Brownouts and blackouts pose risks
While a blackout will cut the flow of electricity completely, a brownout will maintain power, but at reduced capacity or with partial outages. These events can impact business operations and potentially severely impact production operations, for example.
Winter is behind us, but there are important lessons to learn from the past season. Despite the energy crisis and hype around freezing temperatures, in the end the winter was rather mild compared to expectations. However, we should not become complacent, as the constraints on the gas supply will continue, and the electrification of industry is expected to continue to grow, adding pressure to the power grid and further impacting distribution and supply.
Without upgrading the grids, delivering power generated by renewable energy sources to consumers will be a challenge. Most grids were built for traditional oil and gas. This means, they will not be able to transport the electricity. One of the factors behind increased blackouts is in the lack of investments made to power grid capabilities. One problem with investment in transportation lines is that they take a long time to execute.
Generally, people speak of electrification and renewables as something we have in place – however there is a long way to go before this will be realised. To get to a renewable future, we will still rely heavily on oil and gas, and require more time and even greater investments. Maintaining operations during a brownout or blackout is about managing risks and preventing losses. In this article, we dive into how companies can prepare for both intentional and unintentional power outages.
Alongside insufficient grid capabilities, severe and extreme weather events, human error, or malfunctioning systems can cause power outages. It is worth noting that not all brownouts are unintentional, as they can also be intentionally executed, for example during maintenance work or triggered as a preventive measure to prevent overload.
As is often the case, business continuity planning is key to successfully managing a brownout or blackout. Each industry will have its own unique issues when it comes to managing operations during a power outage or drop in power levels, thus there is no one-size-fits-all solution that would cover the pulp & paper, pharmaceuticals, metal, retail, and food industries, for example.
Managing risks together
If’s Risk Engineers provide guidance on power outage risks working together with customers, for example when doing survey work offering tailored support and advice, which is as relevant as possible for each individual customer.
– Oftentimes we find that companies using a vast amount of electricity are already aware of the risks relating to power outages and blackouts, and they are in direct contact with local energy companies, as they might also be the ones to balance the grid (in a normal situation), says Andreas Kräling, Head of Property Risk Management Services at If Insurance in Sweden.
It is worth noting that sometimes small and medium-sized companies might not be as aware of these risks to their production as large businesses are. Furthermore, these smaller companies might not be able to negotiate in terms of the speed of the shutdown or power reduction in cases where power outages are imposed. Similarly, power companies may not know that smaller companies may face serious consequences in case of sudden power reduction or partial outage.
As an example, a bakery that is utilising high-capacity bakery tunnel ovens, can face multiple issues in a brownout event. Another issue, for example in the Nordic countries, can be from lower temperatures in buildings during the winter, which may also cause more freezing-related damage followed by mould.
Understanding the risks
Electricity is a vital component of modern life. For companies, it is critical to understand how well their operations can withstand a brownout or blackout.
The effect and consequences of a shortage of energy can vary considerably depending on the industry. Energy intensive industries, such as pulp and paper, can cut down energy usage rapidly. This can be done, for example, by stopping mechanical pulp production and/or other production equipment and instead selling their excess electricity capacity to the grid.
However, other industries may experience significant property losses due to a power outage. In these cases, energy usage can be more intense or fast, as is the case in steel mills. Such demand can lead to potentially significant losses, for example if the mill requires more time to be shutdown to allow for sufficient cool down.
Explains Kräling, “scenarios will vary based on the type of operations and equipment a company is using. However, severe business interruption due to equipment failure can result from a brownout. Therefore, preparation is key to managing operations during a brownout.”
Risks are often well known
Fortunately, risks are often well known among large companies and their energy providers. Normally, power companies know which companies are operating on the grid. Ideally, a controlled power outage or shutdown includes issuing communications to companies operating on the grid in advance to help prevent damage from brownouts.
Local authorities must also be aware of these potential catastrophes, which can lead to huge damages and consequential losses to crucial industries in their own country or region. Further indirect impacts on the local population and society can be severe if several large companies face an unexpected partial outage or reduced voltage supply.
Sometimes, it can be difficult to understand potential chain reactions or risks following an incident beforehand. For example, in industries supplying chemicals to other industries, when production is stopped, there may still be dangerous waste that must be processed afterwards. What are the consequences in later start-up if production has been stopped abruptly or in an extraordinary way? Understanding and evaluating all the potential risks and impacts thoroughly will help companies better prepare for the ‘worst case scenario’.
Slow transition to renewables
As the transition to renewable sources of energy continues, power grids and related infrastructure will need to be updated in order to deliver power effectively and reliably to consumers in the future. It is worth noting that as wind and solar power create a much more volatile supply of energy, there will be an increased and higher strain on the grid.
As a result, the amount of brownouts and blackouts can be expected to increase, and also in areas where these events have previously been less frequent.
Establishing alternative methods for power onsite is rarely an easy solution. The future production may be at risk when searching for alternative capacity. Making rushed or abrupt changes in production due to the introduction of alternative capacity or raw materials may lead to increased risk of a property claim or even a possible liability claim. We also see more on-site storage of these raw materials, which can further increase risks.
Looking ahead, there is plenty of time to prepare for the upcoming winter. Though it may feel far away, taking action now to prepare for the next winter season makes sense. Consider the lessons learned in your company and implementing the required actions early on will help you tackle potential risks that could materialise next winter.