Supporting Network Companies to Tackle Energy Resilience

With increasingly extreme weather events and other external threats facing an aging grid infrastructure, regulators and network companies are considering how to improve energy system resilience. While governments and businesses are evaluating on-site options, the electricity grid is really the first responder when it comes to resilience.

How, then, can electricity network companies make sure they have what’s necessary to improve the grid’s ability to resist, react, and repair when severe events occur? At a high level, they can do three things.

First, electricity network companies cannot do this alone. Interdependencies with other systems must be included in any resilience planning effort. For example, if telecommunication lines go down, utilities cannot communicate with their field equipment. There are also numerous interdependencies between energy and water, meaning a vulnerability in one sector yields vulnerability in the other. We should also consider the roles other government agencies can play in supporting resilience. Whether protecting supply chains or improving multi-jurisdictional coordination, much can be accomplished outside the purview of the energy regulator.

Second, consideration is needed beyond electricity price controls. Setting aside the broader stakeholder needs of an energy resilience plan, some electricity network investments don’t necessarily belong on the shoulders of electricity customers. Putting all of these costs on customers creates a speed brake on any progress made on resilience, and it will mean slower progress than what is reasonably needed. Moreover, some resilience investments are very narrow in geographic implementation but provide benefits to the public at large. Supporting regional hospitals, first responders, and even military bases is about supporting the public good. These types of investments may be better made through taxation than through customer funding.

Finally, network companies need a performance metric for energy resilience around which they can plan. The adage “you can’t manage what you don’t measure” is an ironclad operating principle for electricity networks where every pound put forward in business plans must be defended as an efficient investment. Using performance-based regulation to create incentives around certain outcomes can best leverage resilience metrics, but even more broadly network companies will be able to better justify resilience investments if there is an agreed-upon performance metric. Creating a resilience metric is easier said than done, but several models exist that might be applicable. For example, the Institute of Electrical and Electronic Engineers’ report “Resilience Framework, Methods, and Metrics for the Electricity Sector” from October 2020 provides both qualitative and quantitative frameworks. An imperfect metric is better than no metric.