The Biggest Threat to the Economy Is From Outer Space
Threats to the electric grid are coming from everywhere: saboteurs, weather and, as silly as it sounds, from outer space. The danger is significant and growing, and business risk managers are taking it seriously.
The latest warning comes from Paul Singer’s Elliott Management Corp., a $24.8 billion hedge-fund firm based in New York. Singer warned investors, in a letter obtained by Bloomberg News, of what he sees as the gravest threat: an electromagnetic pulse from the Sun that knocks out the grid for months or longer.
While Elliott’s letters to investors “are typically chock full of scary or depressing scenarios,” writes Singer, “there is one risk that is head-and-shoulders above all the rest in terms of the scope of potential damage adjusted for the likelihood of occurrence.”
While it sounds like the stuff of Hollywood, the threat from the Sun is quite real. Just last week, NASA reported on a 2012 sunburst, known as a coronal mass ejection, with the potential to “knock modern civilization back to the 18th century.”
The miss was about as near as they come: If the pulse had traveled through the same region of space a week earlier, Earth would have been pummeled. Ground currents would have melted the copper in transformers, and the interconnections of the sprawling power lines would have spread the damage far and wide. “We would still be picking up the pieces” two years later, Daniel Baker of the University of Colorado said in a post on NASA’s website.
A powerful solar storm in 1859, known as the Carrington Event, disrupted telegraph service. In today’s plugged-in world, such a storm would wreak havoc worldwide. In the U.S. alone, 130 million people could lose power. As many as 40 million Americans could be left with long-term power disruptions -- anywhere from 16 days to 2 years, according to a report last year by Lloyd’s, a 350-year-old insurance marketplace.
Two years. The reason an outage could last so long is that many of America’s biggest transformers don’t have spares, according to a report by the National Academy of Sciences. Most are no longer produced in the U.S., and if new custom transformers must be ordered, the lead time is a minimum of five months.
Extreme storms like the Carrington event occur approximately once every 150 years. The last one was almost 155 years ago. The potential economic cost of a Carrington-level event today: $2.6 trillion.
The specter of a solar storm is ghastly, but it’s not the only threat to the U.S. grid. We got a reminder of that last year when the Wall Street Journal reported on a Hollywood-style attack on a California electricity facility. Another hint of how vulnerable grids can be: the 2012 blackout in India that left 640 million people without power. While cyber attacks to the grid have so far been limited in scope, the U.S. Federal Energy Regulatory Committee (FERC) found that a coordinated strike could bring down the entire U.S. grid, according to the Wall Street Journal.
These are dress rehearsals. Singer, one of the biggest backers of Republicans politicians, has called for “what should be a bipartisan push to make the country (and the world) safer from this kind of event.”
Congress has been working on legislation to make the grid less vulnerable for years but has yet to reach agreement.
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