Enhancing the 

Security 

of the North 

American 

Electric Grid

MARCH 2020

CONGRESS OF THE UNITED STATES

CONGRESSIONAL BUDGET OFFICE
At a Glance

The electric grid is collection of generating facilities that produce electricity, 

customers that use it, and intermediate power lines and other equipment that 

deliver it to those customers. The vast majority of the threats it faces are localized and handled by the grid’s operators with minimal disruption for customers. But some threats to the grid might cause a widespread and long-lasting 

outage. Threats of that scale are the topic of this report, along with potential 

approaches to improve the grid’s security against those threats.

• Major threats derive from both natural disturbances and human 

adversaries. Naturally occurring threats include a severe solar storm, a major 

hurricane, and a major earthquake. Human-made threats include a highaltitude electromagnetic pulse, a large cyberattack, and a physical attack. 

The likelihood of such natural disasters and attacks is generally expected to 

be quite small, but their costs could be high if they occur.

• Policy approaches that would prevent or mitigate damage include, among 

others, building more early-warning satellites or sensors, improving 

information sharing, enhancing cyber protections, and improving physical 

security. 

• Policy approaches that would improve recovery after a disaster or attack 

include increasing the number of transformers (which are critical 

transmission components) that are stockpiled, improving the security 

of certain types of power plants necessary to help bring the grid back 

into operation, increasing backup power for critical infrastructure, and 

providing more disaster response training.

The Congressional Budget Office has identified some key considerations for 

policymakers by examining two approaches in detail: deploying new spacebased sensors to warn of solar storms and thus better enable operators to prevent or limit damage to the grid and increasing the stock of large transformers 

to aid recovery if significant damage occurs. Those considerations include 

determining the appropriate role for the federal government, deciding what 

factors to weigh, and comparing the advantages and disadvantages of federal 

intervention amid uncertainty.

www.cbo.gov/publication/56083
Contents

Summary 1

The North American Power Grid and Major Threats It Faces 1

Approaches to Reduce the Costs of Major Threats 1

Some Key Considerations for Policymakers 2

The North American Electric Grid 3

Elements of the Electric Grid 4

State and Federal Oversight of the Electric Grid 5

Major Threats to the Electric Grid and Their Potential Impact 7

Naturally Occurring Threats That Could Cause Significant Power Losses 8

Human-Made Threats That Could Cause Significant Power Losses 10

Potential Scale of Impacts and Assessments of Likelihood 12

Uncertainty Surrounding the Estimates 15

Approaches to Reduce the Cost of Major Outages 16

Approaches That Would Prevent or Mitigate Damage 16

Approaches That Would Improve Recovery 17

Two Illustrative Approaches That CBO Examined 18

Deploy New Space-Based Sensors to Detect Solar Storms 18

Increase the Stockpile of Transformers 23

Some Key Considerations for Policymakers 26

Gauging the Rationale for Federal Intervention 26

Deciding Which Factors to Weigh When Considering Federal Intervention 27

Comparing the Advantages and Disadvantages of Federal Intervention Amid Uncertainty 27

Appendix: How Satellites Monitor Space Weather Today 29

List of Tables and Figures 31

About This Document 32
Notes

Numbers in the text may not add up to totals because of rounding.

To remove the effects of inflation, the Congressional Budget Office adjusted dollar 

amounts with the gross domestic product price index from the Bureau of Economic 

Analysis. Unless otherwise noted, dollar values are expressed as 2019 dollars.

The image on the cover was created by Robert Simmon of the National Aeronautics 

and Space Administration’s Earth Observatory using satellite data from 2012 provided 

courtesy of Chris Elvidge of the National Oceanic and Atmospheric Administration’s 

National Geophysical Data Center.
Enhancing the Security of the 

North American Electric Grid

Summary

A secure and reliable supply of electric power is a key 

component of modern economies. Not only are other 

energy sources often poor substitutes, but essentially 

every industrial and commercial process in the United 

States requires its use, and nearly all homes rely on it. 

Even short-term interruptions in the delivery of electric 

power result in economic losses or inconveniences for 

consumers and businesses. Longer outages can result in 

spoilage of food and other perishables, forgone sales, the 

idling of resources in production processes, disruptions 

to the supply of water and fuels, and other threats to 

health and safety. 

This study by the Congressional Budget Office examines 

a range of threats that could cause widespread, longlasting disruptions for the electric grid, including ones 

beyond historical experience. The study discusses a range 

of illustrative approaches to enhance the security of the 

electric grid and some considerations for policymakers to 

take into account.

The North American Power Grid and Major Threats 

It Faces

The power grid is a collection of generating plants, power 

transformers, transmission lines, and other equipment 

that helps move large quantities of electricity over long 

distances; components that distribute smaller quantities 

to end users; and collections of customers that use the 

power. The delivery of power to customers is usually 

highly reliable. Though the grid faces a wide range of 

threats, the vast majority are localized and are handled by 

grid operators with minimal disruption for customers. 

But the grid also faces a number of larger but rare threats 

that have the potential to cause regional disruptions that 

last longer. Naturally occurring threats include a burst of 

solar particles—referred to as a solar storm—that interact 

with Earth’s magnetic field and create a geomagnetic disturbance that could overload certain critical grid components; a hurricane that could affect the supply of power 

along an entire coastal region; and an earthquake that 

could damage or disrupt generating plants, transmission lines, and other equipment and, thereby, the power 

supply of extended areas. Human-made threats include a 

high-altitude electromagnetic pulse (EMP)—most likely 

created by the detonation of a nuclear weapon at high 

altitude—which, like a severe solar storm, could overload 

and disable key components; a cyberattack targeting 

generating plants or grid control systems; and a physical 

attack against certain critical components. 

The likelihood of wide-ranging and long-lasting outages 

is small, but the consequences could be severe. Some 

estimates suggest that losses in the economy could be in 

the hundreds of billions of dollars or even more than a 

trillion dollars in some scenarios. Losses could also be 

considerably less depending on the extent of the disaster 

or attack; the condition of the system, including whether 

the grid retained enough power to handle emergencies; 

and the effectiveness of existing protections and recovery 

measures, among other factors.

Approaches to Reduce the Costs of Major Threats

The utility industry has a number of operational and 

procedural protections that it uses to enhance the 

security of the electric grid and prevent or limit power 

outages. Most are day-to-day protections. But events 

like the 2015 cyberattacks in Ukraine, which targeted 

that country’s grid control systems, and a cyberattack in 

the western United States in early 2019, which briefly 

disrupted communications at several small generating 

sites, have increased awareness about risks and heightened concerns. 

CBO identified a number of approaches for boosting 

the security of the grid—approaches to either prevent 

or mitigate damage or to improve recovery after the 

damage has occurred. The approaches identified are not 

an exhaustive list but, rather, illustrate the wide span of 

possibilities for reducing the risks of a large, long-lasting 

outage. The approaches include improving information 
2 Enhancing the Security of the North American Electric Grid March 2020

sharing, enhancing cyber protections, and improving 

physical security. They also include two approaches that 

CBO examined in relative detail: one to prevent or mitigate damage—deploying space-based sensors to monitor 

solar activity—and one to improve recovery—increasing 

the stock of replacement transformers, which are critical 

in allowing large amounts of electricity to flow throughout the grid.

Space-Based Sensors. One option for monitoring solar 

activity—a dedicated satellite placed in orbit between 

Earth and the sun—would provide early warnings of 

a solar storm. It would carry a coronagraph to provide 

images of the sun that would allow forecasters to provide 

long-term warnings (one day to four days in advance) of 

a solar storm that might strike Earth. It would also carry 

instruments to measure the solar wind, which would 

allow forecasters to provide short-term warnings (15 to 

60 minutes in advance) with more accurate estimates of 

a solar storm’s likely arrival time and the severity of its 

effects on Earth and on the grid. The United States has 

satellites that provide such warnings today, but they are 

old and are expected to stop functioning within several years. At a cost of about $500 million to purchase 

two satellites (one that would be launched in 2024 and 

another that would replace the first roughly five years 

later) and another $500 million to launch and support 

the satellites through 2029, this option would replace the 

current system and improve the reliability and quality of 

the data for more accurate forecasts of solar weather. 

Two other options—placing coronagraphs on the next 

generation of weather satellites or on the International 

Space Station—would cost significantly less and maintain some capability for monitoring solar storms when 

the current space weather satellites fail. Building and 

deploying those chronographs might cost $100 million 

to $150 million over 10 years. But by themselves, neither 

of those two options would provide the data necessary 

for the accurate short-term warnings of an impending 

solar storm that grid operators rely on to take steps to 

protect their systems—warnings that are provided today 

and that would continue under the first option. More 

accurate warnings might also avoid the cost to operators 

of taking unnecessary steps to prepare for storms that 

end up having little effect on Earth.

The National Oceanic and Atmospheric Administration 

(NOAA) has published plans to deploy a dedicated satellite between Earth and the sun but without a follow-on 

spare satellite (as under the first option) and place a 

coronagraph on the next weather satellite (as under the 

second option) so that the agency would have two coronagraphs in orbit. But it has not yet secured most of the 

funding to implement that plan. 

Replacement Transformers. Large power transformers 

can take a long time to manufacture, leaving portions 

of the grid vulnerable if they become disabled and need 

to be replaced. One option for boosting the stock of 

transformers would be to provide subsidies—in the form 

of funds or tax credits—to suppliers of electricity that 

they could use to buy and hold transformers in reserve. 

This option would leave various technical decisions in 

suppliers’ hands, but setting the appropriate subsidy 

level would be difficult, and a significant share of the 

federal costs would only reduce the utilities’ net cost of 

units that they would have purchased anyway. Another 

option would be for the federal government to own a 

stockpile of transformers, which, as necessary after a 

disaster or attack, it could sell or give to suppliers. By the 

Department of Energy’s estimate, the stockpile would 

need to consist of at least 100 transformers, at a cost of 

$2 million to $9 million each.1 Yet another option would 

be for the federal government to require suppliers to hold 

private reserves of a specified size. That option would 

have negligible costs for the government, but determining the appropriate size of such a requirement, like 

setting an appropriate subsidy level, would be difficult. 

Some Key Considerations for Policymakers

One consideration for policymakers is the appropriate 

role for the federal government in improving the security 

of the electric grid. To what extent would the private 

sector acting alone take the full range of potential 

benefits into account when deciding what to invest in 

protection or recovery? 

The benefits of a new class of space-based sensors 

dedicated to monitoring and evaluating space weather, 

for example, would extend beyond the electricity sector. 

Other industries, too, such as the telecommunications 

and transportation industries, could benefit from early 

warnings about potentially damaging solar storms. 

Because the benefits would be widespread and difficult, 

if not impossible, to limit only to parties that paid for 

1. Department of Energy, Office of Electricity Delivery and Energy 

Reliability, Large Power Transformers and the U.S. Electric Grid

(April 2014), https://go.usa.gov/xyu8R.
March 2020 Enhancing the Security of the North American Electric Grid 3

them, it is unlikely that the private sector would invest in 

space weather sensors on its own and more likely that the 

approach would depend on federal support, similar to 

the federal role in providing Earth weather satellites. 

Private-sector electricity suppliers have a greater 

incentive to pursue some of the benefits associated with 

investing in reserve transformers. As a result, suppliers 

hold their own reserves, both individually as part of 

their business planning and collectively in reservesharing arrangements. But in making decisions from the 

perspective of their business and their geographic area, 

suppliers may not fully account for some benefits of 

avoiding outages, such as ensuring economic stability or 

public safety. 

Another consideration is just which factors to weigh. 

CBO’s analysis focused primarily on the potential loss of 

national economic output (gross domestic product, or 

GDP) resulting from major outages and on the budgetary costs of policy alternatives. But GDP does not capture all the costs of an outage—such as inconvenience, 

personal discomfort, or even loss of life—and policymakers could take those or other factors into account. 

Some threats to the electric grid also threaten military 

security and public health, so policymakers might weigh 

the benefit of avoided damage to those sectors—even in 

circumstances when the avoided loss of GDP would be 

relatively small or the costs of the policy would be high. 

Other potential factors are the possibility of inefficiencies that subsidies or regulations could impart to the 

economy and the effects that policy-induced changes in 

prices might have on households with different amounts 

of income or people who live in different regions of the 

country.

Still another consideration is the advantages and disadvantages of federal intervention amid the uncertainty 

surrounding estimates of them. Avoiding a loss of GDP 

is one benefit of improving the security of the grid and 

reducing the chance of a widespread, enduring power 

outage. But estimates of the size of potential losses are 

highly uncertain, as are estimates of their likelihood, suggesting a large range of possible outcomes and complicating decisions about investing in the security of the grid. 

Deploying new solar satellites, for example, which would 

probably cost about $1 billion over 10 years, could offer 

some protection from solar storms. Without it, the 

economic costs of a severe solar storm could be large, but 

the likelihood of such infrequent storms is uncertain. 

Moreover, the degree to which the early warning from 

a satellite would reduce the damage from a severe solar 

storm is also uncertain. 

The North American Electric Grid 

The electric grid is responsible for delivering power to 

some 150 million customers (households, businesses, and 

government facilities), sometimes across considerable distances. Those deliveries are usually very reliable: In recent 

years, the average annual loss of power for a typical customer has ranged between three and eight hours (roughly 

one-tenth of one percent of the time or less).2 The higher 

end of the range occurred because of what the industry 

classifies as major events: snowstorms, hurricanes, and 

others. But usually, the cause of an outage is something 

affecting local delivery, such as less severe weather or an 

equipment problem, and the outage affects a small area 

and is not long-lasting.

But the overall stability of the electric grid has also been 

punctuated by rare, wide-ranging outages of greater 

magnitude. Those outages are often caused by severe 

coastal storms or by system failures on especially hot 

days. In one of the most significant instances, states in 

the Northeast and portions of Canada experienced a 

major outage in August 2003, when a blackout spread 

regionally: A localized power failure, coupled with a 

control system failure, in Ohio overloaded nearby transmission facilities, which in turn progressively overloaded 

other portions of the network. The cascading effects were 

large enough to leave 50 million people without power 

for several days in many locations and up to a week in 

others. The cost of the 2003 blackout has been estimated 

by several researchers at between $5 billion and $14 billion (in 2019 dollars), mostly reflecting lost income 

and forgone profits, losses of perishable inventories, and 

expenses for repairs to the electric system—though some 

2. Energy Information Administration, “EIA Data Show Average 

Frequency and Duration of Electric Power Outages,” Today in 

Energy (September 12, 2016), www.eia.gov/todayinenergy/detail.

php?id=27892, “Average Frequency and Duration of Electric 

Distribution Outages Vary by States,” Today in Energy (April 5, 

2018), www.eia.gov/todayinenergy/detail.php?id=35652, and 

“Average U.S. Electricity Customer Interruptions Totaled Nearly 

8 Hours in 2017,” Today in Energy (November 30, 2018), www.

eia.gov/todayinenergy/detail.php?id=37652. 
4 Enhancing the Security of the North American Electric Grid March 2020

or even much of the loss of economic activity reflected 

in those estimates may have been recouped once power 

returned.3

The threat of wildfires in California and temporary 

preventive blackouts provide a recent reminder of the 

disruption of outages. Because of high winds and dry 

conditions, power producers have temporarily shut off 

the electricity several times in counties throughout the 

state to help prevent downed power lines from sparking 

brush fires. By one account, a preventive blackout over 

the course of several days in October 2019 affecting 

some 700,000 homes and businesses may have resulted 

in $1 billion of economic damage.4 (That sum reflects 

estimates of the average amount that customers would be 

willing to pay to avoid a loss of power, which incorporates the value of lost income, medical care, and spoiled 

food, among other items.)With dry seasonal conditions 

expected to persist in coming years, such outages and 

their attendant losses will probably continue.

