How about this for an epic disaster movie plot? The London Olympic Games is about to start; the English capital basks under the global spotlight. But days before Usain Bolt and Jessica Ennis take to the track, a huge blast of solar energy shoots from the sun and engulfs the earth.
Life as we know it shudders to a halt. Power grids are taken out and satellites destroyed. IT and communications systems are thrown into turmoil and essential services falter. And with the failure of electric pumps, water is in danger of running out.
This is not a film script. It’s a near miss.
On 23 July 2012, four days before the London Games’ opening ceremony, a monster flare erupted from the surface of the sun and surged way beyond the orbit of the earth.
Luckily, it shot from the far side of the sun. Had this eruption happened just a week earlier, its source point would have been facing the earth. The mega flare would have enveloped the planet, causing unimaginable damage to systems that are the very foundation of modern life.
There is a 12% chance (that’s one in eight) of such an event happening again before 2022.1
Counting the cost of sun storms
Why, suddenly, have solar events become such a risk? It’s all down to human progress. Increasingly, we are reliant on electronic systems that are vulnerable to sun storm damage. As our reliance on these systems grows, the greater the destruction when a mega solar flare strikes.
This is not a hypothetical. Large cities, for a start, have little in the way of preparation for such events in the modern era.
In 1989, for example, Canada’s Hydro-Québec power grid failed within two minutes when geomagnetic-induced currents overloaded the system’s transformers. The following 12-hour outage affected more than six million people. It closed schools and businesses, halted the Montreal Metro during the morning rush hour and closed the city’s Trudeau Airport.2
Despite their potential for catastrophic damage, solar flares are an emerging risk that is poorly understood and, in many cases, managed inadequately.
In terms of human misery, the cost of such an event could be unquantifiable. As for economic and industrial impact, figures have been calculated for the potential damage. It’s difficult to overestimate the price of ignoring the risks.
Huge economic cost: The price of putting right the 2012 flare could have been astronomical; upwards of $2 trillion.2 This sum is 20 times greater than the costs of Hurricane Katrina. The expense is so great, some insurers are excluding solar flare damage as a risk.
Multi-year business interruption: Specialised equipment that could replace the components that could have been lost to sun storm damage is made by only a few manufacturers. It has been estimated that damage from a large flare could take several years to make good.2
What is a solar flare?
The sun has an activity cycle similar to a hurricane cycle. When the sun is in an active phase, it releases titanic surges of plasma and radiation, known as coronal mass ejections (CMEs). As they reach the earth, these eruptions cause geomagnetic storms that disrupt the planet’s magnetic fields.
The biggest solar storm on record is the Carrington event of 1859, a huge CME named after British scientist Richard Carrington, who was the first person to link solar flares with electromagnetic damage. During this enormous sun storm, the flare was so strong that telegraph operators recorded sparks leaping from their equipment, the ‘internet’ of its era. And the northern lights – a form of geomagnetic disturbance - were seen as far south as Honolulu and Cuba.
How is construction affected by solar events?
Sudden variations in the earth’s electromagnetic field can short out circuits on electronic components. Power grids and satellites (which serve GPS and communications systems) are vulnerable during these events.
If a flare of this strength was to hit the earth today, it would affect the advanced technologies that underlie most industrial processes. Even a modest solar storm can affect radio communications systems and GPS signals for aeroplanes on long distance flights.
In the aftermath of a mega flare, communications satellites would need to be replaced. Multi-ton transformers damaged by a solar storm might take years to repair. Whole power grid systems could need to be rebuilt.
Like most industries, construction would be impacted heavily by a CME. Power outages would affect all workings of a project including IT systems and, as a consequence, processes such as building information modelling (BIM), plus virtual and artificial reality programmes.
The destruction of communications and GPS satellites would result in sat nav and calibration issues for construction sites. The power cuts and damage to electrical equipment would affect robotics and other automated processes used on most construction sites, meaning work could grind to a halt.
It’s not just grid energy that is affected. Projects relying on off grid solar power will face problems of their own.
The panels themselves do not house circuit technology, meaning electromagnetic pulses have little to no effect on solar panels. The same is true for battery banks that store the energy.
However, inverters and charge controllers are at risk. During a mild solar storm, an inverter will shut down the rest of the solar energy system to protect it from further damage. It might sustain a blown fuse, also. In the case of a strong solar event, inverters and charge controllers could be damaged irreversibly.4
How is solar storm risk being managed?
