The resilience imperative

The recent spate of hurricanes, wildfires, and earthquakes have brought the issue of resilience to the fore for businesses and the communities they operate in.

The increasingly higher intensity disasters, which are also occurring more often due to global climate change, punishes local communities. NOAA’s National Center for Environmental Information tracks the impact of these “billion-dollar disasters” – disasters where the damage costs are greater than or equal to a billion dollars – and the statistics are stunning.

  • The United States was impacted by 14 billion-dollar disasters in 2018.
  • The annual average number of billion-dollar disasters for the past three years (2016-2018) is more than double the long-term average.
  • The average disaster costs in the past three years (2016-2018) has ballooned to over $150 billion/year

Cities and utilities at the center of the energy transition face challenges to mitigate and plan recovery from worst or beyond worse-case scenarios. States across the nation are recognizing the imminent risk to residents and businesses and exposure from these events and are taking action. Leaders at the helm of utilities are prioritizing action to address these risks and/or are being asked to do so. The CEO of New Jersey’s PSE&G, Ralph Izzo, has been decisive and pioneering in his stance on climate change. PSE&G has closed its coal-burning plants and is a leading developer of solar and wind power. In Feb 2019, Michigan’s Governor Whitmer asked the Michigan Public Service Commission to evaluate by July 2019 “if the systems are adequate to account for changing system conditions and extreme weather events and identifies recommendations to mitigate risk and ensure safe, reliable energy.” Two of the largest Michigan utilities, DTE and Consumers, have set goals to move to a greener energy mix to mitigate the risks from climate change.

California wildfires in 2017 and 2018 have been ferocious in their intensity and have destroyed tens of thousands of buildings. The total 2018 wildfire costs in California are estimated at $24 billion. California Public Utilities Commission President, Michael Picker, was a driving force behind California’s first ever Wildfire Technology Summit in March 2019, which convened national and international thought leaders and practitioners from state and local governments, academia and industry, to discuss innovative strategies, technologies, and practical tools to better manage these devastating disasters.

Southern California Edison, which provides electricity to  more than15 million people has managed to limit its exposure to wildfire-related risks. SCE’s CEO Pizarro describes their multi-prong and incremental approach: “There are several tens of percents that we know we can reduce the risk. As an initial step, we think covered conductors, combined with vegetation management practices, combined with other equipment we’re changing out in high fire-risk areas — that all combines to an overall risk reduction.” In addition to the above, SCE also leverages data-driven algorithms and predictive models to determine wildfire threats and has a dedicated expert incident meteorologist in its first ever fire scientist role to help combat the threat of wildfires.

Closer to home in our DNV family, colleagues and friends have been impacted by wildfires, hurricanes, and floods. We are driven by our purpose of safeguarding life, property and the environment, and enabling organizations to advance the safety and sustainability of their business. Recognizing these enormous risks, DNV has over the past several years developed new tools ranging from building resilience, to risk management for the grid, to planning for future climate scenarios, in order to help assess and reduce risks to the energy grid and built environment presented by disasters precipitated due to climate change.

Furthermore, major investors are seeking climate risk disclosure both in financial risk disclosures and through reporting frameworks like Carbon Disclosure Project (CDP) and the Global Real Estate Sustainability Benchmark (GRESB).

The energy transition must occur more rapidly and in the context of the new climate in order to meet the UN’s urgent warning. We recognize that risk and opportunity are two sides of the same coin, and we are exploring how we can turn climate risks into climate opportunities in collaboration with UN Global Compact, Sustainia, and other partners in the private sector.

Look for the next post in our series on resilience covering specific local scenarios, starting with our colleague Jennifer McWilliams’ post on California Wildfires.

References:

4/9/2019 9:00:00 AM

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Jarred Metoyer

Jarred Metoyer

Service Area Manager, Markets and Risk

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Gomathi Sadhasivan

Gomathi Sadhasivan

Director, Customer Decision Sciences

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