Much of the oversight responsibility of the electric grid, 

including its reliability, lies with state and federal authorities; local authorities play a limited role.

3. See National Research Council, Terrorism and the Electric Power 

Delivery System (National Academies Press, 2012), https://doi.

org/10.17226/12050; Kristina Hamachi LaCommare and Joseph 

H. Eto, Understanding the Cost of Power Interruptions to U.S. 

Electricity Consumers, LBNL-55718 (Ernest Orland Lawrence 

Berkeley National Laboratory, September 2004), https://go.usa.

gov/xydaD; U.S.–Canada Power System Outage Task Force, 

Final Report on the August 14, 2003, Blackout in the United States 

and Canada: Causes and Recommendations (April 2004), https://

go.usa.gov/xydaq; Electricity Consumers Resource Council, 

The Economic Impacts of the August 2003 Blackout (February 9, 

2004), http://tinyurl.com/y286sep6; Patrick L. Anderson and 

Ilhan K. Geckil, Northeast Blackout Likely to Reduce U.S. Earnings 

by $6.4 Billion,” Working Paper 2003-2 (Anderson Economic 

Group, August 19, 2003), http://tinyurl.com/yyeqjplf; and ICF 

Consulting, The Economic Cost of the Blackout: An Issue Paper on 

the Northeastern Blackout, August 14, 2003, www.solarstorms.org/

ICFBlackout2003.pdf (190 KB).

4. For the estimate of the number of customers affected by the 

outage, see Andrew G. Campbell, “Northern California Goes 

Dark,” Energy Institute Blog (October 14, 2019), https://tinyurl.

com/r3a4b8n. For the estimate of economic losses from the 

outage, see Catherine Wolfram, “Measuring the Economic Costs 

of the PG&E Outages,” Energy Institute Blog (October 14, 

2019), https://tinyurl.com/wn4ep3h.

Elements of the Electric Grid

The North American electric grid spans the continental 

United States, most of Canada, and a small portion of 

northern Mexico. The grid is composed of two main 

networks, or interconnections—Eastern and Western—

which are largely electrically separate from other power 

regions, and three smaller interconnections for Texas, 

Quebec, and Alaska (see Figure 1). Hawaii, Puerto Rico, 

other island territories, and portions of Canada operate 

separate grids. 

The grid broadly consists of four main elements (see 

Figure 2). Power is first produced at one of nearly 

10,000 generating plants.5 It is initially transported 

through high-voltage transmission lines for long distances and then delivered by lower-voltage distribution 

lines for shorter distances. Customers are the final component: industrial facilities, commercial establishments 

(usually considered to include government facilities as 

well), and residences. Power transformers, which are used 

in the grid at an estimated 56,000 substations (locations 

containing a variety of electrical equipment, including 

transformers, switches, system controls, and other components), first increase the voltage of the power produced 

at the generating station—so that it can be transported 

long distances more efficiently—and later reduce the 

voltage so that it can be used by customers.6 Because 

transformers allow large amounts of electricity to flow 

throughout the transmission grid, they are among the 

grid’s most critical components.

End-use customers are served by about 3,000 electricity providers.7

 Those providers include about 200 large 

investor-owned utilities, which provide about 65 percent of the power; 5 federal agencies that produce 

and sell about 1 percent of the power; and roughly 

2,800 regional or local providers, which sell the remaining share. 

5. Energy Information Administration, Electric Power Annual 2018

(October 2019), www.eia.gov/electricity/annual/. 

6. Department of Energy, Transforming the Nation’s Electricity 

System: The Second Installment of the Quadrennial Energy Review

(January 2017), https://go.usa.gov/xydxn.

7. Calculation based on figures from Department of Energy, 

Transforming the Nation’s Electricity System: The Second Installment 

of the Quadrennial Energy Review (January 2017), https://go.usa.

gov/xydxn; and Energy Information Administration, “Electric 

Sales, Revenue, and Average Price,” Table 10, “2018 Utility 

Bundled Retail Sales—Total” (October 1, 2019), www.eia.gov/

electricity/sales_revenue_price/.
March 2020 Enhancing the Security of the North American Electric Grid 5

State and Federal Oversight of the Electric Grid

Oversight of the U.S. electric grid is shared primarily 

between state and federal authorities. State commissions 

are responsible for approving most aspects of electric utilities’ operations, such as the siting and construction of 

new power plants, the local distribution of electricity to 

customers, and the retail prices customers pay for electric 

service. Local authorities provide some oversight, though 

it is generally limited to input into the siting of facilities 

as well as some review of the environmental impacts of 

certain projects.

The federal government, through the Federal Energy 

Regulatory Commission (FERC), regulates public utilities’ transmission and wholesale sale of electricity that 

Figure 1.

The North American Electric Grid

Quebec

Interconnection

Eastern

Interconnection

Western

Interconnection

Alaska

Interconnection

Texas

Interconnection

Source: Congressional Budget Office, adapted from Western Electricity Coordinating Council, “The Bulk-Power System” (accessed October 23, 2019), 

https://tinyurl.com/y3tvrw8n.

The North American grid comprises two major networks, or interconnections—Eastern and Western—and three smaller interconnections—Quebec, 

Texas, and Alaska. Unlike Quebec and Texas, which have a few connections with the Eastern Interconnection, through which small amounts of power 

are exchanged, the Alaska Interconnection consists of two separate and unconnected networks, neither of which exchanges power with any other 

interconnection. Also, the State of Hawaii and Puerto Rico and other island territories operate their own grids (which are not shown).
6 Enhancing the Security of the North American Electric Grid March 2020

Figure 2.

The Main Elements of the Electric Grid

Power Plants

and Other Facilities

Produce Electricity

Renewable and 

Other Power Facility

Hydroelectric

Facility

Fossil Fuel Power 

Plant

Nuclear Power 

Plant

Industrial

Customers

Residential

Customers

Commercial

Customers

High-Voltage 

Power Lines Carry 

Electricity Long 

Distances

High-Voltage

Step-Up 

Power 

Transformer

High-Voltage

Step-Down 

Power 

Transformer

Low-Voltage 

Power Lines Carry 

Electricity

to Customers

Large and Small 

Customers Use Power

GENERATION TRANSMISSION DISTRIBUTION POWER CONSUMERS

Source: Congressional Budget Office.

A step-up power transformer takes electricity produced at generating plants and raises the voltage of that power so that it can be transmitted more 

efficiently. A step-down transformer reduces that voltage before the power is distributed to customers. 

Commercial customers in this context include the federal government and state and local governments.
March 2020 Enhancing the Security of the North American Electric Grid 7

crosses state lines.8 Wholesale transactions that take place 

entirely within state boundaries are regulated by state 

authorities. 

Following the 2003 Northeast outage, lawmakers 

granted FERC oversight over the reliability of the bulk 

power system—that is, high-voltage transmission lines 

and associated facilities. (Individual states continue 

to oversee the reliability of local distribution.) By law, 

FERC conducts that oversight by reviewing and approving mandatory reliability standards proposed by what is 

referred to as an electric reliability organization. In 2006, 

FERC designated the nonprofit North American Electric 

Reliability Corporation (NERC) as the electric reliability 

organization of North America. Since then, NERC has 

established more than 100 mandatory reliability standards.9

 Most of those standards reflect general operational and planning requirements. But some specifically 

address threats to the electric grid examined in this 

report: physical attacks, cyberattacks, and solar storms.10

The standards include requirements for administering 

personnel risk assessments and training, reporting incidents, protecting information, implementing operating 

procedures, and conducting vulnerability assessments. 

In most cases, options for compliance are open-ended: 

Electricity suppliers decide how best to meet NERC’s 

guidelines. For instance, to comply with a standard 

8. FERC does not have regulatory jurisdiction over the transmission 

and wholesale sale of power within Hawaii, Alaska, or much of 

Texas. Power flows are considered to be in interstate commerce 

only when they cross state lines and are synchronous—that is, 

the power on each side of the state line has the same frequency, 

voltage, and other electrical characteristics. Hawaii and Alaska 

have no interstate connections, so they are not within FERC’s 

jurisdiction. Although Texas is connected to adjacent states, a 

large portion of Texas is connected to those states only through 

a limited number of locations, where alternating current is 

converted into direct current, transferred over the border, and 

then converted back to alternating current on the other side. 

The power included in such transactions is not synchronous. 

Therefore, the portions of the Texas grid behind those 

connections are not subject to FERC’s jurisdiction. See Jim Lazar, 

Electricity Regulation in the US: A Guide, 2nd ed. (The Regulatory 

Assistance Project, 2016), http://tinyurl.com/y647dzpg.

9. See Ashley J. Lawson, Maintaining Electric Reliability With 

Wind and Solar Sources: Background and Issues for Congress, 

Report R45764, version 2 (Congressional Research Service, 

June 10, 2019), https://go.usa.gov/xd5PB. 

10. See North American Electric Reliability Corporation, 

“Mandatory Standards Subject to Enforcement” (accessed 

January 10, 2020), www.nerc.net/standardsreports/

standardssummary.aspx. 

that will require developing plans to meet performance 

requirements starting in 2022, suppliers may develop 

additional operational procedures, boost training, use 

new grid hardware, remove vulnerable components, 

or participate in sharing agreements for critical equipment.11 Partly to comply with new reliability and security standards, but also to upgrade aging infrastructure 

and to enhance security otherwise, utilities have invested 

close to $50 billion annually in recent years for improvements to their transmission and distribution systems.12

NERC’s standards have increased the security of the 

electric grid, particularly with regard to commonplace 

contingencies and threats, but vulnerabilities remain, 

especially for more serious threats. One recent finding, 

for example, is that the grid might be vulnerable to a 

geographically dispersed cyberattack that targets less protected electrical systems small enough to be exempt from 

full compliance with NERC’s standards.13 More broadly, 

the development of NERC’s mandatory standards is 

relatively recent, so gauging their ultimate effectiveness 

against the more extreme types of threats examined in 

this study is difficult.

Major Threats to the Electric Grid and Their 

Potential Impact 

Some threats to the U.S. electric grid are relatively common—such as wildlife, vegetation, equipment failure, 

and thunderstorms—and usually cause localized outages 

that are routinely managed by electricity suppliers and 

grid operators. But other threats are far less common and 

can be more severe in their geographic scope and duration, having a significant impact on economic activity 

and people’s well-being. 

11. See Government Accountability Office, Critical Infrastructure 

Protection: Electricity Suppliers Have Taken Actions to Address 

Electromagnetic Risks, and Additional Research Is Ongoing, GAO18-67 (February 2018), www.gao.gov/products/GAO-18-67. 

12. Energy Information Administration, “Major Utilities Continue to 

Increase Spending on U.S. Electric Distribution Systems,” Today 

in Energy (July 20, 2018), www.eia.gov/todayinenergy/detail.

php?id=36675, and “Utilities Continue to Increase Spending on 

Transmission Infrastructure,” Today in Energy (February 9, 2018), 

www.eia.gov/todayinenergy/detail.php?id=34892. 

13. See Government Accountability Office, Critical Infrastructure 

Protection: Actions Needed to Address Significant Cybersecurity Risks 

Facing the Electric Grid, GAO-19-332 (August 2019), www.gao.

gov/products/GAO-19-332. 
8 Enhancing the Security of the North American Electric Grid March 2020

Those major threats can be broadly classified as naturally 

occurring or human-made. Naturally occurring threats 

include a solar storm, a coastal hurricane, and an earthquake, whereas human-made threats include the detonation of an EMP, a cyberattack, and a physical attack. 

Although all such threats share an element of unpredictability, the likelihood of the naturally occurring events 

is generally better understood because a historical record 

exists and the likelihood generally changes little over 

the course of years or even decades. In contrast, there is 

little historical basis to draw on to assess the likelihood 

of human-made threats. And even when some historical 

basis exists, the threats might change significantly over 

relatively short periods of time, possibly to the point of 

becoming unpredictable.14

Given the wide range of threats and the substantial 

uncertainties underlying estimates of the likelihood 

and costs of many of them, CBO has characterized 

them in broad terms that are expressed as approximate 

orders of magnitude. CBO focused on relatively large 

and potentially costly versions of the threats (such as a 

major hurricane or earthquake that results in substantial 

damage) and relied on approximations of costs cited in 

the literature given existing protections for the electric 

grid (where those are known). In general, events expected 

to be of higher probability are associated with expectations of smaller economic consequences and vice versa 

(see Figure 3). For example, a severe solar storm that 

causes a strong geomagnetic disturbance may be less than 

one-tenth as likely to occur as a major hurricane but 

has a cost that could be 50 times greater or more. Thus, 

decisions about enhancing the security of the electric 

grid range from considering approaches that target lowlikelihood but high-cost threats, such as a severe solar 

storm or a high-altitude EMP, to considering approaches 

that target higher-likelihood, lower-cost threats, such as a 

hurricane or a physical attack. 

Naturally Occurring Threats That Could Cause 

Significant Power Losses

Most naturally occurring threats have limited impact 

on the electric grid, either because the consequences 

are limited or because risk management practices are 

well established throughout the grid. However, some 

14. See Benjamin L. Preston and others, Resilience of the U.S. 

Electricity System: A Multi-Hazard Perspective (prepared for the 

Department of Energy, Office of Energy Policy and Systems 

Analysis, August 18, 2016), https://go.usa.gov/xydU9 (PDF, 

4.2 MB).

naturally occurring threats, such as a solar storm, if large 

enough, could cause more significant and wide-ranging 

damage to the grid.

Solar Storm. A severe solar storm could present a significant threat to the electric grid, especially at higher northern or southern latitudes. Originating from an eruption 

on the sun’s surface and able to reach Earth generally 

within a few days, a mass of charged particles can interact with Earth’s magnetic field and cause a geomagnetic 

disturbance. 

