The most-severe space-weather event in recorded history happened in 1859. Intense solar flares were accompanied by massive coronal-mass ejections (CMEs) that created the largest geomagnetic storms on record. Telegraph operators received electric shocks, and telegraph lines melted. Auroras were seen all over the globe.

If an event of similar magnitude were to occur today, experts estimate it would take down more than half the power grid and damage so many transformers that it would take years to recover.

Such catastrophic events are rare, but how rare? According to records of past events, Earth experienced an occurrence in the last approximately 150 years. Therefore, the yearly chance of occurrence is 1 in 150.

But this estimate ignores the physical details. A rigorous analysis may show that we have simply been lucky (or unlucky) in the past. And it does not take a repeat of the Carrington event to cause catastrophic loss.

In fact, devastating space weather events have occurred much more recently, giving us a hint of what could happen again.

At 2:44 a.m. on March 13, 1989, the Hydro-Quebec power grid was humming along smoothly while most grid customers slumbered peacefully. Less than two minutes later, however, the entire Quebec power grid had collapsed in a rapid cascade of events.

On the same day throughout North America and the United Kingdom, electrical disturbances barraged power grids for several hours. On the Hydro-Quebec grid, a number of pieces of equipment sustained damage, including two transformers that had to be removed from service.

In New Jersey, a $12 million generation step-up transformer at the Salem nuclear plant suffered permanent insulation damage.

The cause? A powerful geomagnetic storm triggered by a blast of magnetized plasma from the Sun.

The magnetic storm spawned electric currents in the ground and in power lines—currents which rapidly incapacitated key power grid components. As a result, schools and many businesses were closed for the day, and grid customers tried to stay warm at home.

Luckily, within nine hours, power was restored to most customers in Quebec. The Salem nuclear plant also was fortunate. They were able to install a spare transformer within a “short” six-month timeframe.

Over the next two years there were 12 transformer failures in North America suspected to be related to the storm. The outage was a chilling reminder of our reliance on electrical power—and the vulnerability of our grid to geomagnetic storms.

In the 22 years since the Quebec grid was damaged, global companies and regional economies have increased reliance on the electrical grid dramatically, meaning the impact today of a similar solar event would be even more drastic.

RISK-MANAGEMENT PREPERATIONS

Quantifying financial exposure to space-weather events is challenging. When doing so, risk managers should consider plans for both short-term and long-term power outages.

In this context, short-term means hours to a day, with a recurrence interval of a few years. Power-outage mitigation plans could include back-up generators for critical systems, redundant and co-located software and data systems (especially for revenue, customer-facing and customer-service operations), or a contingent business-interruption policy that covers utility outage. Where supply-chain risks are important, a tailored contingent business-interruption policy should be in place.

A long-term, space-weather-caused outage could last for a week, a month or even a year without electricity. There is no way to prevent it from striking your company; the risk lies in our power grid.

A mitigating strategy, pre-approved and ready for implementation after such an event, should include alternative locations to be used for business operations.

Consider that neighboring companies will be searching frantically for similar locations and services. The risk of a space-weather outage is lower in certain places in the United States than others. Therefore, a company with multiple locations could have a business-continuity plan that includes relocation of critical functions when it becomes clear the outage will last longer than a specified time period. Data access at new locations should also be considered.

Beyond financial exposure, another non-trivial aspect is communication; how will management communicate with each other, employees, partners and customers? Corporate reputation and employee morale should be addressed within the company's risk-management plan.

Companies that communicate proactively are viewed as trustworthy leaders by their customers, employees, the media and local government. Organizations that appear to change their spokesperson or alter their plans every few days, however, are perceived as unprepared. When the problems continue for days or months, public patience can dissolve into a feeding frenzy.

While the chance of a space-weather-caused long-term outage is small, it cannot be disregarded—if such an event does occur, the cost would be staggering.

DEFINING SPACE WEATHER—AND ITS DANGERS

Space weather is a general term describing conditions in space that affect the Earth and our technological systems. Geomagnetic storms, which can not only cripple the electrical grid but can also corrode oil and gas pipelines, are only one aspect of space weather.

Solar flares can disrupt radio communication, aviation communication and navigation, and they can interfere with the GPS signals used in our positioning and timing technologies.

One perhaps under-addressed risk is a cascading interruption in energy supply. Even a short-term electrical power outage can create a shortage in oil supply because oil refineries depend on electrical power from the grid. A refinery can take up to several days to recover from an electric power outage.

Most space-weather events originate at the Sun and are a consequence of its magnetic outbursts. The Sun's magnetic activity is periodic, with a peak in activity approximately every 11 years. For several years surrounding this peak, the chance of solar storms is much higher. We are currently in Cycle 24, with a predicted peak in June 2013.

This means that from now until 2017 or so, we should be on alert for strong solar flares and large coronal mass ejections (CMEs). Historically, the strongest storms happen during the decline of the solar cycle, so the period from 2013 through 2017 may pose the largest risk.

Scientists agree that it is only a matter of time until we experience an event of similar magnitude. When it does happen, preparation will be the key to avoiding disaster.

Nicole Homeier is staff scientist in remote sensing at Atmospheric and Environmental Research (AER), where her recent research focuses on space weather and industry impacts. She can be reached at [email protected]. Kyle Beatty is managing director of business solutions at AER, providing risk management and meteorological expertise globally. He can be reached at [email protected]. James Martin Griffin is staff scientist at AER, involved in space-weather research, including how the upper atmosphere and space environment affect satellites and remote-sensing measurements of Earth. He can be reached at [email protected]. The authors are located at AER headquarters in Lexington, Mass.