Improving visibility over extreme weather and operational risk

In 1900, the deadliest storm in American history hit the island of Galveston, a low-lying stretch of beach and businesses hovering just three miles off the Texas coast. The 27-mile-long island – now home to just shy of 50,000 people – suffered massive losses in the Galveston Hurricane. Eight thousand people died in the 15-foot storm surge, leaving the island with a lasting sensibility about hurricane preparedness. The hurricane’s legacy is a 16-foot-thick, 17-foot-high sea wall that forms a 10-mile-long resolute barrier against the rage of the sea. 

For the businesses operating in the Gulf of Mexico, storms are par for the course. But the increasing frequency and intensity of hurricanes – spurred by the warming waters and changing climate patterns – means storms like the 1900 disaster may be more likely than in years gone by. 

Across the US, companies operating in areas affected by severe weather must implement risk mitigation strategies and operational preparedness procedures. Because it’s not ‘if’ the big one hits; it’s ‘when.’

“The number and cost of weather and climate disasters are increasing in the United States due to a combination of increased exposure (such as more assets at risk), vulnerability (where we build, how we build, often in harm’s way) and climate change supercharging the frequency of some types of extremes that lead to billion-dollar disasters,” says a spokesperson from the National Weather Service (NWS). 

These ‘billion-dollar disasters’ are more than just a figure of speech. Last year the highest number ever (28) of billion-dollar disasters (adjusted for inflation) was recorded. In the 2010s, the average number of such massive disasters was only 13.1 per year. The 1990s saw just 5.7 per year. 

The National Centers for Environmental Information (NCEI) maps the cost of storms against the environmental risk. Hurricanes pose the most obvious threat across the Gulf states. But, severe storms featuring thunder, lightning or tornadoes, are the most prevalent across the breadth of the country, from the Rockies to the Appalachians. 

The NWS says the time between storms is also decreasing, leading to less time to recover from one event before preparing for the next. “We have seen this in recent days and weeks across numerous central and southern states, as round after round of severe thunderstorm impacts strike areas repeatedly. This increased frequency of events can lengthen recovery time and cost.”

The organisation says emergency management, risk mitigation, infrastructure security and a focus on where businesses operate are key to preventing a rise in such devastating economic impacts.

The Port of Galveston lies on one of the country’s 50 biggest cargo waterways. Oil and gas businesses dot the Texas coast and the island of Galveston is just miles from the refineries at Texas City. The major cargo and recreational thoroughfare of the Intracoastal Waterway extends both north and south of the island. 

Roger Rees, port director and CEO of Galveston Wharves, says: “Port preparedness for hurricanes and other severe weather events begins months before the peak of hurricane season.” The port coordinates its operations with everyone from its tenants and staff to federal and state organisations to ensure safety remains its top priority. “When severe weather threatens the region, we and our tenants make operational decisions to ensure the safety of everyone working on the waterfront based on the guidance of the National Weather Service, the US Coast Guard and other experts.”

The NWS and National Oceanic and Atmospheric Administration (NOAA) provide open-source data and information about weather to all. “Whether the information is needed for a specific location, regionally, or to support national-scale business decisions, information from NWS Offices allows businesses to assess risk from daily and high-impact weather events, and to mitigate the impacts to business operations,” the NWS says.

Weather tracking is now incredibly detailed. Forecast maps and alerts can help businesses to prepare for storms. Technology is playing its role too, with weather intelligence becoming more easily developed and understood. These tools can help organisations to make the most effective, timely decisions about their operations when storms threaten. 

Not only do businesses need to prepare for weather-related risks, but broader weather changes and patterns may also impact strategic planning. 

Octopus Energy is a British-based renewable energy business that has expanded into the US with a major solar and wind presence in Texas. CEO Michael Lee uses technology to manage weather-related changes in energy usage and ensure intelligent operational efficiency throughout the year. 

The system, called Kraken, harnesses the power of a smart infrastructure grid to lower the price of energy when it is more readily available – like when the wind is blowing – and allows customers to ‘buy’ and ‘sell’ energy across the network to keep costs low and efficiencies high.

In Texas, where energy usage is highly dependent on the weather – the state can soar beyond 100°F in the summer months and dip below freezing in the winter – Lee says there is an enormous opportunity to rethink how customers use power.

Building resilience into the energy infrastructure on a daily basis, and encouraging customers to change their energy consumption behaviours, will also help the state weather the extremes. “In this world of climate change, with bigger storms and volatility, it helps to rethink the grid on a few levels. That includes energy generation and storage, and flexible usage at the household level.” By digitalising the energy grid, Octopus is trying to build a harder-wearing, more resilient power system, so that when events like tornadoes or hurricanes happen, power can still reach consumers at home or work. 