If the disturbance is large enough, it could create strong 

electric currents along long-distance transmission lines 

that could overload and disable large power transformers. If enough transformers were affected, regional 

power losses could occur. Older transformers can be at a 

heightened risk because some of the components degrade 

over time and reduce the ability of the transformers to 

withstand the strong currents. With typical warranties of 

30 to 35 years, large power transformers in the United 

States have an average age of about 40 years, and some 

are more than 70 years old.15 By one set of estimates, 

perhaps 200 to 350 large power transformers within 

the United States would be at risk of damage from a 

severe solar storm, which amounts to roughly 10 percent 

to 20 percent of the large power transformers in the 

country.16

Another possibility following a solar storm—and one 

that some consider more likely—is that few transformers 

would be damaged but that systemwide losses of power 

could still occur because of what is termed a voltage 

collapse. Such a scenario could unfold if the resulting currents flowing through power lines overloaded 

power transformers and caused them to draw greater 

15. Department of Energy, Office of Electricity Delivery and Energy 

Reliability, Large Power Transformers and the U.S. Electric Grid

(June 2012), https://go.usa.gov/xydPm (PDF, 2.2 MB).

16. John G. Kappenman, Geomagnetic Storms and Their Impacts 

on the U.S. Power Grid (prepared for Oak Ridge National 

Laboratory, January 2010), https://go.usa.gov/xydE9 (PDF, 

14.0 MB), and “The Vulnerability of the U.S. Electric Power 

Grid to Severe Space Weather Events” (presentation at the 

2009 Space Weather Enterprise Forum, Office of the Federal 

Coordinator for Meteorology, May 19–20, 2009), www.ofcm.

gov/meetings/swef/2009/; and Department of Energy, Office 

of Electricity Delivery and Energy Reliability, Large Power 

Transformers and the U.S. Electric Grid (April 2014), https://

go.usa.gov/xp2vy (PDF, 2.2 MB).
March 2020 Enhancing the Security of the North American Electric Grid 9

amounts of a certain type of power on the grid—what 

is called reactive power—that is necessary to maintain 

the system’s voltage levels and stability, resulting in a net 

shortfall of that power.17 In that case, although potentially widespread, the power outages would probably be 

shorter, hours in some cases, potentially days in others.

Although powerful solar storms are rare, millions of 

people were left without power for about a half-day on 

March 13, 1989, after a geomagnetic disturbance damaged three transformers and triggered protective relays 

that disabled Quebec’s power grid.18 Power supplies in 

17. See Royal Academy of Engineering, Extreme Space Weather: 

Impacts on Engineered Systems and Infrastructure (February 2013), 

https://tinyurl.com/u7upaf9 (PDF, 2.7 MB).

18. Government Accountability Office, Critical Infrastructure 

Protection: Protecting the Electric Grid From Geomagnetic 

the United States and neighboring provinces in Canada 

were not significantly affected because the Quebec grid is 

largely separate from the U.S. and other Canadian grids. 

Other large solar storms have struck Earth, though at 

times when the grid was less developed or nonexistent. A 

1921 storm, for instance, was estimated to have induced 

electric currents on long transmission lines about 

10 times stronger than those affecting the Quebec grid 

in 1989.19 The 1859 Carrington Event—named after 

the amateur astronomer Richard Carrington, who was 

among the first to document the storm—reportedly 

Disturbances, GAO-19-98 (December 2018), www.gao.gov/

products/GAO-19-98.

19. National Research Council, Severe Space Weather Events—

Understanding Societal and Economic Impacts: A Workshop 

Report (National Academies Press, 2008), https://doi.

org/10.17226/12507. 

Figure 3.

Judgments About the Likelihood of Major Threats to the Grid and the Economic Effects From the Loss of 

Power

Major

Hurricane

Major

Earthquake

Large

Cyberattack

Severe

Solar Storm

High-Altitude

Electromagnetic

Pulse

Physical

Attack

Localized

Large

Coordinated

Likelihood

(Expected average

occurrence)

High

(Averaging about one

every 10 years)

Medium

(Averaging about one

every 50 years)

Low

(Averaging about one

every 100 years)

Very Low

(Averaging about one

every 150 years or more)

Very Low

(Hundreds of millions of 

dollars or less)

Low

(Billions of dollars or 

less)

Medium

(Tens of billions 

of dollars)

Potential Economic Eect

High

(Hundreds of 

billions of dollars)

Very High

(A trillion dollars 

or more)

Source: Congressional Budget Office.

The location of a bubble reflects a rough estimate of the likelihood and economic cost of each threat if realized, based on a survey of the literature. The 

length and width of the bubbles reflect the uncertainty that surrounds both the likehood and the costs.

Assessments about the potential economic effect are limited to the costs stemming from the loss of power and not the costs of physical damage more 

broadly, which could be significant, particularly from hurricanes and earthquakes. 
10 Enhancing the Security of the North American Electric Grid March 2020

created visible auroras as far south as Cuba and caused 

telegraph lines to spark, starting fires in some telegraph 

offices. Though the Carrington Event occurred before 

electricity was produced on an industrial scale, a similarly powerful solar storm missed Earth in July 2012 and 

was observed by a solar satellite. Experts calculated that 

Earth would have been in the storm’s path had the storm 

occurred a week earlier.20

Hurricane. Damage caused by hurricanes has been 

the most common cause of wide-ranging power outages in the United States. Particularly large storms like 

Hurricane Katrina in 2005—the costliest storm in U.S. 

history—and Hurricane Sandy in 2012 bring wind 

damage and flooding that can cause power outages 

lasting days or even weeks over regions spanning several 

states. Local distribution and long-distance transmission 

equipment are the parts of the electric grid that are most 

vulnerable to hurricanes, although generating plants and 

transformer substations face risks from coastal flooding.

Earthquake. Power outages can be a serious secondary 

effect of an earthquake. Although the United States 

has not yet experienced an earthquake that has seriously damaged large portions of the electric grid, the 

March 2011 Tohoku earthquake off Japan and associated 

tsunami damaged several coastal nuclear reactors and 

left 4.5 million households without power.21 The largest 

risks of earthquakes for the North American grid center 

on the New Madrid fault in the five-state region around 

Memphis, Tennessee; the San Andreas and other faults 

in California; and the Cascadia subduction zone about 

50 miles off the coast of Oregon and Washington. More 

than other naturally occurring threats, a major earthquake would threaten many components of the electric 

grid—generating facilities, transmission towers, substations, distribution facilities, and end users’ facilities or 

homes—although such damage is more likely to be local 

than regional.

20. Daniel N. Baker and others, “A Major Solar Eruptive Event in 

July 2012: Defining Extreme Space Weather Scenarios,” Space 

Weather, vol. 11, no. 10 (October 2013), pp. 585–591, https://

agupubs.onlinelibrary.wiley.com/doi/10.1002/swe.20097. 

21. Federica Ranghieri and Mikio Ishiwatari, eds., Learning From 

Megadisasters: Lessons From the Great East Japan Earthquake (The 

World Bank, 2014), https://openknowledge.worldbank.org/

handle/10986/18864.

Human-Made Threats That Could Cause Significant 

Power Losses

As with naturally occurring threats, many of the consequences of human-made threats would probably be limited enough that electricity suppliers and grid operators 

could manage them within their usual procedures. But a 

distinguishing aspect of human-made threats is that they 

could be targeted for maximum impact. A cyberattack 

could be conducted in several waves, for instance, or a 

cyberattack and physical attack could be conducted in 

tandem, boosting their effects. In addition, tactics of 

human-made threats can be adapted to overcome the 

protections in place.

Electromagnetic Pulse. A high-altitude detonation of 

a nuclear weapon can generate an EMP that consists 

of three distinct periods—often referred to as components. The first component is a pulse that could overload 

and damage electronics, leaving computer systems and 

electronic controls at risk. The second is a pulse having effects similar to lightning’s, though occurring over 

a much larger region. Because the grid has lightning 

protections, it would not face much risk from the second 

component (unless the first component made the grid 

more vulnerable to the second). The final component of 

an EMP—the longest lasting (spanning minutes, potentially)—could create strong electric currents along power 

lines that could disable large power transformers in much 

the same way as a severe solar storm might. That final 

component—alone or in conjunction with the others—

could disable the grid over a wide area, although the 

research is not unanimous in that regard.22 Because of 

22. Charged by the Congress in 2001 to investigate the threat of 

a high-altitude EMP attack and the potential consequences 

from one, the EMP Commission found that the damage 

could be widespread; see John S. Foster, Jr., and others, Report 

of the Commission to Assess the Threat to the United States 

From Electromagnetic Pulse (EMP) Attack: Critical National 

Infrastructures (April 2008), www.empcommission.org/reports.

php. More recently, the Electric Power Research Institute 

concluded that an EMP would not overload and disable 

many large power transformers, and those that it found might 

become disabled were geographically dispersed. However, the 

analysis viewed regional outages to be possible in roughly half 

the cases considered because the EMP would cause a loss of 

system voltage that—rather than damaging the system—in 

turn would cause a short-term loss of power. The geographic 

extent of those outages was estimated to be on the order of 

several states, and none was judged to be nationwide. See Randy 

Horton, Magnetohydrodynamic Electromagnetic Pulse Assessment 

for the Continental U.S. Electric Grid: Geomagnetically Induced 

Current and Transformer Thermal Analysis (prepared for the 
March 2020 Enhancing the Security of the North American Electric Grid 11

the direct risk to electronics from the first EMP component, other critical sectors could also be at risk, including 

telecommunications, transportation, food distribution, 

emergency response, and banking.

To cause the most disruption, the nuclear detonation 

that created the EMP would have to be at high altitude, 

perhaps 250 miles above Earth, centered over the nation. 

If such an attack occurred, it would probably be delivered via an intercontinental ballistic missile or possibly 

a satellite during a war and would most likely occur in 

conjunction with some other major nuclear attack. In 

that case, the loss of electric power would be only one of 

many problems, including the disabling of other critical 

infrastructure, massive casualties, radiation contamination, and physical destruction. A smaller EMP could be 

created without using a nuclear weapon, but its effects 

would be much more localized and easier for electricity 

suppliers and grid operators to overcome.

Cyberattack. In the context of this study, a cyberattack is 

an attempt to remotely exploit vulnerabilities in computer systems to affect generating stations, transmission 

lines, or grid control systems and disable or disrupt 

power production within a region. A cyberattack could 

be directed at generating stations to cause physical damage or to disable or hamper their operation. Alternatively, 

a cyberattack could be used to reset grid controls and 

reroute power to overload critical lines and equipment. 

To date, cyberattacks have not been thought to be a 

factor affecting the reliability of the electric grid in the 

United States, but some believe that the grid is becoming 

more vulnerable to such threats.23 A recent cyberattack, 

in March 2019—purportedly the first on record for the 

U.S. electric grid—was able to disrupt control system 

communications for a few minutes at several small generating sites located in the western United States, although 

Electric Power Research Institute, February 2017), www.epri.

com/#/pages/product/3002009001/, and Magnetohydrodynamic 

Electromagnetic Pulse Assessment for the Continental U.S. Electric 

Grid: Voltage Stability Analysis (prepared for the Electric Power 

Research Institute, December 2017), www.epri.com/#/pages/

product/000000003002011969/. 

23. See Government Accountability Office, Critical Infrastructure 

Protection: Actions Needed to Address Significant Cybersecurity Risks 

Facing the Electric Grid, GAO-19-332 (August 2019), www.gao.

gov/products/GAO-19-332.

no losses of power occurred.24 In December 2015, 

Ukraine experienced a significant attack. In that case, 

the power outage was short, about six hours before 

grid operators were able to manually secure the system. 

Although the attack is suspected to have originated in 

Russia, its origin has not been proved, illustrating a clear 

advantage that cyberattacks have: a degree of anonymity 

greater than that of other directed threats. 

Just how vulnerable U.S. power supplies are to a significant cyberattack is uncertain. The decentralized and 

dispersed structure of the U.S. electric grid might limit 

the effectiveness of a cyberattack because it would have 

to be configured to apply to an array of grid controls. For 

cyberattackers to disrupt the U.S. electric grid broadly 

and for a long time, they would need to be technically 

sophisticated and undertake considerable planning and 

reconnaissance of the many systems. Some analysts 

believe that such activities are ongoing.25

But modernizations of the electric grid suggest a growing 

number of vulnerabilities that might be exploited by 

cyber methods. The increased reliance on digital controls 

for producing and routing power is one such modernization that could be the target of a cyberattack. Indeed, 

one proposal before the Congress includes a provision to 

study the effectiveness of removing the digital controls of 

certain critical components, despite their many operational advantages, and instead relying on older analog 

and sometimes manual technologies for their operation, 

both of which are far less susceptible to cyber threats.26

Similarly, the growth in renewable sources of electricity 

increases the number of pathways for intrusions, but 

those sources can also enhance security by diversifying 

the types of generating capacity. 

Physical Attack. A physical attack is most likely to be 

a localized threat, unless done in conjunction with a 

24. See Blake Sobczak, “Report Reveals Play-by-Play of First U.S. 

Grid Cyberattack,” E&E News (September 6, 2019), www.

eenews.net/energywire/stories/1061111289; and North American 

Electric Reliability Corporation, Lesson Learned: Risks Posed by 

Firewall Firmware Vulnerabilities (September 4, 2019), www.nerc.

com/pa/rrm/ea/Pages/Lessons-Learned.aspx.

25. See Idaho National Laboratory, Mission Support Center, Cyber 

Threat and Vulnerability Analysis of the U.S. Electric Sector (August 

2016), https://tinyurl.com/yy5podlx.

26. Securing Energy Infrastructure Act, S. 174, 116th Cong. 

(2019, accessed October 28, 2019), www.congress.gov/

bill/116th-congress/senate-bill/174/text.
12 Enhancing the Security of the North American Electric Grid March 2020

cyberattack or conducted at a scale difficult to coordinate 

and implement. Therefore, a physical attack probably 

would not have a widespread impact on the electric grid 

simply because the number of different paths through 

which electric power can be delivered to end users within 

a highly interconnected network would require disabling 

many critical components at the same time. 

To date, there have been two physical attacks of note 

on the U.S. grid. One, in California, at the Metcalf 

Transmission Substation in 2013 resulted in $15 million 

worth of damage to the grid.27 The other, in Utah in 

2016, left 13,000 customers without power for much of 

a day.28 In both cases, gunmen shot and disabled electric transformers. Those experiences probably typify the 

scale of threat that a physical attack represents: an attack 

on individual components of the grid rather than on a 

large number of simultaneous targets. However, a large 

coordinated attack or, more likely, an insider attack (by 

an employee or an on-site contractor or by a vendor) on 

control equipment or system software could cause greater 

and more costly damage.

Potential Scale of Impacts and Assessments of 

Likelihood

The costs of a large power outage stemming from a 

natural disaster or attack can be measured in a number 

of ways. One measure is the overall business interruption—the forgone goods and services, as measured by 

the change in GDP.29 Businesses suffering power outages 

would be less able to produce, though some unaffected 

businesses could see their production increase—in 

part to make up for less output from the affected businesses and in part to accommodate resulting changes in 

spending. For example, consumers could increase their 

spending on hotel services or restaurants in less affected 

regions. The loss of power could also damage machinery and equipment and other forms of the nation’s 

27. “2013 Attack on Metcalf, California, Power Grid Substation 

Committed by ‘An Insider’: DHS,” Homeland Security News Wire

(October 19, 2015), https://tinyurl.com/y4nrdok6. 

