Are Solar Storms New Threat to Global Supply Chains?

Over the past few months, we've faced historic disastrous events involving the environment. Pesky ash clouds . . . a catastrophic oil spill . . . and now there's a withering severe drought in Russia that threatens to create shock waves throughout the agro-business sector.

Is it time to be on the lookout for yet another? Some experts think so, and they're warning that upcoming solar storms could be a new threat to global supply chains.

Storm activity on the sun typically ebbs and flows, following an 11-year cycle, and researchers calculate that the current cycle, Solar Cycle 24, will peak in 2013. Even though the National Oceanic and Atmospheric Administration's Space Weather Prediction Center estimates that Solar Cycle 24 will be below average in intensity, analysts warn that the potential for electrical system interference is quite real.

For example, the impending peak solar storm activity could create geomagnetic storms that cripple our current electric grids and transformers. Of course, given the world's reliance on electricity and internet commerce, disruptions like this could, in turn, wreak havoc on global supply chains and the international economy as a whole.

Quebec's power grid was shut down by a geomagnetic event in 1989. Five million people were without power for nine hours, and the direct cost of the outage amounted to $2 billion.

Since then, the power industry has implemented early warning systems, while keeping a careful eye on solar activity. However, according to A.V. Riswadkar, product liability director for Zurich Services Corp., mitigation measures and response protocols remain in their "infancy," and "a lot of work still needs to be done."

The US Congress is taking notice of these risks, too. Pending legislation, titled The Grid Reliability and Infrastructure Defense Act, is designed to "protect the bulk-power system and electric infrastructure critical to the defense of the United States from cybersecurity and other threats and vulnerabilities" (including geomagnetic storms).

TAGS: Finance
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