country”; and this year’s Chilean rainstorms which left thousands without power.  

The energy system of the future needs to incorporate concepts such as ‘soft resilience’, the report said, with a focus on integrating single assets into power systems that can recover quickly from sudden impacts by reducing the impact of damage or outage and minimizing service interruptions. This is in contrast to ‘hard resistance’, which focuses on building single assets in a way that can withstand extreme events.

In addition, the report said power producers must consider weather risk coverage as part of financing. “Current estimates for the cost of energy system adaptation do not fully account for the additional financing required to accommodate these new emerging risks,” Frei said. “We need to ensure that resilience can turn these risks into rewards.”

Among the report’s recommendations for financial risk mitigation are weather derivatives that complement traditional re-insurance solutions; catastrophe bonds that transfer peak risks to capital markets; and adaption bonds which ensure funds go towards resilience measures, particularly in vulnerable areas. In addition, it noted that the power sector “must consider the downsides of lengthy public procurement in relation to disaster response”.  


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