28. Peter Behr, “Substation Attack Is New Evidence of Grid 

Vulnerability,” E&E News (October 6, 2016), www.eenews.net/

stories/1060043920.

29. Business interruption is sometimes used in the research literature 

to measure the contemporaneous reduction in sales of goods and 

services. But governments and nonprofit companies also produce 

goods and services, and a change in businesses’ sales of goods 

and services can extend beyond the contemporaneous period. All 

those effects are captured in a change in GDP. 

capital stock, reducing the economy’s capacity to produce in future years; in other words, the loss of power 

could destroy wealth. Other measures include expenses 

incurred in the aftermath of the disaster or attack (for 

example, costs of temporary housing or of additional 

transportation) and what are termed hidden costs. 

Examples of the latter include the loss of schooling, 

emotional distress, inconvenience or discomfort from 

the lack of modern services or the loss of power during 

hot or cold weather. Finally, a resulting lack of food, 

sanitation, medical care, and potable water, among other 

problems, could degrade people’s health and in some 

cases cause deaths, particularly among members of at-risk 

groups: children, the elderly, and the infirm.30

Some of the various measures of costs overlap with others, so the overall cost is not the sum of those individual 

costs. For instance, to the extent that the market cost of 

replacement capital reflects the value of future business 

activity generated from it, the business interruption cost 

and the destruction of capital equipment are different 

measures of much the same effect, so counting them 

both would double-count the loss. 

The expected costs of potential natural disasters or 

attacks will inform both private and government decisions to invest in security measures for the electric grid. 

A proper accounting requires an accurate understanding 

of an event’s likelihood and the range of potential costs. 

For those threats that are realized frequently, electricity 

suppliers and grid operators understand the likelihood 

and scale and have made investments they believe 

are appropriate. But for threats that are realized only 

30. Hurricane Katrina in 2005 caused an estimated 1,800 fatalities, 

and, more recently, Hurricane Maria, nearly 3,000 or (by some 

assessments) more. In both cases, the proportion of deaths 

stemming from the lack of electricity, rather than from direct 

damage or flooding, is unknown. See Richard D. Knabb, 

Jamie R. Rhome, and Daniel P. Brown, Tropical Cyclone Report, 

Hurricane Katrina, 23–30 August 2005 (National Hurricane 

Center, December 20, 2005; updated September 14, 2011), 

www.nhc.noaa.gov/data/tcr/AL122005_Katrina.pdf (PDF, 

2.2 MB); George Washington University, Milken Institute 

School of Public Health, Ascertainment of the Estimated Excess 

Mortality From Hurricane Maria and Puerto Rico (August 

2018), https://prstudy.publichealth.gwu.edu/releases-reports; 

and Nishant Kishore and others, “Mortality in Puerto Rico 

After Hurricane Maria,” The New England Journal of Medicine, 

vol. 379, no. 2 (July 12, 2018), www.nejm.org/doi/pdf/10.1056/

NEJMsa1803972.
March 2020 Enhancing the Security of the North American Electric Grid 13

infrequently or that have never been realized, neither the 

likelihood nor the potential costs are well understood. 

Research on the Cost of Outages From Disasters or 

Attacks. Relatively few studies have been done that can 

serve as a basis for reliably judging the cost of outages 

from large-scale disasters or attacks, and the ones that 

exist do not all measure the same set of factors. Some 

estimates describe losses in electricity sales and forgone 

sales of final goods and services. Others reflect damage to 

structures and equipment and other capital assets. And 

still others include estimates of the inconvenience and 

other less tangible costs of outages affecting consumers’ 

well-being. 

Nevertheless, a review of the research suggests that the 

cost of power losses could be hundreds of billions of 

dollars, or perhaps more than a trillion dollars, following a severe solar storm, a significant cyberattack, or 

the detonation of a high-altitude EMP—if the disaster or attack caused widespread, long-lasting damage 

to the electric grid. One study concluded that a large 

geomagnetic disturbance resulting from a severe solar 

storm could cause GDP losses of about $160 billion to 

$700 billion over the course of about a year—or roughly 

between 1 percent and 3 percent of GDP.31 Those figures 

take into account some offsetting effects in the U.S. 

economy—changes in prices, interest rates, and other 

factors that would reallocate production activity and 

labor and capital inputs and thereby lessen the impact. 

The magnitude of the cost would depend on the severity 

of the disturbance, the elements of the grid affected and 

the extent to which they were damaged, and the rate at 

which power was restored. 

Similarly, an assessment of a large hypothetical cyberattack focused on the East Coast estimated GDP losses 

of $260 billion to $1.1 trillion over five years, mostly 

concentrated in the first two years following the attack.32

Although there has been limited evaluation of the economic effects of a high-altitude EMP, CBO concludes 

that the losses stemming from such an attack would 

31. Edward Oughton and others, Helios Solar Storm Scenario

(University of Cambridge, Cambridge Centre for Risk Studies, 

November 2016), https://tinyurl.com/y2n3w63k.

32. Trevor Maynard and Nick Beecroft, Business Blackout: The 

Insurance Implication of a Cyber Attack on the U.S. Power Grid

(Lloyd’s and University of Cambridge, Cambridge Centre for 

Risk Studies, May 2015), https://tinyurl.com/y48wspj5 (PDF, 

4.1 MB).

probably be on par with those from a severe solar storm 

or a large cyberattack because the potential geographic 

scope and duration of the outages caused by all three are 

similar. 

A survey of recent hurricanes and estimates of potential 

impacts from earthquakes suggest that those natural 

disasters could cause tens of billions of dollars in overall 

losses depending on the geographic scope and severity. 

However, costs attributable to the loss of electric power 

probably account for a small portion of those estimates, 

which include costs of physical damage to structures and 

equipment and other capital assets besides the electric 

grid and the resulting effects on economic activity.

The cost of a physical attack or of a limited cyberattack—targeting transmission system components or a 

single generating plant, for example—would be smaller, 

perhaps millions of dollars, possibly billions for a large 

enough attack. Smaller values in that range would reflect 

less damage to physical capital (generating plants, industrial machinery, and other equipment), whereas larger 

values would reflect a combination of more extensive 

physical damage and a longer outage affecting a wider 

area. Two studies that considered illustrative versions 

of those more significant attacks tallied losses of up to 

$20 billion.33

Research on the Likelihood of Disasters or Attacks. 

Because some historical evidence is available, probability 

estimates are generally firmer for naturally occurring 

threats than for human-made ones. For solar storms, a 

survey of point estimates suggests that the probability 

of a Carrington-level storm is between 1 percent and 

12 percent over a decade’s time—or, on average, one 

such storm every 80 to 1,000 years.34 That estimate is 

33. Adam Rose, Gbadebo Oladosu, and Shu-Yi Liao, “Business 

Interruption Impacts of a Terrorist Attack on the Electric Power 

System of Los Angeles: Customer Resilience to a Total Blackout,” 

Risk Analysis, vol. 27, no. 3 (2007), pp. 513–531, https://doi.

org/10.1111/j.1539-6924.2007.00912.x; and Michael Greenberg 

and others, “Short and Intermediate Economic Impacts of a 

Terrorist-Initiated Loss of Electric Power: Case Study of New 

Jersey,” Energy Policy, vol. 35, no. 1 (2007), pp. 722–733, https://

doi.org/10.1016/j.enpol.2006.01.017.

34. David Morina and others, “Probability Estimate of a Carringtonlike Geomagnetic Storm,” Science Reports (February 20, 2019), 

https://doi.org/10.1038/s41598-019-38918-8; and Pete Riley, 

“On the Probability of Occurrence of Extreme Space Weather 

Events,” Space Weather, vol. 10, no. 2 (February 2012), https://

doi.org/10.1029/2011SW000734.
14 Enhancing the Security of the North American Electric Grid March 2020

based on observations of storms that have hit Earth and 

near misses that have been detected. But the observations 

are limited to the past 150 years, when solar storms have 

been documented, leaving a wide swath of uncertainty 

around the estimate. One study reported a wider range, 

concluding that the probability (expressed with 95 percent confidence) of a Carrington-level storm over the 

course of a decade is somewhere between almost zero and 

23 percent depending on the analytical methods used, 

a range so large as to call into question the reliability of 

any probability estimate.35

Estimates of the likelihood of earthquakes have a long 

geological record to draw on, and hurricanes occur fairly 

regularly, so probability estimates for both are probably 

more accurate than they are for severe solar storms. In 

the United States, California faces the greatest likelihood 

of a significant earthquake, whereas the most severe 

earthquake—with strong onshore effects as well as the 

possibility of destructive coastal flooding from tsunamis—is expected to occur in the Cascadia zone, off the 

coast of Oregon and Washington. Estimates suggest 

that, over the course of a decade, California faces a more 

than 50 percent chance of a magnitude 7 or stronger 

earthquake (that is, a strong to major earthquake causing a significant economic damage and loss of life) and 

Cascadia faces about a 2 percent risk of a magnitude 9 

earthquake (among the most powerful possible, causing 

near-total destruction and a large loss of life).36 Stated 

differently, those probabilities suggest that, on average, 

such a California earthquake occurs roughly once every 

20 years and such a Cascadia earthquake, about once 

every 500 years.

Strong hurricanes are more likely than severe earthquakes. Since 1851, about 100 strong hurricanes 

have made landfall in the United States: about 65 of 

35. Jeffrey J. Love, “Credible Occurrence Probabilities for Extreme 

Geophysical Events: Earthquakes, Volcanic Eruptions, Magnetic 

Storms,” Geophysical Research Letters, vol. 39, no. 10 (May 18, 

2012), https://doi.org/10.1029/2012GL051431.

36. Edward H. Field and others, “UCERF3: A New Earthquake 

Forecast for California’s Complex Fault System,” Fact Sheet 

2015-3009 (U.S. Geological Survey, March 2015), https://

dx.doi.org/10.3133/fs20153009; and Cascadia Region 

Earthquake Workgroup, “Cascadia Subduction Zone 

Earthquakes: A Magnitude 9.0 Earthquake Scenario” (2013), 

https://crew.org/products-and-programs/earthquake-scenarios/. 

CBO calculated the 10-year probabilities on the basis of 30-year 

and 50-year estimates for California and Cascadia, respectively.

Category 3 (with sustained winds of up to 130 miles per 

hour), 25 of Category 4 (with sustained winds of at least 

130 miles per hour), and 4 of Category 5 (with sustained 

winds of at least 157 miles per hour).37 On the basis of 

that evidence, the likelihood that a Category 4 or stronger storm will strike the United States over a 10-year 

period is high—about 85 percent (averaging about one 

every 6 years); and the likelihood of a Category 5 storm, 

about 23 percent (averaging about one every 40 years).38

As climate change is expected to increase the intensity 

of storms, the likelihood of such storms will probably be 

greater in the future.39

The likelihood of human-made threats is more difficult to assess, and few estimates exist. One group of 

researchers has provided these estimates: over 10 years, 

a 20 percent chance of a large cyberattack on the U.S. 

electric grid affecting 50 generators and causing losses 

of $260 billion (equivalent to an average of about one 

such attack every 50 years), and a 5 percent chance of 

an attack affecting 100 generators and causing losses of 

about $1.1 trillion (equivalent to an average of about one 

such attack every 200 years).40 But the United States has 

never experienced such an attack, so judging the reasonableness of such estimates is difficult. 

Added to the fortunate lack of historical experience with 

human-made threats is the potential for them to constantly evolve. The chance of a high-altitude EMP or a 

large cyberattack depends on geopolitical relations, the 

37. National Oceanic and Atmospheric Administration, National 

Research Division, “Continental United States Hurricane 

Impacts/Landfalls, 1851–2018” (accessed October 17, 2019), 

www.aoml.noaa.gov/hrd/tcfaq/E23.html.

38. See National Oceanic and Atmospheric Administration, National 

Research Division, “Continental United States Hurricane 

Impacts/Landfalls, 1851–2018” (accessed October 17, 2019), 

www.aoml.noaa.gov/hrd/tcfaq/E23.html; and Colorado 

State University, Tropical Meteorology Research Project, and 

Bridgewater State University, GeoGraphics Laboratory, “United 

States Landfalling Hurricane Project” (accessed October 17, 

2019), http://e-transit.org/hurricane/welcome.html.

39. See U.S. Global Change Research Program, Fourth National 

Climate Assessment, vol. II, Impacts, Risks, and Adaptation in 

the United States (2018, revised June 2019), https://nca2018.

globalchange.gov/downloads/.

40. Trevor Maynard and Nick Beecroft, Business Blackout: The 

Insurance Implication of a Cyber Attack on the U.S. Power Grid

(Lloyd’s and University of Cambridge, Cambridge Centre for 

Risk Studies, May 2015), https://tinyurl.com/y48wspj5 (PDF, 

4.1 MB).
March 2020 Enhancing the Security of the North American Electric Grid 15

abilities of those attempting the attack, and the safeguards in place—with all of those changing over time. 

Given the uncertainties, a commission formed by the 

Congress in 2001 that was charged with evaluating the 

level of threat posed by a high-altitude EMP decided not 

to address the question of likelihood.41

Even without historical experience or a complete set of 

estimates, a logical assessment of comparative likelihood 

is possible. Because a cyberattack can originate in distant 

and remote locations and the source of the attack may 

be harder to trace than with other deliberate actions, the 

chances of a large cyberattack are probably greater than 

the chances of a similarly disruptive physical attack. 

The chances of a small physical or insider attack are 

probably significant given the large number of targets 

available and the comparatively few resources necessary 

to conduct one. In contrast, the chances of a large coordinated physical attack—in which many components in 

the grid are simultaneously targeted—are probably very 

small because of the logistical complexity necessary to 

conduct an attack of that scale and remain undetected 

during the preparation. 

A high-altitude EMP is probably less likely than a large 

cyberattack. Developing a nuclear device and delivering it for high-altitude detonation are almost certainly 

possible only for established nation-states that have the 

motivation, resources, and technical ability. Any nation 

intending to use a nuclear weapon against the United 

States would then run the risk of inviting a nuclear 

reprisal. Consequently, such an attack would probably 

occur only during a crisis serious enough and with the 

stakes high enough that the attacker would take such a 

great risk.

Uncertainty Surrounding the Estimates

Estimates of the likelihood and costs of disasters and 

attacks affecting the electric grid are uncertain for several 

reasons. First, as discussed above, for some events there is 

41. See John S. Foster, Jr., and others, Report of the Commission to 

Assess the Threat to the United States From Electromagnetic Pulse 

(EMP) Attack: Critical National Infrastructures (April 2008), 

www.empcommission.org/reports.php; and Michael Frankel, 

James Scouras, and Antonio De Simone, Assessing the Risk of 

Catastrophic Cyber Attack: Lessons From the Electromagnetic Pulse 

Commission (Johns Hopkins Applied Physics Laboratory, 2015), 

https://tinyurl.com/y5nhgffq (PDF, 12.3 MB).

little or no historical experience to draw upon to estimate 

either the likelihood or the economic impact. 

