Severe weather the leading cause of costly power outages in U.S. – report

Severe weather is the leading cause of power outages in the United States, causing nearly 700 widespread power outages between 2003 and 2012 and costing the economy between $18bn and $33bn per year on average, according to a report prepared by the President’s Council of Economic Advisers and the U.S. Department of Energy’s Office of Electricity Delivery and Energy Reliability.

The 28-page report released Aug. 12 pointed out that, while annual costs fluctuate significantly, they are highest in years with major storms including Hurricane Ike in 2008, a year for which cost estimates ranged from $40bn to $75bn, and Superstorm Sandy in 2012, a year for which cost estimates range from $27bn to $52bn. Those costs included lost output and wages, spoiled inventory, delayed production, inconvenience and damage to the electric grid, according to the report.

In addition to the estimated cost of widespread outages caused by severe weather, the report described the impact of those outages and documented numerous strategies for increasing grid resilience and reliability. The report also touted the need for additional investment to make the grid more resilient, noting that grid resilience includes hardening, advanced capabilities, and recovery/reconstitution.

Although most of the report’s attention focused on best practices for hardening, resilience strategies must also consider options to improve grid flexibility and control, the authors of the report said. Resilience includes reconstitution and general readiness, such as pole maintenance, vegetation management, use of mobile transformers and substations, and participation in mutual assistance groups.

The report listed six priorities tied to the overarching goal of achieving grid resilience. Those include risk management, considering cost-effective strengthening, including considering placing utility lines underground and elevating substations, and increasing system flexibility and robustness using measures including increasing the number of transmission lines to provide greater capacity and control over energy flows.

Other priorities included increasing visualization and situational awareness through measures including additional deployment of smart meters and utilizing phasor measurement units, deploying advanced control capabilities including installing automated feeder control switches, and using advanced methods to track and predict the availability of critical components and systems.

Challenges to achieving a greater degree of resilience are diverse and include the fact that transformers are custom-made pieces of equipment that require substantial lead time to replace those that are damaged or destroyed. Another challenge is the simple economic reality that “[r]eplacing a [transmission and distribution] facility is far less expensive than building and maintaining flood protection,” the report’s authors said.

The report also included case studies dealing with Hurricane Irene in 2011 and Superstorm Sandy in 2012, as well as case studies focusing on how utilities including NextEra Energy (NYSE:NEE) subsidiary Florida Power & Light (FPL) and Entergy (NYSE:ETR) plan to draw on their experiences to improve electric system resilience for their customers.

While the report indicated the cost of weather-related power outages is high and rising as storms grow more severe and the electrical grid ages, it also noted a number of caveats that must be applied to the methodologies used to arrive at the estimates. Those caveats included that the scaled distribution of outages was estimated based on data from large storms, and then applied to smaller storms. In addition, to the extent that businesses are prioritized for power restoration, the estimate in the report may overstate the actual cost of outages.

Finally, the report included data showing that, while 2008 – the year of Hurricane Ike – was the most expensive year since 2003 in terms of damage caused by storms, at between $40bn and $75bn, 2007 and 2009 were the least expensive, at between $5bn and $10bn, and between $8bn and $14b, respectively.

The report concluded by noting that the Recovery Act had allocated $4.5bn for smart grid technology, and noted that a multi-dimensional strategy will prepare the United Stated for the increasing incidence of severe weather.

“Continued investment in grid modernization and resilience will mitigate these costs over time, saving the economy billions of dollars and reducing the hardship experienced by millions of Americans when extreme weather strikes,” the authors said.