The technologically enabled model the company deploys is making resilience and emergency preparedness easier for Octopus Energy. Lee says: “We’re rethinking what it means for both supply and demand. We are dynamically managing a lot of thermostats here in Texas, because historically that led to a lot of the challenges, but it’s really important to be able to intelligently manage them. They will lead to a lot of the opportunity for a well-balanced grid.”

The Great Storm of 1900 – and its brethren – are not isolated events. The Galveston Hurricane sent thunderstorms and storm surges across the Caribbean, heavy rains and flooding as far north as Massachusetts and even wrought damage upon ships in Newfoundland. 

The changing climate means these events are not just likely to happen. They will happen more frequently and with more intensity. And the ripple effects may extend beyond just the area of operations for any specific business. Companies should consider their risk factors and put into place safeguards for their people, assets and operations lest they become just one of the increasing number of 'billion-dollar disasters.’

Lightning damage to wind turbines is the biggest cause of unplanned downtime for energy businesses, resulting in 233 days of downtime on average, per claim, according to risk management firm DNV and Insurance company Axis Capital.

When considering that more than two billion lightning strikes are seen across the globe each year, the potential for downtime is huge. Weather intelligence company Vaisala’s lightning detection networks have charted the number of lightning strikes across the US, indicating an alarming number of severe weather incidents, particularly across the central US and Florida.

Similarly, every state across the country may be plagued by drought, wildfires, snowstorms, hurricanes, tornadoes, flooding, ice storms, mudslides and other disasters. 

Each event has a cost. Even if the disaster doesn’t fundamentally harm a business’s operations or people, that business may simply have to shut down operations for a period of time. And time is money. In the UK, the Airport Operators Association calculated a loss of £10,000 ($12,770) per minute while closed and with drastically reduced services during the early days of the pandemic. 

Operational decision-making – based on effective risk management processes and evolving technologies – can help mitigate the risk of lost time and money while also ensuring companies operate safely and effectively. 

“There has been a gradual and important integration of climate change risk into corporate decision-making and risk management,” says Wynne Lawrence, partner at global law firm Clyde & Co. “This was expedited by the TCFD (Task Force on Climate-related Financial Disclosure) recommendations and is now increasingly expected as an element of mainstream financial reporting, particularly in Europe. One of the metrics that companies must consider and report on is physical risk (there are also risks due to the net zero transition and liability risks). Severe weather is one important element of this (as are slow-onset changes to the environment, which cannot be ignored).”

When hurricanes threaten the Texas coast, safety becomes the main priority because operating in a storm could not only be dangerous, but disastrous.

The Port of Galveston’s process sees Brett Milutin, the executive deputy port director, engage in regular calls with the NWS and the US Coast Guard (USCG). The port communicates these updates to its stakeholders – including tenants and commercial partners – so they may take action as well. Milutin will consider everything from weather forecasts to marine safety bulletins and suggested or required safety actions. 

Then, the USCG captain of the port will call for a cease of traffic one to two days before gale-force winds or hurricane-force winds arrive. It then becomes port director and CEO Rodger Rees’ decision on whether or not to close the port. He gathers further insights from the NWS and the city of Galveston. Safety is the primary priority in this decision-making process. “The maritime industry is crucial to the US economy; however, the US Coast Guard, as well as state and local officials, including port executives, place safety above all else,” Rees says. 

Technological developments and weather intelligence can help businesses make better decisions about the risk weather has on their operations. 

Tornado warnings, for example, provide anywhere from eight to 18 minutes of alert. The NWS’s Storm Prediction Center and the NOAA Hazardous Weather Testbed (HWT) are working to reduce the false alarm rate and increase warning times, to give people and businesses the best possible information about these severe weather events. 

The testbed is a kind of incubator for weather technology and insights. The NWS says: “The HWT also allows forecasters to interact with researchers and modellers with the goal of helping to focus future research in areas that accelerate forecast improvement and maximise societal benefits. Many of the tools used today by operational meteorologists at the NOAA/NWS Storm Prediction Center, across the NWS, and the broader weather enterprise, began with ideas that were tested and refined in the HWT.”

Energy infrastructure is at particular risk from climate change, both in the US and abroad. In Texas, Octopus Energy uses technology and smart grid adaptations to manage supply when temperatures reach the extremes. 

Clyde & Co. cites a similar response by the energy firms in Scotland.  Lawrence says temperature, snow, ice and lightning can all pose risks to the energy grid. “One example is the widespread power cuts in and around Edinburgh due to winter storms in February 2021. For construction projects, extreme weather events can result in significant delays and increased expense. For example, strong winds render working at height unsafe and may damage scaffolding and equipment. Heavy rains can prevent access to machinery, flood the site or prevent safe installation of electrics. Poor visibility or freezing conditions also raise safety issues.”