Second, the likelihood of an event is not the same as the 

chance of a major failure of the electric grid. A severe 

solar storm, for instance, might damage some transformers, though too few to cause a widespread outage. 

Some of the studies CBO considered evaluated the 

chance that the operations of the grid would be affected, 

but others—most notably the investigations of natural 

disasters—are assessments only of the likelihood of the 

event’s occurrence, not of the consequences for the grid. 

For the studies that take into account the effects on the 

grid, many of the estimates of economic damage reflect 

extreme-case scenarios, so losses would probably be less 

in most cases.

Third, outages of similar geographic scope and duration 

can have different economic consequences depending on 

the types of customers and industries affected. Outages 

would tend to be more costly if, for example, they 

affected businesses that are more dependent on electricity 

as an input (banks, rather than farms, for instance) or 

businesses that are a key component of a supply chain 

(such as energy producers). 

Fourth, relying on the experience of small outages to 

estimate the effects of large outages—as studies must 

do because historical experience with large outages is 

limited—might not capture the outcomes of those longer, bigger outages well. Many of the interdependencies 

between the electric grid and other critical infrastructure, 

such as communications, financial services, water treatment and sanitation, and public health, and the consequent economic feedback might be apparent only if and 

when a longer, bigger outage occurs. 

Fifth, the limited number of studies available often lack 

detail on the types of costs that are included (such as 

business interruption costs, the destruction of wealth, 

and hidden costs). And even if the costs of various types 

are detailed, many of the studies do not clearly account 

for some broader feedback in the economy or interdependencies among critical industries that could positively or negatively affect the ultimate cost of an outage.

Finally, few of the studies detail the extent to which 

existing protections and procedures are accounted for 

in the estimates of damage. Because such strategies are 

routinely used to manage power flows, they may be 
16 Enhancing the Security of the North American Electric Grid March 2020

included, but if those strategies have implicitly been 

excluded, the economic effects would probably be 

smaller than the studies estimate, though by how much 

is unknown.

Approaches to Reduce the Cost of Major 

Outages

The utility industry has, in addition to physical protections, a number of operational and procedural protections to improve the security of the electric grid. Given 

advance warning of an impending threat, grid operators 

could act to minimize the impact by, for instance, boosting generation in some areas and reducing it in others 

to reroute flows of power or, if the threat seemed severe 

enough, even temporarily shutting down portions of the 

grid to reduce damage. Following a major disaster or 

attack that reduced capacity, grid operators might ration 

power by using rolling blackouts. And for prolonged 

outages, mobile generating units—diesel generators or 

natural gas combustion turbines—might be used to provide localized power or to power certain critical sectors, 

such as water treatment, sanitation, public health, and 

emergency services, among others. 

Beyond those and other operational and procedural 

protections already in place, CBO identified a range of 

possible approaches to address threats facing the North 

American grid, along with their applicability to the range 

of threats considered in this report (see Table 1). Those 

approaches do not represent an exhaustive list of the 

strategies possible. Rather, they are meant to illustrate 

how approaches can differ. Some constitute strategies to 

prevent or limit effects of a disaster or attack, whereas 

others would improve or hasten recovery. Similarly, some 

approaches are widely applicable to a range of threats, 

but others are more narrowly focused. 

Approaches That Would Prevent or Mitigate Damage

Among approaches that would prevent or mitigate 

damage, hardening grid components—that is, building 

protective barriers around power plants or transformers, upgrading the transmission system to protect it, or 

building new control centers to better withstand natural 

disasters or physical attacks—would apply to a range of 

threats to different degrees, depending on the specific 

approach implemented. For instance, protecting the 

transmission system (by, say, installing equipment that 

can absorb an influx of power or circuit breakers that 

isolate elements of the grid when power surges occur) 

would apply most to the threats of a severe solar storm or 

a high-altitude EMP, for which the potential for power 

surges is greatest. Certain other ways of hardening the 

grid (for instance, installing protective barriers or flood 

controls) could offer some protection against the physical 

damage that a hurricane, earthquake, or physical attack 

could bring. But such improvements would not protect 

against a cyberattack, which would most likely target 

plant operations or grid controls through communication networks. Similarly, satellites that would provide 

early warning of an impending solar storm would help 

grid operators prevent damage to large power transformers but would not provide any protection against an 

EMP.

Improving information sharing and developing microgrids—that is, areas of the grid that may be electrically 

isolated from the surrounding larger grid and remain 

fully functional—are other examples of approaches that 

might prevent or mitigate damage across a wide range 

of threats. Improving information sharing—reporting 

and sharing knowledge of threats, system vulnerabilities 

and corrective actions, and best practices, among other 

information—could help address the threat of a cyberattack, which is continually evolving. Developing microgrids could contain damage and insulate other areas from 

being affected, thereby potentially reducing the impact 

of a wide range of disasters and attacks. Indeed, some 

consider the development of microgrids as a potential 

protection against power outages that have stemmed 

from California wildfires in recent years. Microgrids 

would allow communities at lower risk from power outages to continue receiving service and isolate themselves 

from other areas at higher risk. But because the development of microgrids is in its infancy and is currently best 

suited for protecting smaller facilities, such as hospitals 

and military facilities, or, potentially, individual communities, the approach is unlikely to be used as a broad grid 

security measure for the foreseeable future.

Enhancing cyber protections and improving the physical security of grid components would represent more 

narrowly focused approaches, specifically addressing the 

threats of a cyberattack and a physical attack. Enhancing 

cyber protections includes continually improving the 

monitoring and assessment of global threats, identifying 

vulnerabilities and measures to safeguard systems, and 

promoting best practices, among other activities. In 

addition to the protective barriers around critical components discussed above, improving physical security 
March 2020 Enhancing the Security of the North American Electric Grid 17

includes activities such as improving personnel screening 

and increasing security staffing. 

Approaches That Would Improve Recovery

Among approaches that would improve recovery once 

power is lost, one is improving the security of certain 

types of power plants necessary to help bring the grid 

back into operation—referred to as blackstart generators. 

Unlike most power plants, which require power to begin 

operations, blackstart generators—usually diesel generators, hydroelectric facilities, and certain types of natural 

gas generators—effectively require no outside power. 

Consequently, they can be employed to start a sequence 

of using smaller plants to progressively restart larger 

plants, ultimately returning power to the grid as a whole. 

A recent investigation concluded that there is sufficient 

blackstart capacity in place in the United States, but 

some analysts have noted the possibility that cyberattacks 

could specifically target the controls of those types of 

plants, thereby limiting their availability for repowering 

the grid.42

Similarly, increasing the availability of backup power for 

critical infrastructure—that is, maintaining a supply of 

diesel generators and other power supplies not dependent 

42. See Federal Energy Regulatory Commission and North American 

Electric Reliability Corporation, Report on the FERC-NERCRegional Entity Joint Review of Restoration and Recovery Plans: 

Blackstart Resources Availability (May 2018), https://go.usa.gov/

xdwJV (PDF, 704 KB); testimony of Andrew L. Ott, President 

and Chief Executive Officer, PJM Interconnection, before 

the Senate Committee on Energy and Natural Resources, An 

Examination of Blackstart, the Process for Returning Energy to 

the Power Grid After a System-Wide Blackout, and Other System 

Restoration Plans in the Electric Utility Industry (October 11, 

2018), https://go.usa.gov/xyuj7; and testimony of Juan Torres, 

Associate Laboratory Director for Energy Systems Integration, 

National Reviewable Energy Laboratory, before the Senate 

Committee on Energy and Natural Resources (October 11, 

2018), https://go.usa.gov/xyuj7.

Table 1.

Possible Approaches to Address Large Threats to the North American Grid

Type of

Threat

Approaches That Would Prevent or Mitigate Damage Approaches That Would Improve Recovery

Build More

EarlyWarning 

Satellites

Harden 

Grid 

Components

Improve 

Information 

Sharing

Develop 

Microgrids

Enhance 

Cyber 

Protections

Improve 

Physical 

Security

Increase the 

Number of 

Transformers 

Stockpiled

Improve 

Security of 

Blackstart 

Generators

Increase Backup 

Power for Critical 

Infrastructure

Provide More 

Disaster 

Response 

Training

Naturally 

Occurring

Severe Solar Storm

(Geomagnetic 

disturbance)a

Major Hurricane

(Category 

4 or 5)

Major Earthquake

(Magnitude 7+)

HumanMade

High-Altitude 

Electromagnetic 

Pulse

Large 

Cyberattackb

Physical Attackc

 High Applicability to the Threat Medium Applicability to the Threat Some Applicability to the Threat

Source: Congressional Budget Office.

a. A severe geomagnetic disturbance resulting from a powerful, fast-moving coronal mass ejection.

b. An attack that simultaneously targets a large number of critical grid systems or controls.

c. Although targeting a significant enough number of elements of the grid to affect power supplies regionally might be possible, doing so would be 

difficult. Accordingly, CBO expects that the most likely form of physical attack would be much more limited in nature.
18 Enhancing the Security of the North American Electric Grid March 2020

on the grid’s being operational—and providing more 

disaster response training could boost the recovery from 

a wide range of disasters and attacks. Both approaches 

are currently used to a degree. For example, hospitals and 

other medical services, some government facilities, and 

certain telecommunications services have backup power 

in place. The availability of backup power provides a 

degree of protection against any threat that can cause 

widespread outages. But unless accompanied by advances 

in microgrid or other technologies, backup power will 

probably remain a targeted, smaller-scale protection. 

Disaster response training occurs at the plant and local 

levels and at the national level, where simulation exercises—like the Grid Security Exercise (or GridEx) sponsored by NERC—test the industry’s ability to respond 

to threats such as a coordinated cyberattack and physical 

attack. Those exercises also help identify additional 

risks and interdependencies that may otherwise become 

apparent only after a significant loss of power.43 GridEx 

is a recurring exercise, but it is voluntary and takes place 

every other year, suggesting that more comprehensive or 

more frequent exercises could provide additional security. 

Two Illustrative Approaches That CBO 

Examined

To illustrate the considerations for policymakers as they 

decide how to address threats to the electric grid, CBO 

chose two approaches to analyze in some detail: deploying of a set of space-based sensors that would continue 

to provide (and in some cases improve) reliable early 

warning of a solar storm, and increasing reserves of large 

power transformers and related equipment. 

CBO examined those approaches because they could 

address, at least in part, the potential long-term disruptions from some of the most consequential threats to 

the grid. Providing grid operators time to implement 

protections, space-based sensors would be intended to 

reduce the wide-ranging threat that a large solar storm 

could pose to large power transformers and, to a lesser 

extent, generating facilities. Large power transformers are 

vulnerable to such threats and, because they take many 

months to manufacture and install, greatly affect recovery times if they are damaged or disabled. Consequently, 

43. See The President’s National Infrastructure Advisory Council, 

Surviving a Catastrophic Power Outage: How to Strengthen 

the Capabilities of the Nation (December 2018), www.hsdl.

org/?abstract&did=819354.

increasing reserves of transformers, along with related 

equipment, could address, at least in part, the security 

of a critical aspect of the grid against a range of the 

threats—including a severe solar storm, a high-altitude 

EMP, and possibly a cyberattack or physical attack—that 

could result in billions of dollars or, by some estimates, 

even more than a trillion dollars of economic damage.

In addition, the two approaches that CBO examined 

focus on improving the grid’s security during different 

phases of an event. Spaced-based sensors are a beforethe-fact approach that would allow procedures to be 

implemented to prevent or mitigate damage to the grid. 

A larger reserve of transformers and critical grid components, in contrast, is an after-the-fact approach that 

could enhance the pace of recovery if they were damaged 

or became inoperable. 

Deploy New Space-Based Sensors to Detect Solar 

Storms

One approach to reducing the economic and social harm 

that would result from a large-scale disruption of the 

electric grid would be to deploy new, dedicated systems 

in space to provide early warning of solar storms by 

detecting them before they reach Earth. Similar systems 

exist in space today, but they are aging and were not 

designed to be the reliable source of data that is needed 

for uninterrupted forecasting of space weather. NOAA 

has formulated a program to deploy new satellites, but 

lawmakers have yet to commit to fully funding it.

Warned of a solar storm soon enough, operators can, 

depending on the expected severity, take a number 

of actions to protect the grid, minimize damage, and 

maximize the availability of power once the threat has 

passed. To the extent that the protections prevent damage (particularly to elements of the grid that would take 

many months to replace) or a power outage, they would 

avoid the costs of repairs and lost electricity sales and 

economic and social costs to customers affected by an 

outage. Moreover, other industries also facing significant 

risk from the effects of solar storms (such as the telecommunications and airline industries) could act on the 

warnings and take preventive action.

Existing Capabilities for Detecting Solar Storms. Solar 

storms can affect Earth in a variety of ways. Most consequential for the electric grid are coronal mass ejections, 

which send large quantities of charged particles and their 

associated magnetic fields into space. If those particles 
March 2020 Enhancing the Security of the North American Electric Grid 19

hit Earth, they can disturb its magnetic fields and disrupt 

currents in power lines and other equipment essential for 

the grid to function. 

Currently, to prepare for such a geomagnetic disturbance 

that might result from a solar storm, utilities rely on 

early notifications from space weather forecasts provided 

by NOAA’s Space Weather Prediction Center. The center 

processes data from existing satellites and uses computer 

models to predict the severity of the effects that a solar 

storm will have on systems on Earth, aircraft in the 

air, and satellites in orbit. It issues watches, warnings, 

and alerts. Smaller solar storms are relatively common, 

notifications occur, and grid operators are practiced at 

responding in ways that protect their ability to deliver 

power to their customers. 

Just as there are categories for classifying hurricanes, 

there are space weather scales for communicating the 

expected severity of solar storms. Electricity suppliers, 

telecommunications providers, providers of precision 

navigation services, airlines, and other industries monitor 

the space weather forecasts and take preventive action as 

needed. Grid operators, for example, can delay critical 

maintenance, bring in reserve power, and, if necessary, 

temporarily shut down sections of the grid to ensure continued delivery of power to critical self-contained areas 

or to contain losses in other areas. But preventive actions 

themselves can have costs (such as preventive evacuations 

and business closures in a broad area in anticipation of a 

hurricane that misses that area), so more accurate space 

weather warnings reduce the unnecessary actions that 

industries otherwise would take. 

The warning system depends on data that NOAA 

receives from instruments on a patchwork of satellites 

(see the appendix for a discussion of the sensors and 

satellites used to detect solar storms). Almost all of those 

satellites were designed for research purposes and not for 

providing reliable continuous data for early notifications 

of solar storms, and most of the satellites are well past 

their design life and could stop functioning without 

warning. If any of the existing instruments fail, NOAA’s 

ability to provide such notifications will be reduced, 

possibly severely. Moreover, after such a failure, building 

a replacement satellite and placing it in orbit to restore 

NOAA’s ability would take years, and in the interim, the 

agency would have little ability to forecast solar storms.

