Space Storm Insurance

Within 90 seconds, the entire eastern half of the US is without power.  … A year later and millions of Americans are dead and the nation’s infrastructure lies in tatters. …. An extraordinary report funded by NASA and issued by the US National Academy of Sciences (NAS) in January this year claims [the Sun] could do just that.  … A severe space weather event in the US could induce ground currents that would knock out 300 key transformers within about 90 seconds, cutting off the power for more than 130 million people. … this whole situation would not improve for months, maybe years: melted transformer hubs cannot be repaired, only replaced. …  Within a month, then, the handful of spare transformers would be used up. The rest will have to be built to order, something that can take up to 12 months. … According to the NAS report, the impact of what it terms a “severe geomagnetic storm scenario” could be as high as $2 trillion. And that’s just the first year after the storm. The NAS puts the recovery time at four to 10 years.

That is from a recent New Scientist.  Here is that NAS report, and here is a 2000 article in IEEE Spectrum.  This sort of disaster could come from a solar storm about as strong as one we saw in 1859.   I just consulted for a prestigious government consulting firm, who told me they are trying but have yet to convince US government agencies to take this problem seriously.  Apparently it would just take about ten million dollars to protect the US power industry from a huge solar flare, and this would also help protect against a nuke EMP.  But apparently too many crazies support the idea for US bureaucrats to want to take the idea seriously.  Hat tip to Robert Koslover.

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  • ShardPhoenix

    If it’s really that cheap to prevent then it might be a better idea to lobby the power companies directly (unless these transformers are owned by the government).

  • Constant

    If there’s any way to internalize the benefit locally, then the incentives would be better for local utilities to go to the very minor expense of protecting themselves. Even if it’s not possible to do that, 10 million dollars doesn’t seem entirely out of the range of possibility to be raised privately – I think charities commonly raise much more than that.

  • Mike

    Are you sure that’s $10 million, and not $10 billion? The former sounds like spare change for the defense budget — I think they spend about as much on psychics and telepathy research and such.

  • Shard and Constant, we won’t let power companies charge more for delivering their product in extreme situations, so they have little financial incentive to prepare specifically for such situations.

    Mike, I’m sure.

  • Constant

    Robin, I’m on board with letting prices go up, but I don’t think that’s a sufficient explanation. Going by Wiki, a solar storm would last a few days, so the extreme situation would last a few days. But then it would be over and the situation would no longer be extreme. But the article describes a loss of power of many months. While I can understand why the utilities may say “to heck with the customers” during the extreme situation of a solar storm, the scenario involves the utilities going out of business in the months after, possibly contributing to the cost of building replacement transformers. Is all this not worth insuring against – I mean, to the utilities themselves, so they can maintain a revenue stream in the months after the solar storm and so they can avoid the cost of rebuilding the transformers? Conceivably it is not, but I find it hard to believe, unless it is sufficiently improbable. But if it is sufficiently improbable, then maybe it’s not something for the rest of us to worry about either.

    • Josh

      Is all this not worth insuring against – I mean, to the utilities themselves, so they can maintain a revenue stream in the months after the solar storm and so they can avoid the cost of rebuilding the transformers?

      Exactly. They should have an incentive whether or not they are allowed to charge more.

    • Power firms have some incentive, but just far out of proportion to social value, so they will do far too little relative to what should be done.

  • Doug S.

    According to Wikipedia, large solar storms hit the Earth about once every 500 years…

  • James Andrix

    It’s possible that we are prepared but for whatever reason our preparations are classified.

    • Sorry, that is just not plausible.

      • Jim Babcock

        Why not? If the US military has a stockpile of spare equipment to bring out in the event another nation uses an EMP on us, then they would not want other nations to know that we have that stockpile, since if they did then they would probably try to locate and target it too.

  • Dagon

    Something is wrong with these numbers. If this is a commonly-accepted, documented risk, and would cost only $10 million nationwide (that’s less than 600 bucks per source listed in, then individual managers would simply be stupid not to protect themselves from recrimination.

    Many might be so stupid, but not most or all. Someone along the line is giving you incorrect estimates of probability, severity, or cost of protection.

  • Was there ever a single case of huge stakes single event insurance working properly? I would guess it would be heads you pay insurance premium, tails insurer goes bankrupt or is bailed out by taxpayers, just like with the current financial crisis.

    Markets and prediction markets can be wonderful sometimes, but they are not universal solutions to every single problem in the world.

    • Roko

      I think robin has mistitled this article. He isn’t advocating insurance for space weather – he is advocating preventing the disaster by hardening transformers or building up a stockpile of them.

      He should rename it “preparations for space storms” or “mitigate space storms”

      • Yes, my use of the word “insurance” was needlessly confusing.

    • Roko

      And in defence of decision markets/futarchy, they would almost certainly have recommended paying up $10million by now.

  • fenn

    shocked at that low 10 million number

    I hope you will push this issue. Seems like one where public intellectuals with platforms like this could actually make a real world difference.

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  • K. Larson

    I believe there are significant network effects and dependencies in the power grid (although I’ve no direct knowledge of the engineering involved). A single operator who installs protection may be doing very little to protect himself unless others do the same. Such a coordination problem could account for the reluctance of existing operators to spend on protection. Although, 10 million does seem almost absurdly low.

  • David

    Buy spare transformers, lots of them and put them in secure storage depots throughout the nation along with other spare parts. This might well cost hundreds of millions of dollars, but it is the only decent defense you can make for this critical part of our infrastructure against what I call the attack of the 24 angry rednecks (so named because 24 angry rednecks could easily cause the scenario depicted in the original post with nothing more than hunting weapons, improvised explosives, cell phones, and pickup trucks). Unfortunately the US is notoriously slothful in the area of civil defense, and has been since at least the 80s. It’s almost comical that we spend crazy amounts of money on missile defense but don’t spend the far smaller amounts of money needed to protect against attacks like these. News flash, almost every nation on earth can field 24 angry rednecks, although the local translation may vary.

  • mtc

    Well the wikipedia link on the 1859 storm says it took 18 hours for the massive coronal ejection to actually get to earth. So in 18 hours, we can’t just open all the relevant breakers (that are set up trip almost instantly during overload conditions)? I understand just shutting down power generation doesn’t help any, but I have to think there’s a way to break the loops in the distribution system and save all/most of the transformers. So you have a 24/48/72 hour blackout, which causes some significant problems, but certainly doesn’t leave millions dead (as destroying most of the electrical infastructure might plausibly does over a year).

  • Robert Koslover

    mtc, the real problem is that we may not have nearly that much time of warning.

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  • John

    Robin, what’s the source of the $10 million estimate? I don’t see it in the linked materials.

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  • John Smith

    According to the Department of Homelamd Security report, the estimated protection cost is $150 million, and not $10 million.

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