After hearing and reading more and more about the increased risk of black-outs due to energy transition and cybersecurity concerns, the blackout of Spain and Portugal yesterday was a massive real-life experience and wake-up call. With so many of our E&Cers working from Spain (and one person in Portugal), our own operations were heavily impacted. Our people are working hard to catch up with the work they couldn’t do as they couldn’t use the internet. I experienced it firsthand as I was in our Valencia office for a meeting with our team coaches. From a personal point of view, walking around in a city without electrical power was a strong experience. A strong reminder of how dependent we’ve become on power supply and how many of the features of our modern lives that we’ve come to consider self-evident depend on the amperes flowing through the cables. But these are of course peanuts compared to the challenges our clients have had to face in navigating large industrial facilities through such a blackout.
Let’s follow the Spanish government in not jumping to conclusions too rapidly as to what caused this. Let’s hope thorough analysis is made public so that all of us energy professionals can do our thinking about how to better protect the energy system and the companies we work for against blackouts. Whatever the precise cause of yesterday’s blackout, it didn’t come out of the blue. Experts have been warning about the increased likelihood of blackouts due to the combination of energy transition and cybersecurity concerns. How could you not read yesterday’s event as confirmation of those warnings? So, rather than speculating about causes or the likelihood of it happening again, it’s better to draw lessons and get yourself better prepared for the next blackout, when and wherever it might come. The head of Germany’s grid agency (Bundesnetzagentur) Klaus Müller was cited in Handelsblatt for claiming that it is “highly unlikely” that an event as the one we saw yesterday in Spain and Portugal would occur in Germany. I don’t think such calculus is wise … For Spain and Portugal specifically, it is to be notified that today there were still some small blackouts left or right. While the root cause of this event is not clear, the grid operator cannot take any measures to avoid a new occurrence, so there is risk. We also want to warn that there’s a lot of false information and speculation. Red Electrica is making the official statements which you can find here: https://www.ree.es/es/sala-de-prensa/actualidad. E&C will of course keep you informed of the situation.
Working for clients across the globe, we observe that in Europe, companies have taken the high reliability of grids for granted. This means they are ill-prepared for blackout events. Some of the procurement professionals we work with are even looking at this too purely from a contractual / liabilities point of view, believing they can force the hands of suppliers and grid operators to guarantee 100% supply. Yesterday here in Spain, it didn’t matter what contract you had negotiated, you didn’t have electrical power. Like any technical system, power supply can fail. And if it does as it did yesterday, it’s hard to see how the force majeure argument would not hold. Here’s a list of ideas of what you can do:
When an event occurs:
- The number one rule: be prepared, have your technical contingency plan ready so that you can shut down safely, if available switch over to backup supply speedily and have restart procedures for when the power supply has been restored. Make sure there is coordination between plant / facility / technical management and procurement to make sure this contingency plan is aligned with your contractual arrangements.
- Don’t just wait for the live test of such a contingency plan, train your staff members to execute it.
- Flank it with a communication plan so that you can quickly inform your staff members about what’s happening. Think about communication tools and prepare a scenario where there is no communication by phone at all, e.g., by assigning a physical place where people come together to co-ordinate actions in case of a blackout of both power and communication systems. Think about the analogue communication channels to be set up in a situation without any communication tools, where basically you need to go back to a system of physical messengers.
(I would like to share first-hand experience here. Mobile phone connectivity was on/off throughout the day. Meaning that some of us had some connection from time to time, others had none. It’s therefore recommended you bring a group of people together with different providers. SMS worked better than communication tools using the internet such as WhatsApp or Teams. Make sure people know that. We have no landline in our Valencia office, so I can’t say anything about how that functioned.)
- Yesterday’s event was a general blackout, meaning that the restoration of power seemed to be quite a general event executed zone by zone. In smaller scale blackout events, there are sometimes provisions for critical businesses and/or businesses in general to be restored first. Investigate whether that is the case in your region and if it is, explore the possibilities of getting yourself on the highest priorities list.