Two types of instruments are essential for providing 

early warning of coronal mass ejections: a coronagraph 

that takes images of the sun to detect solar activity and 

a set of instruments that measure the stream of particles 

from the sun (the solar wind) to estimate the timing and 

size of the storm and the severity of its effects on Earth. 

Coronagraphs can provide early warning if they are in 

certain orbits around Earth or the sun, but measurements of the solar wind must be taken in orbits between 

Earth and the sun. Data from other types of instruments 

that measure ultraviolet radiation or other phenomena 

emanating from the sun are important for detecting 

solar flares and radiation storms (which affect satellites 

and communications) and can provide complementary 

information about coronal mass ejections.

The Solar and Heliospheric Observatory (SOHO) is the 

only source of coronagraph images of the sun from the 

direction of Earth. Built by the National Aeronautics and 

Space Administration (NASA) and the European Space 

Agency (ESA) as a research mission, it was launched in 

1995 and is already more than 20 years past the end 

of its planned service life. SOHO’s solar panels are 

degrading and are expected to stop providing enough 

power for operations by 2026. The Deep Space Climate 

Observatory (DSCOVR) is the primary instrument used 

by space weather forecasters to measure the solar wind. 

Launched in 2015, it was expected to operate for at least 

five years. Both satellites are in orbits between Earth and 

the sun and were built for solar science missions, not to 

provide reliable solar data for space weather forecasters. 

Both satellites (along with another aging satellite, the 

Advanced Composition Explorer (ACE), which provides 

a backup source of data on the solar wind) are expected 

to stop operating by the mid-2020s.

Options for Sustaining or Improving Space Weather 

Monitoring. CBO examined three options that would 

sustain and, in some cases, improve capabilities to monitor solar activity in space:

• The first option would improve on today’s capabilities 

by deploying better and more reliable satellites. 

NOAA would build two new satellites, one deployed 

in 2024 and another deployed about five years later, 

when the first reached the end of its planned service 

life. Both satellites would carry a coronagraph and 

instruments to measure the solar wind in an orbit 

between Earth and the sun. The equipment would be 

more modern, reliable, and accurate than what is now 
20 Enhancing the Security of the North American Electric Grid March 2020

in space. NOAA would also build a ground system to 

receive and process data. 

• The second option would place a coronagraph 

on each of the next generation of meteorological 

satellites (those used for forecasting weather on Earth) 

that orbit Earth, but it would not deploy new solar 

wind instruments. 

• The third option would be like the second except that 

it would place the coronagraph on the International 

Space Station—a stopgap approach if the satellites 

deployed today fail sooner than expected. 

Both the second and third options would be less costly 

but would provide less accurate and less useful forecasts. 

NOAA already has under way a program to implement 

half of the first two options as part of its Space Weather 

Follow On program: The agency would acquire the 

first of the two satellites in the first option and deploy 

a coronagraph on only one meteorological satellite. To 

date, the Congress has funded a small fraction of the 

costs of NOAA’s program and has not yet committed to 

full funding. The agency has also considered the third 

option as a stopgap measure but currently has no plans 

to pursue it because it would not meet NOAA’s requirements for reliable continuous data. 

NOAA’s strategy would change the U.S. approach to the 

space weather satellite program from one that relies on 

satellites designed for other purposes to one that establishes those satellites as part of a dedicated infrastructure 

for detecting space weather—echoing the approach that 

NOAA has used for meteorological satellites for decades. 

The private sector has not demonstrated that it would 

invest in monitoring and forecasting space weather on its 

own and is probably unlikely to do so. Forecasts of solar 

conditions and warnings of impending storms amount 

to a public good. Thus, for matters of public safety and 

economic stability, among others, the benefits of early 

detection and warnings would probably be shared with 

entities providing no funding for the spaced-based 

sensors. That broad availability of the information limits 

the incentive for the private sector to fund the services. 

In addition, the benefits of solar storm warnings extend 

well beyond the U.S. electricity sector. Such warnings 

could preclude widespread disruptions in telecommunications, GPS (global positioning system) navigation, and 

transportation that could impose costs on many U.S. 

households and businesses. The diffuse nature of those 

benefits makes it even more unlikely that the private 

sector alone would fund solar monitoring.

Deploy a New Dedicated Space Weather Satellite Between 

Earth and the Sun. Under this option, NOAA would get 

the funding that it estimates it would need to develop 

and build the new satellite that it is currently planning, the Space Weather Follow On-L1 (SWFO-L1), 

which would provide continuous data after SOHO and 

DSCOVR stop operating. NOAA would also get the 

funding it has requested to build the ground system 

planned for collecting and distributing the data from 

the satellite. This option would go one step further than 

NOAA’s plan: It would also fund a second satellite to 

replace the first at the end of its service life. Because 

building a satellite takes several years, NOAA would start 

constructing the second satellite and its instruments after 

the first satellite was launched and would launch it about 

five years after the first, or later if the first lasted longer 

than anticipated. The first satellite would be launched in 

2024 and would have an expected life of five years. 

The new space weather satellite would be placed in orbit 

at the same location as SOHO, DSCOVR, and ACE, 

around a point known as the Lagrange 1 point, or L1, 

between Earth and the sun, about 1 million miles from 

Earth, where the satellite would maintain a fixed position 

relative to those two much larger bodies. The satellite 

would include a coronagraph, specifically, the compact 

coronagraph that the U.S. Naval Research Laboratory is 

currently developing for NOAA.44 Other sensors on the 

satellite—a magnetometer, a solar wind plasma detector, 

and an ion spectrometer in a package called the Space 

Weather Instrument Suite—would monitor the solar 

wind and measure the intensity and timing of storms 

headed toward Earth.

Like the satellites currently in service, the new satellite 

would provide between 15 and 60 minutes of warning 

time about the severity of an incoming solar storm. 

Compared with the existing satellites (which were 

designed for research), the instruments on the new 

44. See Elsayed R. Talaat, Director, Office of Projects, Planning, 

and Analysis, National Oceanographic and Atmospheric 

Administration, “NOAA’s Current and Future Space Weather 

Architecture” (presentation to the 2019 Space Weather 

Workshop, April 4, 2019), https://go.usa.gov/xdQPc (PDF, 

2.0 MB).
March 2020 Enhancing the Security of the North American Electric Grid 21

satellites would be designed to provide better data, be 

more reliable, and be better suited to the needs of space 

weather forecasters. For example, the coronagraph would 

be designed to better operate in the high-radiation 

environment associated with a severe solar storm, conditions that can overwhelm the existing coronagraph. In 

addition, the magnetometer on the new satellite would 

be designed to provide better resolution for measurements of the strength and direction of the magnetic field 

headed toward Earth, which are key factors in predicting the effects that a storm will have on Earth and the 

electric grid. 

The Congress appropriated about $7 million for the 

new satellite in 2019, and the Administration requested 

about $11 million in its 2020 budget.45 (Those totals 

exclude the cost of developing the coronagraph for the 

new satellite). Altogether, NOAA expects to need about 

$500 million over the next 10 years to acquire the first 

satellite with its coronagraph, launch it in 2024, build 

the ground system, and operate and support the satellite 

and ground system for five years.46

Overall, CBO estimates that the cost of a dedicated space 

weather satellite program similar to NOAA’s proposed 

SWFO-L1 program (but including a second satellite and 

its launch costs) would be about $1 billion (in 2020 dollars) over a 10-year period (2020 through 2029):47

• Developing and building the two satellites and their 

coronagraphs would cost almost $500 million.

45. For 2020, the Congress provided a larger appropriation than 

NOAA requested for the overall SWFO program, which includes 

the SWFO-L1 satellite as well as the ground system and a 

coronagraph that would go on a future meteorological satellite. 

As of this writing, NOAA has not determined how that increase 

will be distributed among the elements of the program, including 

the new satellite.

46. CBO’s analysis of costs is drawn primarily from National Oceanic 

and Atmospheric Administration, Space Weather Follow-On: Space 

Weather Observation Needs and Plans, Including and Beyond a 

Solar Coronagraph (March 2019), Appendix D.

47. That figure differs from one provided in Congressional 

Budget Office, cost estimate for S. 881, the Space Weather 

Research and Forecasting Act (May 31, 2019), www.cbo.gov/

publication/55322. That earlier estimate covered 5 years, rather 

than the 10 covered here, and did not include building and 

launching a second satellite.

• Launching the satellites into their orbits would cost 

about $200 million. For the first satellite, NOAA 

plans to share a ride to L1 on the rocket that will 

carry a NASA research satellite, the Interstellar 

Mapping and Acceleration Probe (IMAP), into orbit 

around L1.48 Thus, the launch would be essentially 

free to NOAA. Launching the second satellite on 

its own would cost about $200 million, although 

costs could be lower if the second satellite could also 

share a ride. In addition, commercial providers are 

currently developing lower-cost launch services that 

might be available when the second satellite was ready 

to launch, but their costs are not yet known.

• By NOAA’s estimates, building the ground system for 

the satellites would cost almost $200 million.

• Operating the system and providing technological 

support would cost about $30 million a year, or 

$150 million over five years, from 2024 through 

2029, CBO estimates.

Those estimates are based on data from NOAA and 

may change as it continues to refine its plans. Moreover, 

CBO’s estimates cover the next 10 years, but if the 

United States remains committed to providing accurate 

and timely space weather forecasts, many of those costs 

(such as building replacement satellites and operating the 

system) would continue at roughly the same level beyond 

2029. Other costs, such as building the ground system, 

would be onetime costs. 

A recent investigation of a hypothetical once-per-century 

severe solar storm affecting the United Kingdom concluded that current satellite capabilities would reduce 

GDP losses by about 80 percent relative to a case in 

which no satellites are available to monitor solar conditions, which will be the situation if current satellites 

become disabled and are not replaced.49 Though existing 

satellites are currently in use, new satellites would have to 

48. Although IMAP is designed for other purposes, it will provide 

measurements of the solar wind that will be useful for predicting 

space weather. Those data would complement rather than 

duplicate what DSCOVR provides and SWFO-L1 would 

provide. If SWFO-L1 failed or was not developed and deployed, 

IMAP could provide at least a partial alternative source of data on 

the solar wind.

49. Edward J. Oughton and others, “A Risk Assessment Framework 

for the Socio-Economic Impacts of Electricity Transmission 

Infrastructure Failure Due to Space Weather: An Application to 
22 Enhancing the Security of the North American Electric Grid March 2020

be deployed by the mid-2020s to ensure continued monitoring.The SWFO-L1 satellite and its ground system 

would offer a number of improvements over the existing 

configuration, including better and more reliable sensors 

and a faster transmission of the data to Earth. Those 

capabilities would probably help reduce losses further 

(that is, by more than 80 percent) by providing faster 

and more accurate forecasts of solar storms.50

Translated for the U.S. economy, that study’s findings 

suggest that the new satellite would help avoid GDP 

losses ranging from $128 billion to $560 billion (that is, 

80 percent of the costs of a severe solar storm without 

any monitoring based on one study’s estimated range of 

$160 billion to $700 billion, as discussed above). 

Those estimates of avoided losses can be coupled with 

the aforementioned survey of point estimates of the 

likelihood of a severe (Carrington-level) geomagnetic disturbance affecting the United States (1 percent to 12 percent over a decade) to yield two estimates spanning a 

broad range of expected losses of GDP that might be 

prevented by a dedicated space weather satellite and its 

replacement. Specifically, those estimates would be about 

$1.3 billion (0.01 x $128 billion) and about $67 billion 

(0.12 x $560 billion) over 10 years. 

Even though those estimates are imprecise, they do not 

convey the extent of the uncertainties. The GDP losses 

that a Carrington-level event would impose could be 

higher or lower than the estimated range of $160 billion 

the United Kingdom,” Risk Analysis, vol. 39, no. 5 (November 

2018), https://doi.org/10.1111/risa.13229.

50. By one estimate, enhancing the capabilities of space weather 

satellites relative to those in space today—including better sensors 

and faster transmission of data from a satellite at L1 (as this 

option would do) and the positioning of an additional satellite 

at the L5 Lagrange point to provide even earlier monitoring 

of solar conditions—could reduce GDP losses from a solar 

storm by another 70 percent relative to those that could occur 

with current capabilities. Taken together with the protections 

afforded by the current capabilities, satellites with enhanced 

capabilities might reduce losses by about 95 percent relative to 

those that could arise from not having a space weather satellite 

at all. The option assessed in this report would provide only part 

of that enhancement because it would not include a satellite at 

L5, although the European Space Agency is considering such a 

system. See Edward J. Oughton and others, “A Risk Assessment 

Framework for the Socio-Economic Impacts of Electricity 

Transmission Infrastructure Failure Due to Space Weather,” 

Risk Analysis, vol. 39, no. 5 (November 2018), https://doi.

org/10.1111/risa.13229.

to $700 billion. In addition, the estimated likelihood of 

a 1 percent to 12 percent chance of such an event over a 

decade does not capture the full range of possibilities; the 

actual likelihood could be even closer to zero than the 

bottom of the range or substantially higher than the top 

of it. 

Beyond those uncertainties, other factors could positively or negatively affect a decision to fund the satellites. Avoiding or lessening a disaster stemming from a 

solar storm would do more than protect the economy’s 

output; it could protect against, among other things, loss 

of life, damage to public health, and the destruction of 

wealth. For the federal government, it could protect tax 

revenues and avoid or reduce the spending that follows 

from disasters. Factors working in the opposite direction 

are the possibility that false alarms raised by the satellite could create new costs and the possibility that the 

avoided losses could apply only far in the future (and a 

dollar in the future is worth less than a dollar today, even 

after being adjusted for inflation).

Install Coronagraphs on New Weather Satellites. In addition to asking for funding for the SWFO-L1 satellite, in 

its 2020 budget request NOAA proposed deploying a 

compact coronagraph on the next weather satellite that 

it plans to deploy in a geostationary orbit around Earth. 

That geostationary weather satellite, the Geostationary 

Operational Environmental Satellite (GOES-U), would 

be launched in 2024. (Three GOESs are currently in 

orbit—two in use and one as a spare.)

NOAA’s motivation for adding a coronagraph to 

GOES-U is twofold: to deploy a coronagraph as soon 

as possible to provide a hedge against the loss of SOHO 

(the only other coronagraph in space between Earth 

and the sun) and to provide a long-term backup for the 

coronagraph that it plans to deploy on SWFO-L1. That 

approach is consistent with NOAA’s goal of creating a 

robust capability for predicting space weather (like the 

approach the agency takes for its meteorological forecasting mission) that will continue to function during 

large solar storms and that includes backups for the most 

important instruments in case they fail. 

Under CBO’s option, NOAA would get the funding it 

estimates that it will need to place a compact coronagraph on GOES-U, but this option would go one step 

further and provide funding to place another compact 

coronagraph on the satellite that follows GOES-U, 
March 2020 Enhancing the Security of the North American Electric Grid 23

which could be launched in the late 2020s. If combined 

with the first option, this option would provide a redundant system (which NOAA plans) for detecting and forecasting the effects of solar storms, because a coronagraph 

in geosynchronous orbit would provide data of about 

the same quality and as quickly as a coronagraph in orbit 

closer to the sun does. 

