April 10, 2017 / 0 Comments
How climate change almost stole Christmas
On the second day of Christmas my true love gave to me… power outages.
It was 2011, and Juha Sulkanen, was suddenly without electricity for a day. “It was a very warm winter, so the ground was not frozen. Then, all of a sudden, we got these strong winds and the wind simply tore trees out of the soft ground, bringing overhead power cables down,” says Sulkanen, who is the European Investment Bank’s loan officer for project finance in Finland. “We had to use a wood stove to warm up our Christmas dinner leftovers.”
He was far from alone. Altogether, up to 300 000 homes had no electricity in Southern Finland due to the cyclone called Tapani. The cyclone (also called Patrick and Dagmar, depending on the country) caused a lot of damage in Norway, Sweden, Estonia and Russia. It brought down so many trees Deutsche Bank estimated the price of wood would drop by 15%.
So when Sulkanen started working on a financing agreement to improve the resilience of the power lines with distribution system operator Caruna, it was also personal.
Adapting power lines to climate change
The company hit worst by the storm was a power distribution system operator now called Caruna. It had to spend EUR 20 million on repairs and pay customers EUR 29 million in compensation – not to mention the approximately EUR 200 million in cost of energy not supplied, Caruna’s regulation development manager Bengt Söderlund recounts.
The cyclone was identified as a clear example of extreme weather events brought on by climate change. It caused the government to look at how to adapt various infrastructure to climate change. “It was a lot warmer than typical for that time of year, with temperatures up to +9 degrees centigrade. Because the ground was not frozen, large damage was inflicted to the forests along the coast,” Söderlund says. “The outages caused much discussion in media and among politicians.”
For power distribution systems, the debate resulted in a new law with incentives to invest in the reliability of the grids. Direct compensation to customers for outages longer than 12 hours was increased and stricter obligations for the companies to inform customers were set. By 2028 outages in non-rural areas are not to exceed 6 hours and in rural areas 36 hours. These forced investments were then also taken into account when national authorities determined the fair price for electricity distribution charged to the clients. This caused criticism, but the government has not wavered in its ambition of increasing the reliability, Söderlund says.
In 2014 and 2015 Caruna did forest clearing activities for some 4 100 kilometers of overhead lines to reduce the risk of trees falling onto the line. Now, with the EUR 200 million EIB loan signed in December, Caruna will continue to speed up laying the cables underground.
Improving the network for renewable energy
Next door, in Sweden, the EIB in February signed a loan for EUR 250 million for a similar investment plan with power distribution system operator Ellevio. Sweden was also hit by cyclone Patrick. Northbound train traffic came to a halt on Christmas day. On one stretch of rail, the wind blew 16 rail wagons weighing 313 tons for 500 metres until they derailed. Luckily, nobody got hurt.
However, in Sweden new regulation had been put in place, and investments into weatherproofing networks had got a kick start earlier – after a big winter cyclone called Gudrun hit in 2005. Since January 2011, no outages over 24 hours are allowed. For Ellevio, the new investments include continued weatherproofing, but also improving security of supply by renewing aging assets and increasing capacity in most of all the capital Stockholm to meet the needs of a rapidly growing city. One main focus is to prepare the networks for taking on more renewable energy, and facilitating the use of the network for electric transport charging stations. The Ellevio loan has been included in the Investment Plan for Europe portfolio, partially guaranteed by the European Commission.
“Security of supply is incentivised by the regulator. Network operators increasingly get penalized if they have downtimes exceeding a certain number of hours. But the allowed revenue, what the operators are allowed to charge connected customers, is calculated, taking into consideration the asset base, the investments into the networks,” says EIB loan officer for project finance in Sweden Joakim Palmgren.
With more renewable power being distributed to homes and life made easier for owning CO2-free vehicles, this investment may even help limit the impact of our energy use on the climate. And with the cables underground, protected from falling trees, Finns and Swedes, in addition to doing their part for the planet they love, also have a better chance of getting that train home for Christmas and enjoying their “Piparkakut” or “Pepparkakor” (gingerbread cookies in Finnish and Swedish, respectively). It’s terribly difficult to bake these without an electric oven on that wood stove Juha had to use five years ago.