5 actions for utilities to build resilience, win federal funding, and prepare for new SEC climate disclosure rules 

5 actions for utilities to build resilience, win federal funding, and prepare for new SEC climate disclosure rules 
By Judsen Bruzgul, Ph.D.
Aug 17, 2022
5 MIN. READ
With extreme weather events on the rise, utilities are eager to secure federal infrastructure funding to build resilience. Follow these no-regrets actions to be competitive for the Infrastructure Investment and Jobs Act (IIJA) funding—while laying the groundwork for the SEC‘s forthcoming climate disclosure rules.

Utility infrastructure is not currently built for the risks posed by climate change, including extreme weather events that cause damage and prolonged outages for their customers. In fact, utilities across the country face a $500 billion resilience investment gap.

In addition to the threat of extreme weather, two relatively new developments are compelling utilities to focus on resilience—their top priority according to our utility leader survey. First, the federal government has created new funding opportunities to support utility climate resilience investments. One example, the IIJA, includes funding for projects that make the electric grid more reliable, resilient, flexible, and secure.

Second, the Securities and Exchange Commission (SEC) proposed new rules that could require investor-owned utilities to disclose climate-related risks like extreme weather events fueled by climate change. The SEC could adopt these rules as soon as this year and phase-in the rules over the next few years.

As a utility leader, you can take several actions now that will build your resilience to extreme weather events, position your utility to win federal funding, and prepare for the proposed SEC rules. Put another way, to be competitive for federal funds, you will need to understand and address many of the same climate risks you may need to disclose to the SEC. Here are five actions to take.

To compete for federal funding, you will need to understand the same climate risk and investment priority information that the SEC may require you to disclose in the future. This makes it doubly worth your time to invest in resilience planning.

Identify your priority climate change risks

Utilities are no strangers to extreme weather, having operated systems in the face of extreme events like hurricanes, heat waves, and drought. But with climate change, as extreme weather events become more intense and frequent, historical experience is no longer a reliable predictor of future risk. Utilities operating in different regions across the country may face different types of hazards, with some likely to see events unlike any they have prepared for or experienced in the past.

A high-level screening of infrastructure and operations for climate change risks can help you prioritize where to focus on investigating and performing more detailed analysis.

Such screening exercises can focus on exposure—where major assets (i.e. transmission lines and substations) exist in hazard areas (i.e. future flood zones, future extreme temps, etc.) based on readily available regional or national climate information.

Drill-down with a climate vulnerability study

To position yourself favorably for federal funding opportunities, you will need a clear understanding of the vulnerabilities and constraints of your utility system. A climate change vulnerability study, like the one a major utility developed with our support, arms you with the best available science to protect current and future investments against climate hazards. In our work with this utility, we evaluated present-day assets, operations, and, infrastructure, reviewed operational measures, stress-tested scenarios, and developed strategies to address utility and customer resilience.

When conducting a vulnerability study, you want actionable information that is specific to how your assets and operations could be affected by changing climate and extreme weather. ICF’s climate analytics platform, ClimateSight, cuts through the overwhelming amount of climate data to understand future climate conditions in ways that are tailored to your utility’s specific requirements and circumstances, while rooted in best-available, vetted climate science.

Engage stakeholders

Building climate resilience is a group effort that involves a range of players. You may be working with the city or seeking funds from your state government, so you need to be sure you’re positioned well with the stakeholders who will be involved in your projects.

Because every utility operates within a specific system and service territory, it’s critical to hear from subject matter experts from across your utility and convene an external group to capture the voices and perspectives of community stakeholders, including those in disadvantaged and vulnerable communities. What key insights might your internal stakeholders surface about potential climate impacts to your systems, processes, and supply chains? What do consumer advocates and environmental groups in the community support—and how can you ensure that your resilience investments will benefit your most critical and vulnerable customers? Which stakeholders could be partners on a grant application?

Doing this stakeholder engagement work early and often throughout the risk assessment process will help you craft resilience solutions that are specific to your utility and community context—and win over funders and partners along the way.

Build a resilience plan

Once you understand projected climate changes across your service area—and the impact those changes are likely to have on your system—it’s time to build a climate resilience plan that translates the climate science into a set of resilience-building activities. This will be particularly important because the SEC’s rules may require that utilities disclosure their strategy and implementation plan to reduce climate-related risks.

In the case of our work with the major utility, after helping them conduct a comprehensive vulnerability study, we worked with them to develop an implementation plan that integrates climate change into day-to-day planning, engineering, operations, and preparedness. As a result, the utility’s updated flood-design standard requires that new facilities are designed to be resilient to sea level rise for as long as they are expected to be in operation. For example, facilities built for 80 years of operation must be able to accommodate an additional three feet of sea level rise.

While doing the work of building climate resilience remains a tough sell for some utilities, it’s becoming clearer each year that the cost of inaction is higher than the cost of investing in climate risk assessments and resilience-building projects.

Prioritize your resilience investments

As you seek to build support for resilience projects identified in your plan from different sources—federal funds, regulators, state, other entities—you must be able to provide a clear and well-supported justification of your resilience investment priorities and show how the pieces fit together. This allows you to demonstrate how and why a given investment is a priority in the context of the full utility resilience plan.

By creating a prioritized list of resilience investments that clearly shows the benefits to both your utility and your customers, you will also be laying the groundwork for future climate risk disclosure requirements, whether they are mandated by the SEC or voluntarily through the Task Force on Climate-Related Financial Disclosures and other entities.

Let’s not forget the good news: it all connects. A comprehensive understanding of your climate-related risks is foundational to securing federal resilience funds. This understanding, along with the federal funds you secure, will serve your utility well in the future as you look to SEC’s climate-related risk disclosure requirements that are coming down the pike—no matter how they shake out.

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Meet the author
  1. Judsen Bruzgul, Ph.D., Senior Director, Climate Adaptation and Resilience + ICF Climate Center Senior Fellow

    Judsen helps clients assess vulnerabilities and manage risks from changing climate and extreme weather to infrastructure and natural resources in the United States and abroad. View bio