This option would cost almost $150 million over 

10 years, CBO estimates, if NOAA’s budget documents 

prove to be accurate. Completing the development of the 

first sensor would require about $15 million, and completing the integration with GOES-U, about $40 million. (Building the coronagraph and integrating it into 

the next GOES would cost about $50 million more.) 

There would be no additional launch costs because the 

coronagraphs would be placed on satellites that NOAA 

is already planning to launch. Operating costs would be 

about $5 million a year after GOES-U is launched, CBO 

estimates. No new ground system would be necessary; 

instead, the solar weather instruments would rely on the 

ground system that NOAA uses for the GOES system. 

Mounting a coronagraph on GOES-U and a successor satellite would cost almost $900 million less over 

10 years than building and launching the dedicated satellite and a spare, as in the first option. By itself, however, 

this option would lead to far less accurate forecasts than 

NOAA can make today: When the DSCOVR satellite 

stops operating, NOAA will lose the ability to measure 

the particles associated with a solar storm, and its forecasts will provide significantly less warning time and far 

less accurate estimates of the likely effects on Earth than 

it can provide today. 

Another, albeit transitory, concern with placing a coronagraph on a geostationary satellite is that there are times 

during the year when Earth would block the coronagraph’s view of the sun for several minutes during the 

day. Having a coronagraph on both of the GOESs that 

NOAA keeps in geostationary orbit (one over the East 

Coast of the United States and one over the West Coast), 

which could occur as soon as 2030 under this option, 

would eliminate that problem because only one satellite 

would be in Earth’s shadow at a time.

Install a Coronagraph on the International Space Station.

Another option that has been proposed is placing a 

coronagraph on the International Space Station.51 Such a 

program would cost almost $100 million over 10 years, 

CBO estimates. Of that total, about half would fund 

completing the development of the sensor and integrating it on the space station. Operating costs would make 

up the other half of the total and would be similar to 

those for GOES-U, CBO estimates, about $5 million a 

year. Launch costs are not included, because the instrument would share a launch vehicle with other equipment 

headed to the space station. Altogether, mounting a 

coronagraph on the space station would cost more than 

$900 million less over 10 years than launching a dedicated satellite.52 It would also cost about $50 million less 

than deploying coronagraphs on future GOESs because 

that option would place two coronagraphs in orbit at a 

time. 

The primary motivation for installing a coronagraph 

on the International Space Station would be to get an 

instrument in space as quickly as possible if SOHO 

failed earlier than NASA now estimates. In theory, that 

task could be done as early as 2022, or about one or two 

years before GOES-U and SWFO-L1 are scheduled to 

be launched. Although it could be deployed sooner, a 

coronagraph on the space station would have a serious 

shortcoming: It would be able to observe the sun for 

only about 12 hours a day because the space station, 

which orbits close to Earth, spends half of each day in 

the shadow of Earth. Consequently, it would provide 

a poor substitute for either of the first two options, in 

which the coronagraphs would be able to observe the sun 

continuously. But being able to observe the sun even half 

the time would be better than nothing if SOHO failed 

before one of those satellites could be placed in orbit.

Increase the Stockpile of Transformers 

Another approach to reducing the economic and social 

effects that would result from a large-scale disruption 

of the electric grid would be to enact federal policies 

or programs to increase the number of large power 

51. See, for example, Kyung-suk Cho, “Toward a Next Generation 

Solar Coronagraph: Development of a Compact Diagnostic 

Coronagraph for the ISS,” Journal of the Korean Astronomical 

Society, vol. 50, no. 5 (October 2017), pp. 139–149, https://doi.

org/10.5303/JKAS.2017.50.5.139.

52. NASA has said that a coronagraph installed on the space station 

could be retrieved and used later on a dedicated satellite. In that 

case, the development and purchase cost of the coronagraph 

would be avoided for one of the dedicated space weather 

satellites.
24 Enhancing the Security of the North American Electric Grid March 2020

transformers, along with related equipment, held as 

replacements in inventory. Large power transformers 

handle about 90 percent of electric power generated, 

and because they allow power to flow throughout the 

grid, they are potentially vulnerable to the strong electric 

currents that could be caused by a severe solar storm 

or a high-altitude EMP.53 Such an event could lead to 

widespread and sustained outages of electricity if spare 

transformers were not available because electricity suppliers might have to wait more than a year for new transformers to be manufactured. 

Existing Transformer Reserve Programs. A number 

of private-sector efforts have been undertaken to protect the electric grid. For large power transformers and 

related equipment, a number of private reserve programs 

have been developed in recent years. One effort, the 

Spare Transformer Equipment Program (STEP), is an 

arrangement in which participating electricity suppliers 

are contractually bound to maintain a certain number of 

spares and make them available to other participants in 

the case of a terrorist attack (so a solar storm and other 

naturally occurring threats would not automatically be 

covered). STEP is designed so that participating electricity suppliers could restore their system to at least a 

minimally working order after a loss of up to five substations (transmission facilities each containing one or 

more transformers).54

Another effort has been the formation of a private company, Grid Assurance, by a collection of electric utilities. 

Rather than obligate individual utilities to purchase or 

maintain a certain number of spare transformers, Grid 

Assurance buys and maintains spare transformers on 

behalf of participating utilities with the intent of lowering costs by pooling purchases. Other private programs 

include SpareConnect (a less formal, nonbinding sharing 

arrangement), Wattstock (a program of smaller, more 

rapidly deployable spares for short-term use), the Spare 

Equipment Database Program (a centralized catalog 

of spare equipment held by participants that may be 

available on a nonbinding basis), and the Regional 

53. Electric Power Research Institute, Considerations for a Power 

Transformer Emergency Spare Strategy for the Electric Utility 

Industry (prepared for the Department of Homeland Security, 

September 30, 2014), https://go.usa.gov/xp9Qg (PDF, 1.3 MB).

54. See Department of Energy, Office of Electricity Delivery and 

Energy Reliability, Strategic Transformer Reserve: Report to Congress

(March 2017), https://go.usa.gov/xyu8U (PDF, 9.0 MB).

Equipment Sharing for Transmission Outage Restoration 

program (a voluntary program in which utilities identify 

spares available for sale to other participants in the event 

of a regional disaster or an attack).

However, little information is available about the 

coverage of those existing programs, in part because of 

security concerns about exposing potential weaknesses 

of the grid. By one estimate, about 200 electric utilities participate in STEP, SpareConnect, and the Spare 

Equipment Database Program—the most developed 

programs. Together, they may hold as many as 300 spare 

large power transformers, which would cover at least 

two-thirds of the power provided in the United States.55

However, that estimate is uncertain because it is based in 

part on information provided in regulatory filings made 

before the programs were fully operational and because 

it may reflect some double-counting owing to utilities’ 

overlapping memberships in the programs. For many 

of the more common scenarios, those reserves may be 

sufficient. But for the most extreme scenarios, they may 

fall short of what would be required to avoid widespread, 

long-term outages.

Options for Increasing the Number of Replacement 

Transformers. CBO examined three options for increasing the number of replacement transformers beyond the 

number that the private sector might invest in without 

federal intervention. 

Subsidize Purchases. One option for increasing the stock 

of replacement transformers is to provide subsidies to 

electricity suppliers to purchase transformers and hold 

them in reserve. That arrangement could be accomplished either by appropriating funds or by establishing 

a tax credit for that purpose. Private-sector investment in 

additional spare transformers is at least partially determined by the cost of purchasing them and the benefits 

the utility would receive from having the additional 

units. Federal subsidies would reduce utilities’ purchase 

costs, thereby increasing the number of spare transformers that they would find it worthwhile to purchase. 

One advantage of subsidizing private purchases is that 

it would leave decisions about the types of transformers’ 

55. ICF, Assessment of Large Power Transformer Risk Mitigation 

Strategies (prepared for the Department of Energy, Office of 

Energy Policy and Systems Analysis, October 2016), https://

go.usa.gov/xyu8D (PDF, 809 KB).
March 2020 Enhancing the Security of the North American Electric Grid 25

designs and site-specific factors in the hands of the electricity suppliers. 

A disadvantage of such a program is the difficulty the 

government would face in setting the appropriate subsidy level. Ideally, doing so would entail determining 

the optimal total reserve, the reserve the utility industry would build without any subsidy, and the effects 

of different subsidy levels. In addition, because federal 

authorities would be unable to determine precisely what 

investments electricity providers would have made in the 

absence of a subsidy, the subsidies could not be restricted 

to only those transformers that increased the total reserve 

stock; a significant share of the federal costs—perhaps 

the majority—would serve only to reduce the utilities’ 

net cost of units that they would have purchased even in 

the absence of the federal program.

Invest in a Federal Stockpile. A second option for increasing the stock of replacement transformers is the creation 

of a federally owned stockpile. Under this option, the 

federal government would buy transformers and hold 

them in one or more secure locations that would not 

be vulnerable to the risks faced by transformers that 

are connected to the electric grid. Then, in the event of 

damage to the transformers in operation, the government could either sell the spares to electricity suppliers or 

provide them without charge. 

The cost of a federal stockpile would depend in part 

on the number of transformers and their cost (between 

an estimated $2 million and $9 million each).56 The 

Department of Energy estimates that at least 100 units 

would be necessary for a federally operated reserve, 

though that number could be higher depending on how 

extensive a reserve program was desired and the degree to 

which it displaced private investment.57

The cost of the program also would depend on the costs 

of transporting and installing replacement transformers (estimated by the Department of Energy to boost 

individual costs by about 30 percent) and storing them 

56. Department of Energy, Office of Electricity Delivery and Energy 

Reliability, Large Power Transformers and the U.S. Electric Grid

(April 2014), https://go.usa.gov/xyu8R.

57. Department of Energy, Office of Electricity Delivery and Energy 

Reliability, Strategic Transformer Reserve: Report to Congress

(March 2017), https://go.usa.gov/xyu8U (PDF, 9.0 MB).

until they were needed for use.58 The cost of storage 

would depend partly on the number of storage facilities 

selected, a choice involving some trade-offs. Locating the 

transformer stockpile in a few central locations would 

probably reduce capital costs because fewer storage facilities would be necessary, but it would increase the time 

required to put the reserves into service when needed 

and would probably make the stockpile more vulnerable 

to a physical attack. Greater decentralization, perhaps 

including some on-site storage, would reduce transportation costs between the storage and service locations 

and would reduce the chance that the stockpile would be 

targeted for an attack but could increase capital costs, as 

more reserve units would be necessary for replacements 

to be available locally. Implementing a federal reserve 

program would require assessing those trade-offs and 

other technical details, probably in extensive consultation 

with the utility industry.

One argument against having the federal government 

create and hold a stockpile of transformers is that it 

could displace a large amount of private investment and 

result in little change in the overall number of replacements available. CBO expects that electricity suppliers 

would regard transformers in a federal stockpile as 

substitutes for privately held stockpiles and reduce their 

own efforts to build reserves. Such substitution might 

not reduce privately held reserve transformers one for 

one, because differences in transformers’ designs and 

site-specific factors could mean that transformers in federal reserves might not be considered perfect substitutes 

in all instances. But federal spending for a public-sector 

reserve could displace a large amount of private investment and result in little change in the overall number of 

replacements available.

Set a Federal Requirement. A third option for increasing the number of spare transformers would be for the 

federal government to require that electricity suppliers 

hold private reserves of a specified size. That option

would have negligible costs to the government and 

could be implemented in a way that did not undercut cost-effective investments the private sector would 

have made on its own to avoid the most likely types of 

outages. 

58. Department of Energy, Office of Electricity Delivery and Energy 

Reliability, Large Power Transformers and the U.S. Electric Grid

(April 2014), https://go.usa.gov/xyu8R.
26 Enhancing the Security of the North American Electric Grid March 2020

However, the feasibility of such a mandate is unclear. 

One issue is the government’s ability to hold the utility industry as a whole responsible for the mandate. 

Although FERC has jurisdiction over the reliability of 

bulk power, by law FERC can only review and approve 

standards set forth by NERC. FERC itself has no legal 

authority to propose standards. So mandating the private 

sector’s participation in a reserve program is outside 

FERC’s jurisdiction. However, the Congress has the 

option of amending the Federal Power Act to provide 

that authority to FERC.59

Another issue is that the federal government has less 

expertise about the operations of energy suppliers than 

do the suppliers themselves, which raises the possibility 

that a federal mandate would not efficiently reflect the 

public interest as intended. For example, the government would probably be less equipped to determine the 

appropriate number of spare units required, their size, 

and other technical characteristics. 

Some Key Considerations for Policymakers

Decisions about federal actions can often require policymakers to answer three key questions: 

• What is the rationale for federal intervention? 

• What factors should be weighed when contemplating 

such intervention? 

• How should the advantages and disadvantages of 

intervention be compared amid great uncertainty?

CBO’s catalog of major threats to the electric grid and its 

examination of approaches to addressing those threats, 

including its consideration of two approaches in detail, 

illuminate the challenges in addressing those three 

questions. The rationale for federal intervention will vary 

for different approaches. A variety of factors, sometimes 

noneconomic ones, can come into play. And the possibilities for accurately assessing advantages and disadvantages 

of individual approaches will range from being relatively 

straightforward to being extremely uncertain. 

Gauging the Rationale for Federal Intervention

In many cases, the private sector’s decisions about what 

to produce, and how to produce it, will both maximize 

profits and be consistent with an allocation of resources 

59. Federal Power Act, 16 U.S. Code § 824o.

that is best for society as a whole. That coincidence of 

private and public benefits is most likely to occur when 

all of the societal costs and benefits associated with 

producing and consuming goods are fully reflected in the 

prices that households and businesses pay for them. 

A rationale for federal intervention is to address a “market failure,” that is, when some of the costs or benefits 

associated with producing or consuming a good are 

not reflected in the prices paid. In such cases, federal 

intervention may help correct the failure. For example, 

a company that invests in basic science research may generate knowledge that is widely beneficial, but because the 

knowledge may be of a form that it is freely available, the 

company cannot fully capture the benefits of the research 

in the form of profits. Thus, absent intervention, there 

will be too little investment in that basic research from a 

societal point of view. 

Another rationale for government intervention is to 

address underinvestment when the social benefits can 

exceed the private benefits. For instance, to help mitigate 

the financial risks of terrorism, the federal government 

provides catastrophic federal reinsurance through the 

Terrorism Risk Insurance Act (TRIA) program, which 

provides federal payments to private insurers to reimburse them for a portion of their terrorism-related losses 

on commercial policies after an attack. Without TRIA, 

the supply of terrorism insurance would be smaller—

rates would be higher and policy limits could be lower—

and commercial developers in higher-risk areas might 

have difficulty finding financing for their projects.60

As a result, new construction and job creation could 

lessen and economic growth could slow, even with the 

likelihood that some of the development that occurs in 

higher-risk areas under TRIA would occur in lower-risk 

areas if the law did not exist. With TRIA, commercial 

construction in major urban areas is greater, which helps 

preserve economic benefits resulting from the concentration of related businesses. But that continued construction also increases possible losses from a terrorist event.

