Extreme weather events are high on the agenda, and their effects are difficult to ignore; lights out in Manhattan after Hurricane Sandy, nuclear and thermal power plants being shut down due to long-lasting heat waves in Europe and changing rainfall patterns in Kenya impacting hydropower. All these incidents are a result of extreme weather events, and at a time when energy systems are increasingly integrated it is vital that we are able to protect and repair energy infrastructure when unusual weather patterns arise.
With COP 21 on the horizon, and the World Energy Congress already recognised as a key milestone on the long road from Paris, we need to better understand the future threats to energy systems all over the world. The evidence of increasing extreme weather events, is highlighted in our recently published report, The road to resilience − managing and financing extreme weather risks , which investigates how entire energy systems can bounce back after these natural events, and how they can prepare for future disruption and system stress. To address climate change, we must not only make steps to mitigate the global effects, but also develop measures which can better adapt to these changes.
There is significant evidence to suggest that the frequency, severity and exposure of energy systems to extreme weather events are on the increase. Yesterday’s unlikely has already become today’s reality. The number of extreme weather events increased more than 4 times from 38 in 1980 to 174 events in 2014, and we are expecting a further rise in these events in the future, driven by the increase in global average temperature. The effects of these extreme weather events on global energy systems are significant, and in the long term, we can expect that extreme hot and cold temperatures will raise overall energy demand and strain peak capacity. We could also see reduced efficiency of thermal plants, cooling constraints on thermal and nuclear plants and increased stress on transmission and distribution (T&D) systems.
More extreme events such as tropical storms, droughts or floods may not only impact energy production and revenue streams, but also the equipment itself, and while in the past, impact-resistant – ‘fail-safe’ – structures were built, the complexity of today’s energy systems and increased incidences of extreme weather require a shift towards a ‘safe-fail’ approach. This approach aims to make weather impact resistant solutions ‘smarter not stronger’, with energy supplies more secure, more reliable, and the process of restoring services made more efficient following any disruption.
Soft adaptation measures are increasingly used alongside traditional hard resilience measures to safeguard energy systems in the event of extreme weather occurring. These soft adaptation measures aim to manage the impact of extreme weather, and include controlled shut-down as well as robust and rapid restart procedures, awareness campaigns, and disaster relief and emergency response programmes.
Financing resilient energy infrastructures
Financing soft and hard resilience measures to cope with extreme weather events, plus the general financing challenges of energy infrastructure, must be addressed to ensure that all the elements of the energy trilemma – energy security, energy equity and environmental sustainability – are met. Without the necessary adaptation measures, balancing the energy trilemma will be at risk in the future, and in a context of unprecedented uncertainty and sluggish economic growth it is a challenge to ensure the necessary financing is in place. There is also a growing recognition of the need to develop finance for the adaptation of current energy infrastructures. Unlike mitigation measures, adaptation measures often lack regulatory guidance about what is necessary to increase resilience and currently there are no agreed goals or metrics for adaptation or specific responses to extreme weather.
A challenge for financing resilient energy infrastructure and systems is encouraging funding and investment from a variety of sources. Projects to increase resilience need to have a return on investment to attract private investors so they are able to identify tangible returns, reduce business interruption and enhance profitability. As extreme weather events are by definition extraordinary events, no standard business model will be able to incorporate related risks unless clear norms and regulation provide a framework to do so.
Importantly, policy frameworks must support broader private sector involvement through traditional cooperative methods (such as public−private partnerships), but also by incentivising the creation of new financial and insurance vehicles that address the shift in market dynamics. Specifically tailored funds that embrace the changing nature of the industry can help to address and reduce the additional upfront capital costs that result from enhancing the resilience by safeguarding energy systems and key infrastructure choke points against the effects of extreme weather events. While the benefits are clear, assessing the economic losses caused by extreme weather events is more difficult. Given the expansive costs of energy system failures, policymakers must ensure that investors are provided with appropriate incentives to invest in system-wide resilience.
In the post COP21 agenda, this issue is likely to increase in importance as energy, finance and regulators struggle to find the best way to respond to this emerging risk. This issue promises to be one of the hot topics at the 23rd World Energy Congress in Istanbul next October. Much has been said and even more is still to be done as we look to embrace this new frontier for energy.
 Swiss Re Economic Research and Consulting, 2015: Sigma world insurance database (last accessed 10 September 2015)
 Pachauri, R K, Allen M R, Barros V R et al, 2014: Climate Change 2014: Synthesis report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC)
About the author: Born in Switzerland in 1969, Christoph Frei became the World Energy Council’s youngest Secretary General in April 2009. He has an assignment as Adjunct Professor and acts as Advisor to the President of the Swiss Federal Institute of Technology (EPFL), Lausanne. He is also a member of the World Economic Forum’s Global Agenda Council on Energy Security. Before joining the World Energy Council, Dr Frei was Senior Director, Energy Industries & Policy at the World Economic Forum (WEF) and a member of WEF’s Executive Council (2001–2009).