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Solar flares and storms may be a sight to see, but the rare events could do significant damage to the world’s power grids, causing blackouts and triggering heavy business interruption losses.
Solar flares are brief eruptions of intense high-energy radiation from the sun’s surface. They are associated with sunspots and cause electromagnetic disturbances on Earth that can disrupt radio frequency communications and power line transmissions.
David Wade, space underwriter at Atrium Space Insurance Consortium in London, said there is a constant stream of particles coming off the sun known as the solar wind. During particularly active times, the sun may produce a coronal mass ejection that can interact with the earth’s atmosphere and cause problems with the power grid, he said.
“We’re getting ever more reliant on technology — digital electronics, the internet, navigation services — and a really severe space weather event could disrupt all of those things,” Mr. Wade said. “I think one of the big questions is how are people taking this because we see these problems so infrequently.”
A solar storm that occurred in 1859, often referred as the Carrington Event, is largely regarded as the most extreme space weather event on record. It was powerful enough to knock out the telegraph network in North America, Europe, and parts of Australia and Asia for two days.
Geoffrey Saville, London-based senior research manager at Willis Research Network, the research arm of Willis Towers Watson P.L.C., said it is only a matter of time before another large solar storm strikes the earth.
“Risk managers within companies need to understand what their contingency plans are, what kind of equipment is most vulnerable, what will be damaged, what won’t be damaged,” he said. “These are the kinds of questions every company with exposure to these kinds of events should be asking themselves.”
Since the Carrington event, the world has become much more dependent on electricity, and a similar solar event could wreak havoc on the electrical grid.
“The biggest concern of our modern society is that if a similar event were to occur this time it could have an impact on our power supply,” said Michael Bruch, Munich-based head of emerging trends/ environmental, social, governance business services for Allianz Global Corporate & Specialty S.E. “When we are talking about such a big event that goes way beyond what insurance can indemnify because that economic figure might go up to the billions and trillions of economic losses.”
A 2013 report by Lloyd’s of London and Atmospheric Environmental Research Inc., a Verisk Analytics company, called Solar Storm Risk to the North American Power Grid said a solar storm of the same magnitude of the Carrington Event is “almost inevitable,” as historical records indicate that extreme storms of that magnitude occur every 150 years.
The total economic cost of such an event is estimated at $600 billion to $2.6 trillion, according to the report. “If businesses, public services and households are without power for sustained periods of time, insurers could be exposed to significant business interruption claims, particularly as backup supplies are only likely to last for a limited period,” the report said.
A major space weather event could disrupt supply chains, which might trigger business interruption coverages, according to the report. Disruption to the power network would likely lead to widespread cancellation of events, which could affect insurers offering this type of cover, it said.
The electric grid can be hardened against the flow of geomagnetically induced currents in regions with the highest risk of outage, the report said. Current blocking capacitors and geomagnetically induced current monitors can be installed to protect transformers and regulate the power flow.
“The biggest potential impact is to the electrical grid, and there have been studies that said if we had a Carrington level event it could cause major transformers to be damaged and we could be looking at weeks or months of blackouts,” said Richard Quinn, vice president of the space weather division at AER in Superior, Colorado.
“It’s possible. Different people have come up with different estimates, but it’s a one in a 50- or 100-year type event.” A 2016 study by the Cambridge Centre for Risk Studies at the University of Cambridge Judge Business School in the United Kingdom for American International Group Inc. called the Helios Solar Storm Scenario estimated U.S. insurance industry losses for a hypothetical solar storm in the United States in the range of $55 billion to $333.7 billion. Slightly over 90% of this loss would be from service interruption within property insurance policies for those that lose power, while only 1% would relate to direct physical property damage, the report said.
Edward Oughton, research associate at the Cambridge Judge Business School, said the risks associated with solar storms can be mitigated by having adequate space weather forecasting capabilities, such as satellites that monitor solar activity.
“We need to ensure we have robust space weather forecasts to provide early warning to critical infrastructure operators,” Mr. Oughton said. “Currently, a number of the satellites used for this purpose are coming to the end of their life. Yet, without adequate early warning, power grid and satellite operators are unable to put operational mitigation plans into place, making us considerably more vulnerable.”
“In a perfect world, in the next three to five years, we will have built in more robustness into the (warning) system and we will build in more awareness, so the chance of a major catastrophic failure continues to get lower and lower,” said Rodney Viereck, head of the research section at the National Weather Service’s Space Weather Prediction Center in Boulder, Colorado.
“But on the other hand, we don’t know how big a storm could be. We’ve only been looking at space weather for the last 40 years, and so we don’t have a longtime history and there are indications that these storms were quite large back in the 1800s. But it’s hard to tell. There’s a lot of uncertainty and unknown,” he said.
U.S. District Judge Dan Polster in Cleveland, who is handling the opioid multidistrict litigation proceedings, is encouraging the parties to reach a settlement and has set a settlement conference for May 10.