The two approaches CBO examined in detail reflect 

potential differences in the rationale for federal intervention. Sensors dedicated to monitoring solar conditions 

are unlikely to be funded by the private sector acting 

60. See Congressional Budget Office, Federal Reinsurance for 

Terrorism Risk: An Update (January 2015), www.cbo.gov/

publication/49866.
March 2020 Enhancing the Security of the North American Electric Grid 27

alone because the advantages of improved warnings 

would be so widely shared and the information would 

be available to entities choosing not to provide funding. 

In contrast, having access to spare components—transformers and other equipment—is in the business interest 

of electricity suppliers, so they would be more likely to 

invest in having them in reserve. However, to the extent 

that spare components enhance general safety and economic stability following a power loss, the private sector 

may purchase fewer reserves than might be best from a 

societal perspective. 

Other approaches also reflect that difference in the 

rationale for federal intervention. Increased hardening of 

facilities and equipment and improvements in the physical security of individual grid components are arguably 

in the business interest of individual power suppliers, 

so government intervention might not be necessary. In 

contrast, improvements in information sharing or in 

wide-scale disaster response training—though imparting 

benefits to individual power suppliers—might require 

a degree of coordination beyond what private industry 

would be able to conduct acting on its own.

Deciding Which Factors to Weigh When Considering 

Federal Intervention

CBO’s analysis has focused on potential losses of GDP 

and the federal budgetary and private costs of policies. 

Those are two among many factors that policymakers 

may want to take into account when choosing among 

policies to secure the electric grid. Just which factors play 

a role in the decisions and what weight they are given 

will matter. 

Loss of GDP does not account for all the costs of an 

outage. For instance, power outages will cause inconvenience, personal discomfort, and possibly even loss of 

life. Other such factors include the potential effects on 

national security and public health. Policymakers might 

wish to pursue specific measures even if the loss of GDP 

might be relatively small or the cost of the policy might 

be high if the measures maintain military preparedness 

or the ability to address acute medical needs for affected 

populations. 

Another factor is the possibility that the intervention 

will impart additional costs to society that go beyond 

federal budgetary and private costs. For example, 

subsidies and regulations alter decisions about what to 

produce and how to produce it in ways that can cause 

economic inefficiencies—outcomes in which the combined well-being of consumers and producers is not 

maximized—so that the total costs of additional security 

measures extend beyond the actual expenses of purchasing them. 

Still another factor to weigh could be the distributional 

effects of the risks to the electric grid and the costs of 

actions to mitigate those risks. For instance, the costs of 

disruptions to the grid and the benefits of avoiding them 

might fall more heavily on people with lower income 

because they have fewer resources to draw upon, such as 

the money to purchase backup power supplies for their 

homes or to relocate to areas less likely to experience outages. Similarly, certain areas of the country, such as urban 

locations, might be less able to sustain a lengthy loss of 

power than other areas.

Comparing the Advantages and Disadvantages of 

Federal Intervention Amid Uncertainty

Another consideration is how to compare the advantages 

and disadvantages of government intervention when 

estimates of them are highly uncertain. Avoiding a loss 

of GDP is one benefit of improving the security of the 

grid and reducing the chance of a widespread, enduring 

power outage, but estimates of the extent of the potential 

loss are often highly uncertain. Estimates of the likelihood of a potential loss have the same limitation. So a 

large range of possible outcomes complicates decisions 

about efficient investment in security measures for the 

electric grid. 

Some naturally occurring threats, such as hurricanes, 

have occurred frequently enough that relatively reliable estimates of their likelihood and impact have been 

formed. But others, such as solar storms, have rarely 

occurred, leaving uncertain just how likely they are and 

whether their effects would be large. And so little information is available about some threats, particularly some 

human-made threats, that only judgments about general 

trends of likelihood or effects may be possible. 

Individual approaches for improving the security of the 

electric grid also involve a number of uncertainties about 

either their cost or their effectiveness. For new spacebased sensors for solar monitoring, the budgetary costs 

of building and deploying them are broadly known and 

suggest a relatively small expense in exchange for some 

protection from solar storms. But less is known about 

some of the potential costs for the private sector—for 
28 Enhancing the Security of the North American Electric Grid March 2020

instance, the costs of false positive warnings, which could 

prompt the private sector to take precautions against 

storms that ultimately do not affect the grid’s operations. 

Moreover, the additional protection that new sensors 

would provide is not certain. Existing satellites are aging 

and may be nearing their end of life, so they could 

become less effective or cease operating altogether. In 

such cases, the extent of the additional protection from 

replacing sensors is relatively clear. The improvements 

are less clear in the case in which existing satellites are 

in operating condition, although CBO expects that 

new sensors—either through more accurate monitoring or longer operating lives—would offer additional 

protection. 

The effects of increasing the number of replacement 

transformers are similarly difficult to evaluate, as are the 

additional costs to the government and private sector 

of doing so. Although transformer stockpiles might 

address many threats, the reserves do not prevent outages 

but merely shorten them. How much so depends on 

the severity of the disaster or attack and the damage 

incurred by the grid. And even then, outages of different lengths and geographic scope will have different 

economic consequences. Furthermore, federal options 

aimed at increasing the reserve would be complicated by 

uncertainty about the appropriate number of units to 

stockpile, the number of units already stockpiled by the 

private sector, and the policy’s effect on the private sector’s holdings, among other factors. Should policymakers 

wish to increase the reserve of replacement transformers, 

CBO expects that subsidizing purchases by the private 

sector would be more likely to increase the overall size of 

the reserve than having the government do the purchasing. Subsidies would cause the private sector to purchase 

more than it otherwise would have and leave decisions 

about the type and location of reserve transformers in 

the hands of the private sector. In contrast, direct federal 

purchases probably would cause the private sector to 

reduce its purchases. 

The uncertainty involved in decisions to protect the 

electric grid against severe threats can work in two 

directions. It can argue for policies to guard against 

extreme events beyond those that would be supported 

by estimates of the avoided loss of GDP and the cost of 

the policies. Or it can argue for fewer measures precisely 

because the benefits and costs are not well known.
Appendix: 

How Satellites Monitor Space Weather Today

Space weather is determined primarily by solar activity 

and the flow of the solar wind, the stream of highly 

ionized gas that flows continuously outward from the 

sun through the solar system. When the sun ejects a 

large amount of radiation or material rapidly in an 

event such as a solar flare or a coronal mass ejection, the 

solar wind becomes intensified. If the shock wave and 

particles associated with that solar activity strike Earth, 

they can cause problems. Having advance warning of 

an impending solar storm allows operators of different 

systems (including the electric grid, GPS [global 

positioning system] satellites, communications satellites, 

airlines, and spacecraft) to take steps to reduce those 

effects. 

The United States uses a variety of sensors based on 

a collection of existing satellites to provide warnings 

of solar storms. Some of the most important of those 

satellites were not intended for that task. The sensors 

look for unusual solar activities and measure the 

radiation and particles, and their associated magnetic 

fields, coming from the sun. The space weather 

forecasters at the National Oceanic and Atmospheric 

Administration (NOAA) use those data in models to 

forecast space weather.

Essential Features of Space Weather Sensors 

and Satellites

Three primary types of instruments are used to detect a 

solar storm headed toward Earth, determine its strength 

and magnetic field, and estimate its arrival time. Perhaps 

the most important sensor for detecting a storm is a 

coronagraph. That instrument images the sun’s corona 

(the outermost part of the sun’s atmosphere) so that solar 

flares and coronal mass ejections can be observed. 

A coronagraph can provide one to four days’ notice that 

a solar storm might be approaching, but forecasters need 

data from another set of instruments to determine its 

size and speed and the direction of its magnetic field so 

that they can predict when it will reach Earth and what 

effects it might have. To estimate the possible severity 

of a storm’s effects on Earth, they need estimates of the 

strength and direction of the magnetic field created 

by the charged particles. Those estimates cannot be 

made until the particles pass over a monitoring satellite 

equipped with sensors for measuring the solar wind. 

The closer that satellite is to the sun (and the farther it 

is from Earth), the more warning time it can provide. 

Satellites that monitor the solar wind are usually placed 

in orbit around the L1 Lagrange point, a location about 

a million miles from Earth directly between it and the 

sun. There, the gravitational pull of Earth and the sun 

create conditions so that a satellite can orbit around that 

point throughout the year as that point revolves around 

the sun.1 At that location, the satellite can provide a good 

estimate of a solar storm’s size and severity 15 minutes to 

one hour before the storm hits Earth, depending on its 

speed.

A different set of instruments, x-ray and ultraviolet solar 

imagers, can provide an earlier indication of the potential 

severity of a storm because those forms of radiation travel 

at the speed of light. But the estimates of severity of a 

coronal mass ejection from those sensors are less accurate 

than what can be learned by directly measuring the solar 

wind.

Coronagraphs and the x-ray and ultraviolet sensors can 

be located closer to Earth without affecting warning time 

much because the energy they detect is moving at the 

speed of light, much faster than the particles. However, 

to be effective in monitoring the sun, they need to be 

located outside Earth’s atmosphere so that their view of 

the sun is not blocked by the Earth.

1. There are five known Lagrange points in the Earth-sun system. 

Like L1, L2 is about a million miles away from Earth on the 

Earth-sun axis, though in the opposite direction away from the 

sun; L3 is located behind the sun, opposite Earth’s orbit and 

always hidden from Earth; and L4 and L5 are located along 

Earth’s orbit but ahead of and behind that orbit, respectively, by 

about 100 million miles.
30 Enhancing the Security of the North American Electric Grid March 2020

Satellites Currently Used for Predicting 

Space Weather

Several solar monitoring satellites are currently in 

operation, each with different types of instruments, 

though they are aging, and none of them was designed 

for predicting space weather. They include the Solar 

and Heliospheric Observatory (SOHO), the Advanced 

Composition Explorer, the Deep Space Climate 

Observatory (DSCOVR), the Geostationary Operational 

Environmental Satellite series of weather satellites, and 

the Solar Terrestrial Relations Observatory (STEREO).

SOHO

A cooperative effort between the European Space Agency 

and the National Aeronautics and Space Administration 

(NASA), SOHO carries the only coronagraph located 

between Earth and the sun. It is therefore one of the 

most important satellites for monitoring coronal mass 

ejections. It carries 12 instruments, including the 

coronagraph, and is in orbit around the L1 Lagrange 

point. NOAA’s Space Weather Prediction Center relies 

on the coronagraph images from the observatory to 

detect solar storms that are heading toward Earth. 

Launched in December 1995 and designed to operate 

for two years, the satellite has been so successful that its 

mission has been extended several times. Because the 

satellite is well past its planned lifetime, it is experiencing 

age-related problems, including the deterioration of its 

solar panels, and is projected to lose power by 2026. 

How much longer it will continue to function is unclear.

Advanced Composition Explorer

NASA designed the Advanced Composition Explorer as 

a science mission, but the spacecraft has also provided 

NOAA with data about the solar wind streaming toward 

Earth past the L1 point, where the satellite is in orbit. It 

was launched in 1997 and is well past its design life but 

still in service as a backup to DSCOVR; it is expected to 

run out of fuel in 2026.

DSCOVR

When functioning, DSCOVR is space weather 

forecasters’ primary source of data about the solar wind 

and is intended to succeed the Advanced Composition 

Explorer. It was launched in 2015 with a planned life 

span of five years. 

DSCOVR was not originally intended as a primary 

source of data for solar weather predictions but is 

acting as one to provide an interim solution. NASA 

designed DSCOVR as a low-cost satellite, so it lacks 

the redundant systems that NOAA needs for reliable 

continuous operations and is subject to failure if any one 

critical system fails. Indeed, in June 2019, DSCOVR 

experienced a malfunction and has been silent since. 

NOAA has a plan to restart it sometime in 2020 and in 

the interim has been relying on data from the Advanced 

Composition Explorer to fill the gap in solar wind 

measurements.

Geostationary Operational Environmental Satellite 

Series

NOAA has also placed x-ray and ultraviolet sensors for 

monitoring space weather on its most recent terrestrial 

weather satellites, the Geostationary Operational 

Environmental Satellite-N and -R series, which operate 

in geostationary orbits that are about 22,000 miles above 

Earth. The series consists of three satellites in orbit, of 

which two are in operation and one is a spare. That series 

is planned to stay in service through the 2030s.

STEREO

NASA’s STEREO consists of two satellites, which were 

launched in 2006: one ahead of Earth in its orbit, the 

other trailing behind, and each carrying a coronagraph. 

Providing views from two different perspectives, they 

were designed to analyze the structure and evolution 

of solar storms as they travel from the sun, in order to 

better understand the structure of the sun and its corona. 

In 2014, the trailing satellite stopped functioning, 

but the other is still in service, well past its planned 

lifetime. The European Space Agency has proposed 

deploying another satellite to trail Earth in its orbit 

at the L5 Lagrange point, which would also carry a 

coronagraph that could help provide earlier warning of 

coronal mass ejections. Although a compact coronagraph 

at L5 would be a useful complement to a coronagraph 

at L1 or in geostationary orbit, it would not be a good 

substitute.
Tables

1. Possible Approaches to Address Large Threats to the North American Grid 17

Figures

1. The North American Electric Grid 5

2. The Main Elements of the Electric Grid 6

3. Judgments About the Likelihood of Major Threats to the Grid and the 

Economic Effects From the Loss of Power 9

List of Tables and Figures
About This Document

This report was prepared in response to a request from the Chairman of the House Committee 

on Oversight and Government Reform in the 115th Congress. In keeping with the Congressional 

Budget Office’s mandate to provide objective, impartial analysis, the report makes no 

recommendations.

Ron Gecan, Bernard Kempinski (formerly of CBO), and David Mosher prepared the report 

with guidance from Terry Dinan, Edward Keating, Joseph Kile, and Chad Shirley. Perry Beider, 

Sebastien Gay, Kathleen Gramp, Kim Kowalewski (formerly of CBO), and David Torregrosa 

provided helpful comments. Fritz Hirst of the North American Electric Reliability Corporation, 

William Murtagh of the National Oceanic and Atmospheric Administration, David Ortiz of the 

Federal Energy Regulatory Commission, and Adam Rose of the University of Southern California 

also provided helpful comments. The assistance of external reviewers implies no responsibility for 

the final product, which rests solely with CBO.

Jeffrey Kling, Wendy Edelberg, and Robert Sunshine reviewed the report, the editor was John 

Skeen, and the graphics editor was Jorge Salazar. This report is available on CBO’s website 

(www.cbo.gov/publication/56083).

CBO continually seeks feedback to make its work as useful as possible. Please send any comments 

to communications@cbo.gov.

Phillip L. Swagel

Director

March 2020