According to Mitali Chatterjee, Insurance Research Manager at Swiss Re, the global reinsurer, climate change is intensifying severe weather events worldwide, significantly impacting the electric grid, emphasising the need of insurance in funding adaptation efforts and enhancing infrastructure resilience.
An analysis of US power outages from 2012 to 2023 indicates that over one-third of these outages were linked to severe weather. The frequency of such outages has increased in each four-year period during this time frame.
Chatterjee stated: “To reach net zero, most of the growth in supply must come from renewables.”
The International Energy Agency (IEA) “believes that renewable power share must increase from 28% (2021) to 49% in 2030 even in the conservative Announced Policy Scenario (APS).”
Chatterjee points out that the grid remains a significant bottleneck, with approximately 3,000 GW of renewable energy capacity waiting to be connected globally.
Political and planning delays, inadequate investment, and shortages of key components like transformers hinder grid development. The increasing frequency of natural disasters further complicates these efforts.
Chatterjee highlights the profound impact of natural disasters on the power grid. Hurricane Ian left 2.6 million Florida residents without power in 2022, while Hurricane Ida caused outages for 1 million people in Louisiana in 2021.
In the same year, Winter Storm Uri left at least 5 million people without power from Texas to North Dakota. Extreme heat has also damaged power infrastructure, as seen in the 2021 Pacific Northwest heat dome, which melted power cables.
In 2024, Storm Ingunn caused overhead transmission lines to fail in Norway, and flash floods in Sydney submerged substations, disrupting power.
Global average surface temperatures have risen by 1.1 degrees Celsius since 1850. Chatterjee noted: “As a result, climate models project heatwaves are likely to become more frequent and intense.”
Alongside changes to the polar vortex and polar jet stream, leading to cold snaps, heatwaves, droughts, and heavy precipitation.
These changes can significantly impact the electric grid, reducing the efficiency of thermoelectric generators, damaging solar power output and energy storage systems, and increasing the risk of transformer failure.
To enhance resilience, Chatterjee emphasises the importance of retrofitting and redesigning infrastructure. New substations can be equipped with permanent flood protection structures or built on higher ground.
“Infrastructure datasets should clearly indicate the degree of exposure 33, sensitivity 34, and vulnerability 35 of electric grid components. This can include supervisory control and data acquisition (SCADA) temperature monitoring for substations,” continued Chatterjee.
Chatterjee also highlights smart innovations, such as incorporating sensors that detect ambient weather conditions and making grids ‘intelligent,’ to enhance resilience.
“Innovative adaptation strategies could also include nature-based solutions such as the “living with water” project by Duke Energy in North Carolina,” further stated Chatterjee.
Risk transfer and mitigation, including insurance products, offer partial solutions. According to Chatterjee, insurers can be long-term protection partners for energy companies, providing risk management expertise and tailored insurance solutions to protect against weather-related business interruptions.
Enhancing the resilience of electric grids against climate hazards requires adaptation strategies involving data, design, innovation, and investment.
This effort necessitates collaboration among all stakeholders, including energy and utility companies, insurers, and governments.
Chatterjee underscores the critical role insurers play in managing risks and providing financial protection. They can support infrastructure investments and innovations that enhance resilience, ensuring that the electric grid can withstand the increasing threats posed by climate change.