To make better decisions, companies need data. They need to know where weather is likely to affect their operations, the severity of that impact and the potential for long-lasting damage or downtime. By harnessing new technologies and adhering to strategic operational decision-making and risk management plans, they can ensure the safety of their employees and the sustainability of their operations, even when lightning strikes.

Last year, there were 77,494 lightning strikes at or near wind farms in the US. And, 31% of American wind farms saw at least one lightning strike per turbine, on average. 

Lightning and severe weather pose a significant risk, not just for renewable energy businesses, but for ports, mining operations, agriculture, construction and more. The threat from severe weather is also increasing significantly across the US. This changeable and dangerous landscape makes operational risk management and decision-making a difficult, complex – and utterly high stakes – challenge. 

"The US experienced 28 separate billion-dollar weather disasters last year, the highest number on record,” says Hans Loewenheath, product manager at Vaisala Xweather. Vaisala is a global leader in measurement instruments and intelligence for climate action. Its lightning data feeds into the National Weather Service (NWS) and is used by organisations around the world to improve their emergency preparedness. “You’re talking about multiple billions of damage to public infrastructure, private infrastructure and businesses from severe weather as well as lives lost to hurricanes, flooding, heat waves and wildfires. Many companies are realising they need a more strategic approach to prepare for and mitigate these increasingly disruptive and costly events.”

Severe storms cost $55bn in 2023, adjusted for inflation, according to the National Centers for Environmental Information. In 2020, that figure was $15bn less ($40.3bn). And in 2017, it was only $23bn. The rate and intensity of lightning storms and tornadoes are increasing – and are increasingly costly to businesses. Hurricanes, too are on the rise, though the cost to US businesses is highly dependent on if and where the storm hits land. 

This year, between La Niña and the continuously changing climate, the National Oceanic and Atmospheric Administration is predicting a particularly severe season for summer storms – including hurricanes. It predicts that between 17 and 25 named storms will hit the Atlantic this season. The US Energy Information Administration says this will pose a risk to the nation’s oil and gas industry, particularly across the Gulf of Mexico coastline.

Climate change presents challenges for businesses, particularly those affected by weather, but every business must consider some element of weather-related risk. For businesses, risk is managed by balancing insights with various health and safety, operational, efficiency and communications factors that contribute to an organisation’s individual risk appetite. 

But, if they can garner better insights on the weather – if they can know more than the ‘chance of rain’ reported on the news – they can make more effective decisions about their operational risk. Weather Insight can help companies do this by instilling confidence through its platform for protecting and optimising business operations.

“Public weather forecasting services and alerts are not precise enough to make operational decisions on the ground. By necessity, public forecasts cover a wide area at a county or state level. But if you’re an operations director, you have to make decisions about when it is safe to work and when operations should stop at very specific locations. Finding that balance is the challenge we’re helping companies solve,” Loewenheath says. 

Vaisala Xweather brings weather confidence to decision-makers in every weather-sensitive business by combining local sensor data with advanced AI predictions to deliver precise and actionable weather insights.

Its data provides real-time lightning detection and alerts as and when lightning happens. It can also forecast lightning risk for a hyper-specific location for up to 60 minutes in advance of the storm. This helps companies make better decisions about their operations during a weather event.

Loewenheath gives the example of an airport grounding flights due to bad weather. He says: “Companies can optimise their operations by striking a balance between protection and continuity. As an example, the ground crew at an airport can move to safety quite quickly so alert distances and all-clear timers can be shorter. On a wind farm, it takes longer for a technician to descend from the nacelle and reach a safe structure so alert distances and all-clear timers might be set longer. These decisions to stop and restart operations can also be automated, which further improves safety and avoids unnecessary downtime.”

Lightning risk can be severely disruptive and damaging to energy infrastructure and assets at wind farms as well. Most American wind farms are located in Texas, Iowa and Oklahoma. In 2023, the three states with the most lightning strikes are Texas, Florida and Oklahoma. Three wind farms charted over 10 lightning strikes per turbine, according to Vaisala’s ‘Annual Lightning Report.’ And, a pair of wind farms in Texas and Oklahoma struck new heights with over 1,000 lightning strikes each.

Wind turbines are made to withstand lightning – as is sensible for any giant piece of metal pointing up to the sky – but there is always a risk of an exceptional strike, especially to the turbine’s blades, that could lead to expensive replacement costs and diminish the wind farm’s total power output. In fact, the 1-3% of lightning strikes that damage turbines cost the industry $100m each year and account for 60% of the blade losses and nearly 20% of the operational losses, according to industry experts.

Further, there is a risk to human life. But crucial operations such as mining sites – especially those in the most lightning-prone areas – can’t simply shut down every time a thunderhead passes nearby. They need to know when lightning is due to hit and where, so that they can give their operators enough warning to get to safety, without limiting their operational effectiveness. 

