Electricity companies face pandemic challenges ranging from employee safety to supply chain problems, write Richard Craig, Senior Risk Engineer at Aon Risk Solutions; and Mark Potter, Head of Power (EMEA Specialty) at Aon.
Electricity is an essential service, yet its profile in the context of the COVID-19 global health emergency has been well below that of others such as health and social care, food, and emergency services. But while it has perhaps been the least visible, electricity is a common thread that links all of them together: none could function with the lights off.
There is an absolute requirement to keep the electricity supply up and running. While the widespread lockdown has seen significant reductions in demand as industries in particular decrease its power usage, it doesn’t mean that those businesses across the electricity sector – from those involved in the generation, through to transmission, distribution and sales – are not without their challenges as the pandemic continues.
Grid operators such as the UK’s National Grid has already reported that operating the network below its usual power output can itself be problematic. However, electricity companies are facing a range of other issues such as the health and welfare of their staff, the day to day challenges of operations and maintenance in a restricted travelling environment, and supply chain issues for key components – all placing an ever greater demand on their ability to make sure their business continuity plans keep pace with a fast-changing environment.
Depending on where the organisation sits in the electricity power supply chain, there will have been a variety of incident response measures to the pandemic. It’s an industry that has well-rehearsed contingencies in place given its vital national role but a pandemic would have already tested the best of those plans.
On the transmission side, for example, there will be contingencies in place to allow the use of multiple grid control locations as well as a separation of teams to reduce the risk of infection. Social distancing will be in operation but this can be problematic for some organisations and on some sites; if there is a customer fault, for example, can an engineer safely go into people’s homes?
Grid operators around the world will have implemented a range of contingency plans including arranging for key staff to live on-site, minimising the risk of them falling ill and ensuring that these critical roles can be filled. For some electricity companies, it will be harder to get contractors on site and countries will be agreeing on quarantine procedures to allow specialist staff to travel and work on critical power projects.
Some offshore wind projects, for example, have been putting workers into quarantine before sending them out for the scheduled crew replacements on vessels which typically happen every two to four weeks.
Cyber risks grow
Other operational risks exacerbated by the crisis include cyber exposure. The grid system is a prime target for hackers. Israel, for example, is one of the most targeted nations in the world when it comes to cyber-attacks on their electricity system. While most businesses will have robust IT security, an extended home working period for employees may open up new vulnerabilities that have not been accounted for in existing risk management practices.
Supply chain challenges
The supply chain is another challenge given the impact the pandemic is having on the production and shipping of parts and components. In the short term, most companies will have access to spare parts, but they may not be holding a longer-term inventory for major overhauls and refurbishments. This is also an issue for major power construction projects where a significant amount of component supply may come from severely impacted countries which could feed through into project delays.
A key requirement is a need to gather and quantify information regarding key components of the critical supply chain. This can involve understanding whether the supplier has documented plans for business unit continuity and/or information disaster recovery and whether the supplier has plans to take into account the absence of many employees over a long period of time.
Stay onside with key stakeholders
In the electricity industry, there are strict operational and regulatory requirements. These can dictate that inspections are undertaken in certain timeframes and that maintenance work and major overhauls on key equipment are completed on schedule.
Inspections and overhauls are often significant pieces of work that may rely on getting components and parts delivered as well as having large teams on site which means some of those activities are at risk of being postponed or taking longer. And post-pandemic, because there is only so much skilled resource available and travel restrictions could remain for some time, this could lead to further logistical and operational challenges.
Careful management of all key stakeholders is fundamental. From an insurance perspective, it is expected that underwriters will want to know more about how companies are managing their operations and maintenance regimes, supply chains and project developments during these more challenging times. More questions are likely to be asked by underwriters and insurers may adapt terms and conditions, and limits in the future to control the impact on their own portfolios and business.
All these factors place a greater emphasis on making sure that effective communication continues to form a central part of every organisation’s business continuity plan response – a critical hallmark of companies that survive crises successfully according to Aon’s recently released Decision Making In Complex & Volatile Times.
Whether it’s with insurers, regulators, employees, clients, investors and suppliers, those businesses who establish clear and effective lines of communication will be the ones who give themselves the best chance of emerging from the COVID-19 pandemic with their operations and reputations intact once the global economy returns to ‘business as usual’.