Satellites: Currently, there is very little protection available to satellites, leaving sat nav and communications systems vulnerable. During the 1989 solar storm, a number of satellites tumbled out of control for several hours. NASA's TDRS-1 communication satellite recorded more than 250 anomalies as high-energy particles invaded its sensitive electronics. Crew on the Space Shuttle Discovery, orbiting the earth at the time, were alarmed to see a sensor on a hydrogen fuel tank showing unusually high pressure readings. The warning disappeared as soon as the storm subsided.2
Energy systems: Interconnected energy grids in populated areas such as North America’s eastern seaboard are particularly vulnerable. The 1989 solar flare did more than bring Montreal to a halt. US utilities were affected too. New York Power lost 150MW the moment the Quebec power grid went down. The New England Power Pool lost 1,410MW at about the same time. Service to 96 electrical utilities in New England was interrupted while other reserves of electrical power were brought online. Across the US, from coast to coast, more than 200 power grid problems erupted within minutes of the start of the storm.2
Energy companies, cognisant of the risk, are putting safeguards into place. However, take-up is piecemeal as some power plants are too old to modify. Power stations will certainly have long periods out while manufacturers catch up. Nuclear plants will have their own specific issues.
“Cooling [of reactors] requires water circulation and an external heat sink. If pumps cannot run due to lack of power, gravity must be relied upon, but this will not get water into a pressurised system,” says the World Nuclear Association. “Hence there is provision for relieving pressure, sometimes with a vent system, but this must work and be controlled without power.”5
Energy capability following a CME would depend very much on location and local risk management. The capability differs from nation to nation, illustrating the need for due diligence on a global scale.
Supply chain breakdown: A company is only as effective as its suppliers. A solar event is comparable to that of a tsunami in terms of the widespread damage caused. If multiple suppliers have been taken out by a solar flare, they might not have the capability to replace damaged equipment required by the insured. And what about those suppliers’ suppliers?
Where there are a limited number of manufacturers to make equipment (and its components), the sudden demand will increase prices. Even with the best risk management, a company could be undone if the entirety of its supply chain is not managing its risk. Due diligence must be applied to make sure a supply chain can withstand a CME event.
Why insurance cover might not be enough
A Carrington-level event has not happened during the era of modern technology but we have come very close. If (or, more likely, when) the earth takes another megaflare hit, many businesses have limited acknowledgement of how extensive the damage could be and how long it would take to put right.
Due diligence is crucial. Risk managers, insurers and insureds need to educate themselves thoroughly about the implications.
Solar storms feature on the Lloyd’s City Risk Index.6 Power shortages following a CME could affect the following policies:
- Contingent business interruption
- Public and employers’ liability
- Construction plant and equipment and delay in start up
- Directors’ and officers’ policies.8
Various types of cover are available but in this scenario, insurance might not be the most efficient risk mitigant. Depending on the length of a disruption, financial markets could be hit hard, further affecting insurers’ claims volumes and investment returns.
Businesses need to investigate their exposure and take expert advice in order to make informed decisions. Consider the following when examining risk exposure:
- Some insurers are excluding CME damage as a risk.
Even if insurance is obtained, the following questions must be asked:
- Has any claims team a plan for such a scenario where probably only a tsunami could cause as much damage over such a wide area as quickly?
- Has this been catered for in sums insured / periods of indemnity?
- A large solar event would affect a huge amount of insureds. Will your insurer pay your claim?
- And – just as importantly – would they be able to get you up and running given the experience of such events has been low.
Talk to your broker
Solar storms come with a unique range of risk and insurance issues. Traditional off-the-shelf insurance policies could be inadequate in the face of such a complex, overwhelming event.
Contact a specialist insurance broker with the expertise to design policies that suit your business and its needs.
For further information, please contact Peter Chesterfield, Head of Sales, Construction, on +44 (0)20 7528 4829
1NASA, Near Miss: The Solar Superstorm of July 2012
2NASA, The Day The Sun Brought Darkness
3Sun Direct, Can Solar Flares, CME or EMP Damage Your Solar Power System?
4© World Nuclear Association, Safety of Nuclear Power Reactors
5Lloyd’s City Risk Index 2015-2020, Solar Storm Case Study
This blog is compiled for the benefit of clients and prospective clients of companies of the JLT Specialty Limited (“JLT”). It is not legal advice and is intended only to highlight general issues relating to its subject matter; it does not necessarily deal with every aspect of the topic. Views and opinions expressed in this document are those of JLT unless specifically stated otherwise. Whilst every effort has been made to ensure the accuracy of the content of this document, no JLT entity accepts any responsibility for any error, or omission or deficiency. If you intend to take any action or make any decision on the basis of the content of this document, you should first seek specific professional advice. The information contained within this document may not be reproduced and nothing herein shall be construed as conferring to you by implication or otherwise any licence or right to use any JLT intellectual property.