A Framework for Integrating Climate Adaptation Planning and Risk Assessment into Corporate Sustainability and Reporting in the Electricity Utility Sector

Between 2017 and 2020 Electricity Canada undertook a Natural Resources Canada (NRCan) funded three-year project to develop climate adaptation planning guidelines for electricity companies in Canada. The project included strong engagement and consultation with utility stakeholders. The effects of climate change and extreme weather are having direct and indirect impacts on Canada’s electricity infrastructure. Examples of direct impacts include ice accretion and lightning strikes on overhead conductors, wind damage, premature aging, and conductor sag and annealing. Indirect impacts include changes to vegetation management, ice road integrity, vector-borne disease, and supply chain issues, as well as precipitation overwhelming riverine and urban drainage systems, resulting in flooding. The electricity sector has recognized the risks that climate change poses and have begun to take action. Electricity Canada’s project serves to create a framework for risk-based adaptation planning that can be applied consistently across the sector. In 2019, Electricity Canada published a guidance resource that supports their members in the process of integrating adaptation planning and risk management and assessment. This framework can be adapted by users and can augment already existing enterprise risk management (ERM) processes. The framework recognizes that management plans need to be tailored to utility-specific circumstances, and is in line with risk management approaches outlined by the International Organization for Standardization’s (ISO) management system standards.

Understanding and Assessing Impacts

Climate change impacts on electrical infrastructure have been recognized at the international, national, and industry level. While most electricity companies have been proactive in monitoring and planning for climate change and extreme weather, Electricity Canada has recognized the need to develop a clear, consistent, and flexible framework to guide their member companies through a risk-based climate change adaptation planning process that allows utilities to assess and respond to climate risks.

Climate risks and impacts are assessed within an integrated framework that connects adaptation planning processes with existing enterprise risk management (ERM) processes. The Electricity Canada risk management and assessment frameworks are in line with the International Organization for Standardization’s (ISO) management systems (e.g., ISO-31000; ISO-27001) and are designed to be flexible and customizable by the utility members. Recognizing the diverse geography and structure of the electricity sector in Canada, Electricity Canada conducted a series of workshops and consultations with stakeholders to garner feedback that guided the production of the final guidance resources.

Electricity Canada provides guidance on how these processes can be applied by utilities through case examples. For example, consider critical infrastructure located in flood-prone areas.

To further support utilities in understanding the risks climate change poses to their assets and services and the types of mitigation controls and treatments, Electricity Canada developed climate impact tables on a wide range of climate variables, impacts and controls:

  • Extreme weather (lighting, wind, storm surges)
  • Precipitation (mean, extreme)
  • Temperature (mean, extreme)
  • Water levels (sea, lake, river)
  • Water availability
  • Ice cover (sea, lake, river)
  • Ice loss (glacier, ice sheets)
  • Vector- and rodent-borne disease

Identifying Actions

Results from the risk identification and risk impact assessment phases will inform the risk prioritization phase which involves a process of ranking risks from the most to least critical should be developed. This still is critical in prioritizing and selecting the risk-reduction or control strategies. The prioritization scheme may consider whether the risk is immediate or longer term. Typically, immediate risks are considered higher priority. It is important to understand the management’s risk tolerance during this phase and may vary between different teams. In the selection of risk strategies, the goal is to control risks to within tolerance levels.

Risk Response strategies / Risk Mapping

The prioritization and selection of risk response strategies can be determined by mapping the risks on a heat map. Heat mapping provides a quick visual reference to relative priority. Risks that exhibit a high likelihood and high consequence and/or have weak controls are high priority. Inherent risks that rank high should have controls applied to reduce the risk to within management’s risk tolerance. Residual risks that continue to rank above management’s risk tolerance have inadequate controls in place. Electricity Canada notes that risks with a high negative consequence, but low probability may still require treatment even if they cannot be economically justified.

Implementation

Electricity Canada provides guidance on the types and levels of action required to address risks. The type of risk strategy depends on the results of the risk prioritization process. Risk controls are applied to high and medium risks; low risks may be tracked/monitored on a watch list.

Risk treatment involves implementing one or more options to mitigate the risk. It is a cyclical process of assessing risk controls, determining the acceptability of residual risks, generating new risk treatment if residual risks are not tolerable, and assessing the effectiveness of the treatment.

Risk treatment options include:

  • Avoidance: removing the risk source and/or eliminating involvement in activities that lead to the possibility of the risk being realized
  • Sharing or transferring: shifting the burden of the risk to another party through vehicles such as insurance or through joint ventures
  • Mitigation: applying appropriate techniques to reduce the likelihood of an occurrence, its consequences, or both
  • Acceptance: accepting the consequences and likelihood of a particular risk where mitigation is either impossible, not cost effective, or resources are better directed to other higher profile risks

Outcomes and Monitoring Process

At predetermined points within the risk management process, utilities should evaluate the effectiveness of risk response strategies in mitigating risks within acceptable levels. In addition to monitoring the performance of the risk responses, it is also important to monitor factors that influence the risk profile.

Consideration should be given to such changes in the risk profile such as changes in: climate and weather projections, scientific information or methodologies, electricity infrastructure interdependencies, stakeholder expectations or the regulatory requirements. It The failure or ineffectiveness of a risk-treatment measure can introduce risk.

Monitoring and review processes must:

  • Ensure that controls are effective and efficient both in design and operation (For all relevant climate parameters, the team must know the thresholds for infrastructure damage, operational failure, and maintenance decisions)
  • Analyze and learn from events, changes, trends, successes, and failures • Detect changes that may require revision of the plan and priorities
  • Detect changes that may require revision of the plan and priorities
  • Identify emerging risks

Next Steps

In 2018, Electricity Canada conducted a baseline survey to identify where Canadian utilities were at in terms of their climate adaptation planning. In January 2021, the survey was repeated to track progress achieved throughout the duration of the three year project. The 2018 baseline survey results indicated that only 29% of respondents had made use of the content provided in guidance documents. The 2021 survey indicates that over 87% currently acknowledge the added value of the project deliverables.

With the Guidance document having been officially published in early 2021, Electricity Canada is providing this time for members to implement the guidance document. Once members have had sufficient time, Electricity Canada, in consultation with members, will determine the necessary next steps.

Resources

Link to Full Case Study

Additional Resources