The same is true of intense winds and gusts, which are common in all three of the top states for wind energy production. Beyond energy production, mining operations, construction sites, farms, ports and more will all have people working in potentially risky scenarios. If storms make those risks worse, operations will have to cease. But time always equates to money. And shutting down a large construction site for a day because of the chance of storms may be entirely safe, but it might not be entirely efficient – particularly if that storm passes some miles away from the site itself. 

“While lightning is always going to have an element that is inherently unpredictable, Xweather can help businesses define procedures and processes for managing these risks. It’s no longer someone looking at a weather app and eyeballing it. You need something more reliable. You need something you can put in front of your investors to show that you’re taking this problem seriously. You need to show the board that you are managing these financial and safety risks,” Loewenheath says.  

Platforms such as Xweather Insight provide the alerts, situational awareness and insights companies need to take action as a dynamic part of daily operations. By harnessing the power and potential of this crucial business intelligence, companies can improve their resilience and emergency preparedness.

In May this year, a Colorado rancher was killed – along with 34 of his cattle – when lightning struck while he was feeding his herd. This devastating event in Jackson County was the result of just one single stroke of lightning. 

Colorado (24) had the third-most lightning-related deaths in the country between 2006-2023, after Texas (39) and Florida (88), according to the National Lightning Safety Council. Florida (1.64%) and Texas (1.58%) are also two of the three states that have grown the most from net migration from 2008-2023, according to the Pew Research Center’s analysis of US Census data. Colorado is one of the states projected to grow organically in significant numbers. 

As businesses and population centres shift to new places, the risks posed by extreme weather may affect more people.

The NWS says: “Given all these compounding hazard risks, there is an increased need to focus on where we build, how we build and develop improved infrastructure to mitigate impacts from these extreme events that will continue to occur.”

In 2022, Hurricane Ian ravaged Florida’s west coast, submerging Fort Myers and the surrounding area in nearly 15 feet of seawater. The hurricane caused an estimated $112bn in damage, according to NOAA.

In the last month, flood rains have inundated Miami and Fort Lauderdale, prompting a state of emergency and a wave of interruption to business operations, including hundreds of cancelled flights.

Florida’s cities are limited by the state’s unique geography. The Everglades prevent inland expansion while the Gulf of Mexico is a natural barrier as it has created a marshy coast unsuitable for development. On the coasts, small areas of habitation thrive. That’s why cities such as Fort Myers and Cape Coral – which grew by 7% from 2010-2020 – are expanding.

But Cape Coral is also a city built on water. Its 400 miles of canal have drained the swampy land and provided a pleasant, sub-tropical urban centre for over 200,000 people. However, its low-lying profile and Gulf of Mexico location make it a high-risk target for the increasingly drastic hurricanes hitting the Florida coast each year. 

According to Vaisala, Cape Coral is one of the top three metropolitan areas most at risk from lightning. The city suffered 22.7 cloud-to-ground lightning strokes per square kilometre in 2023. It and other cities must develop emergency preparedness and operational decision-making plans to cope with the increased risk of extreme weather. 

“What was a one-in-a-hundred-year event is now more frequent,” Wynne Lawrence, partner at global law firm Clyde & Co says. “This poses problems for business resilience and also insurability, or the availability and cost of insurance, and is an issue the insurance market has been focussing on and grappling with for some considerable time.” She adds that the insurance industry supports businesses with climate risk assessments through the use of modelling and adaptation measures, as well as product innovation.

Climate change is also shifting the traditional weather patterns as well as intensifying them. The NWS cites an academic study indicating that tornado frequency is actually shifting from the plains states to the southeast. In just the last two years, the two billion-dollar tornado disasters that occurred in the US were in so-called ‘Dixie Alley’, one in Alabama and the other across Alabama, Georgia and South Carolina.

The Water Street Company, an insurance firm, writes: “Severe, rare disasters may lead to increased insurance premiums for policyholders in the affected areas. Much like flood insurance for coastal homes, the policy coverage costs may become too much to bear on policyholders in high-risk locations. Following these disasters, insurers may be hesitant to offer coverage in areas that are at high risk for tornadoes or have experienced severe tornado damage in the past, leading to niche policy offerings for these locations.”

Similarly, Lloyds of London says insurers should mitigate their risk when providing cover to people and businesses in tornado-prone areas. “Recent growing population density in some of the areas at highest risk from severe thunderstorms has led to increased exposure to tornadoes,” the insurer writes in its 2023 Tornadoes: A Rising Risk report.

Countless factors affect population change, business development patterns and expansion of human endeavour into riskier locations across the US. The problem therein, though, is that living and working in riskier, more remote or more weather-impacted places comes with higher risks.