- In many countries, our governments have asked us to buy emergency kits that we can keep at home for a situation like the one we had yesterday. Make such kits available in your facilities, also in offices and stores. Supplement it with cereal bars so that people have food. Think about water supply in your offices.
(In our Valencia office where we had our meeting, when the pizzas we had ordered for lunch didn’t show up, we were fortunate that somebody brought cookies in the morning. I’ve asked our admin people to put such emergency kits in the offices as fast as possible.)
- It was amazing to see yesterday afternoon how quickly we revert to a cash economy in such circumstances. While walking back to my hotel, I saw tourists desperately pleading to get some food in shops and at the entrance doors of restaurants which they couldn’t get as they couldn’t pay in cash. Keep some emergency cash available to help your people in these circumstances.
- This is again about your people. Transportation systems were down yesterday. Think about organizing transportation with those people that have cars on the site to get everyone home safely and without too much hassle. People were sleeping on benches in the Sorolla train station here in Valencia last night, and even if the weather’s not too bad here, you don’t want your people to experience that, make sure you have a good relationship with a hotel for such circumstances.
(I want to thank my colleagues living in Valencia for the help they offered and gave to find a solution for everyone.)
- On the financial level, I’m not a lawyer, but I believe that the word “force majeure” was invented for events such as this one. I would therefore not put much hope into compensation for damages. On the flipside, with more and more clients with contracts that physically or financially come down to feeding electricity into the grid, make sure you have your force majeure arguments ready in case a blackout event is preventing you from doing that. Consider this for example when negotiating cash-out conditions in an hourly cashed-out contract, a PPA, when you set up on-site renewable production which can result in a considerable supply to the grid or when you set up a battery project.
What can you do to proactively protect yourself?
- Walking through an eerily silent city of Valencia yesterday (many people were off because of a semi-public holiday), the main noise was the buzzing of generators. Whereas most stores, bars & restaurants or hotels were completely out, some of them still had power thanks to those generators. Think about your emergency supply. Consider on-site generators or a rental contract with good conditions on timing for bringing the generators and plugging them in.
- These days, such emergency supply can consist of renewables combined with batteries. They are not just a more sustainable alternative for diesel generators, they also make sense from a purely economic point of view. I would put it this way: consider on-site solar and batteries for your emergency supply and consider emergency supply when evaluating investment in on-site solar and batteries.
- A lot of you will probably protest now that batteries will be emptied very quickly if they are used to power your complete factory. But two things are to be considered:
- As I walked through the city yesterday evening, I walked into a hotel that had emergency supply. They had minimal light on, the fridges and freezers were powered and … the beer tap. The rest of the building was dark. This is a problem I often see when discussing blackout prevention with clients: they have only one scenario in their head and that is continuing the full supply. Which is of course particularly challenging. But is it absolutely necessary? Start from a security-only scenario, what do you need to power to keep your facility safe? Then add essential equipment to limit economic damage and take full elimination of economic damage as a final scenario. You might also conceive a few scenarios in between those last two.
- Batteries can be used to get you through those first hours while you are waiting for the rented generators to be brought and plugged in. This way, investment in batteries can help you to replace investment in generators with cheaper rental agreements.
- When making up such scenarios for batteries, you should consider that this requires always having a minimum of power available in them, limiting the capacity in the batteries that you can use for other, commercial purposes.
- Again, it’s too early to draw conclusions, but the slow recovery of electricity (in Valencia we waited for 9 hours) is pointing to a lack of black start capacity. I wouldn’t be surprised if in the wake of this event, new initiatives are taken for contracting such capacity. This can be a possibility to make extra money on assets such as batteries and generators.
These are just some first, quick lessons learned from yesterday’s experience. I’m sure that in the coming days, weeks and months, more such learning will come. E&C will keep you informed. I’m also interested how the rapid expansion of solar power (and PPAs) in Spain of the past few years will be evaluated in the light of these events. It is said that in the moment of the event that triggered the blackout, all power in Spain was provided by renewables. I believe that energy transition is both a trigger and a solution for the increased risk of blackouts. Decentralizing the energy supply can create more resilience, both for the individual users and for the complete system.
