Dependency unlimited

A relatively non-severe storm on New Year's Eve caused major power problems for parts of Scotland and Northern England. How would the UK cope with a major widespread winter storm? We have been lucky in recent years, but sooner or later winter will hit hard. Given the staffing levels in Britain's critical infrastructure operators, businesses could face many days, even weeks without power. And long term the problem looks set to get worse. David Honour highlights the importance of a reliable power supply for businesses.

For most businesses, electrical power supply is the ultimate dependency, with almost all critical business services and processes dependent upon electricity at some point. 2003 was a year when major wide-area power outages truly brought home to businesses just how dependent they are on a resource which seems to be becoming less reliable. East Coast US; much of Italy; SE England; and Sweden and Denmark all saw power outages which severely impacted businesses in the area and, although many jumped to the immediate conclusion that the events were terror related, in fact the outages were caused by more prosaic, but ultimately more threatening, reasons in the long term.

The outages were down to a variety of causes:

a) Human error;
b) Inadequate investment;
c) Overloading an old supply system;
d) Poor maintenance;
e) Insufficient numbers of staff for emergency repair teams;
f) Lack of adequate failover systems.

The bad news is that none of these issues have gone away. In fact many are areas which will continue to get worse unless supply companies are forced to grab the bull by the horns. The probability is that sometime during 2004 we will see further outages. Contributory factors include:

a) Ever increasing demand putting greater and greater pressure on already inadequate supply systems;
b) Each year that goes by with inadequate investment means another year when aging equipment undergoes further deterioration;
c) Pressure on profits – extra costs imposed on supply companies to meet new corporate governance legislation and security requirements means additional pressure on profits, which in turn will lead to less investment in systems and in people. Most Western utility companies are now denationalised, so profits are the imperative.
d) Changing weather patterns – it is a fact that storms and weather extremes are becoming more prevalent. The likelihood of above ground power supply lines being impacted by bad weather is therefore increasing.

Long term supply issues
Looking further ahead the position, certainly in the UK, looks set to deteriorate further.
In July of 2003 the Institution of Civil Engineers (ICE) published a damning report into the UK’s critical infrastructure. Entitled ‘The State of the Nation 2003’, the report looked at the many areas of the country’s infrastructure which are vital to the ongoing operation of businesses, government and communities. Electricity supply was singled out for especially dire warnings.

Currently the mix for electricity generation is approximately 32 percent coal, 23 percent nuclear, 38 percent gas, 4 percent oil with 3 percent others and renewables. This offers sufficient capacity but, even now, our supplies are on a relative knife edge, with a period of strong demand, caused for example by a very cold spell of weather, putting such a severe strain on the power supply system that contingency plans have been made for enforced rolling blackouts, California style. The situation is about to get worse, much worse. According to the report emission constraints mean that the UK’s coal-powered generating plants will close shortly after 2016 and only one nuclear power station is likely to remain operational beyond 2020. A government target of 20 percent of energy generated from renewable sources will not be met. It is ‘out of the question without the right incentives’ says the report. Under current government planning, the outstanding balance will have to be replaced by gas-fired power stations, importing 90 percent of their fuel, no later than 2020. Initially, some supplies will come from Norway, but as demand across Europe exhausts supplies during the 2020s, Britain will be forced to source gas supplies from West Africa, the Middle East and the former Soviet Republics. According to the report, Britain’s future energy plans lack both diversity and security of supply and it pointed to the possibly ‘cataclysmic’ effects of becoming reliant upon unsecured, imported fuel supplies’.

“If future gas supplies were interrupted, this country would have major difficulty in keeping the lights on. Britain is a long way from the major new gas fields being developed in central Asia and Africa. Can the security of the UK’s gas supply be guaranteed, given that it will have to travel thousands of miles in a series of pipelines that are vulnerable to mechanical failure, sabotage and terrorist attack? What would happen then? Under current plans, with no gas, this country would have no electricity,” explained Tom Foulkes, ICE Director General, speaking after the launch of the report.

What can businesses do?
The first stage is to recognise the issue and its importance: as stated at the start of this article, power is the ultimate dependency for the modern business. Industry needs a consistent, reliable and secure long-term supply. This must be a high priority for government. The ICE State of the Nation report called for the appointment in the UK of an independent ‘chief engineering adviser’ to ensure a co-ordinated, long-term, sustainable approach to infrastructure planning, rather than decision-making being dominated by political short-termism. ICE believes that the position should be similar in remit to the government’s Chief Medical Officer or Chief Scientific Adviser.

Businesses need to be proactive about the issue. There are two main avenues for action:

1) Lobby
Governments and utilities respond to lobbying, especially if this is done by businesses with political clout. Even so, the many voices of smaller businesses will be heard if the power supply problem is raised often enough and stridently. What business needs to see are credible long term investment plans in critical infrastructure and recognition by government that it can not wash its hands of responsibility for the issue. Stronger and more hands-on regulation may be required. The UK government included an Energy Bill in the recent Queen’s Speech. Businesses must put pressure on the government to ensure that the sustainability, resilience and security of electricity supplies are central to the Bill.

2) Prepare
There is no excuse for businesses to be unprepared for power outages. UPS systems are a ubiquitous requirement and generators are a must for many businesses. However, it may be necessary to take a look at the length of time your business continuity plan presumes that power will be unavailable for. The possibility of outages lasting a week or more is a real possibility. Could your plan cope? Would you need additional generation capabilities for such a long period? Would your fuel supplies last? In the long term, for the very largest businesses, will private power plants be the best solution, taking the control of the risk directly into the hands of the business?

Finally, we can’t ignore the terrorist dimension. There may have been no evidence of terrorist activity behind last year’s major power outages but there is no doubt that terror groups will have noted the chaos caused by the events and how easily problems were propagated around supply networks. If terrorists had no plans previously to disrupt power networks, they will have now.

This article was first published in Enterprise Risk magazine. David Honour is editor of Continuity Central.

•Date: 8th April 2004 •Region: UK •Type: Article •Topic: Power management
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