Critical Infrastructure Protection: Electricity Suppliers Have Taken Actions to Address Electromagnetic Risks, and Additional Research Is Ongoing
Released: 2018-02-07T00:00:00

Letter

Background

Electricity Operation and Delivery in the United States and Canada

The electricity operation and delivery system—collectively referred to as the grid—in the United States and Canada includes four functions: generation, transmission, distribution, and system operations (see fig. 1). Electricity is generated at power plants by burning fossil fuels; through nuclear fission; or by harnessing renewable sources such as wind, solar, geothermal energy, or hydropower. Once wholesale electricity is generated, it enters the bulk power system—a network of high-voltage, high-capacity transmission systems—where it is transformed to a higher voltage and flows through transmission lines, generally over long distances, to areas where it is transformed to a lower voltage and sent through the local distribution system for use by various customers. Throughout this process, system operations are managed by a system operator, such as a local utility.

Below is additional information on the functions of the electric grid, including equipment that may be vulnerable to GMD and HEMP.

Electricity generation. Power plants generate electricity by converting energy from other forms—such as coal, natural gas, or wind—into electricity. While they produce electricity once operating they are vulnerable when power outages occur because initially starting a power plant after an outage typically requires an external source of electricity to operate the control systems—electronics that are integral to their operations. Some power plants have the capability to restore operations by employing a “black start,” which is the process of restoring a plant to operation without relying on off-site sources of electricity, usually through using dedicated diesel generators to provide the electricity needed. However, not all plants have this capability and in the event of a power outage could therefore be vulnerable to lengthy system disruptions.

Electricity transmission. Power plants are generally geographically distant from the areas where electricity is consumed. To move electricity from where it is produced to where it is used, electricity is sent over transmission lines; together, these lines form a network, or grid. To transport energy over long distances with reduced power losses, suppliers increase voltages—the “force” that makes electricity flow through a conductor—and utilize high-voltage transmission lines, operating from 230 up to 765 kilovolts (kV) in North America. According to the Quadrennial Energy Review, as of January 2017, there were approximately 240,000 miles of high-voltage transmission circuit lines in the contiguous United States. During a solar storm, high-voltage transmission lines can act as “antennae” that allow GMD to enter the electric system.

Transformers. Transformers are critical to the efficient and effective delivery of electricity to customers and, under certain circumstances, can be vulnerable to the effects of GMD and HEMP. Transformers facilitate the efficient transfer of electricity over long distances through the transmission system by converting electricity to different voltages along the delivery system—either up or down, depending on the design and function of the transformer (see sidebar). Figure 2 depicts a large power transformer. paired with equipment—for example, a protective relay—that is designed to take them out of service temporarily when the effects of an electromagnetic event reach the grid. If transformers were temporarily taken out of service for preventative purposes, it could lead to an interruption of electricity service to consumers. However, if transformers—especially those more vulnerable due to age, condition, or design—are not taken out of service during an electromagnetic event they are at risk of being permanently damaged when additional electrical current flows into them, causing excessive localized heating and damage to internal components. (See fig. 3 for an example of transformer windings that were damaged from localized heating associated with a GMD event.) Transformers that become permanently damaged during an electromagnetic event can also contribute to interruptions in service. According to DOE, replacing a damaged transformer can be challenging because they are custom-designed and interchangeability and availability of spares is limited. If a usable spare transformer is not immediately available, obtaining a replacement transformer is often a long and costly process, usually involving long delivery lead times due to their size and weight, limited inventory, a complex procurement and manufacturing process, and other factors. According to DOE, in 2014 the average lead time to obtain a large power transformer was between 5 and 16 months, but could take more than 20 months in the event of supply disruptions or delays in procuring raw materials or key parts; larger, more sophisticated models are generally manufactured abroad. According to a transformer manufacturer, depending on the function of the transformer, the voltage rating, and the model, in 2017 the approximate price of a large power transformer, weighing from 170 to 410 tons, ranged from approximately $2 to $7.5 million in the United States.

Distribution system. The final stage in the electric power system is the distribution system, which carries electricity out of the transmission system to industrial, commercial, residential, and other consumers. The distribution system includes equipment that can be damaged during electromagnetic events, but the extent of the risk is limited because distribution lines are generally too short and of too low voltage to pose a risk to distribution equipment.

System operations: Operation of the electricity system is managed by entities such as a local utility, which this report collectively refers to as system operators. Because electric energy is not typically stored in large quantities, system operators must constantly balance the generation and consumption of electricity to maintain reliability. To do this, system operators utilize a system of sensors and controls to monitor power consumption and generation from a centralized location. Operators use computerized systems to send signals to power plants and other grid components to adjust their output to match changes in consumption. Electromagnetic events can interrupt or damage some of the equipment system operators use, which can cause a disturbance in control systems (for example, such events can cause relays to unintentionally operate, which can disable system protection equipment). Because the electric power system increasingly operates at or near reliability limits during peak demand periods, a relatively modest disturbance to the system can potentially pose a risk to system reliability.

In the United States, the electrical infrastructure is primarily operated by private industry, which owns approximately 85 percent of the nation’s critical electrical infrastructure. In contrast, Canada’s electrical infrastructure is primarily organized along provincial lines with large, government-owned, integrated public utilities playing a leading role in the generation, transmission, and distribution of electricity.

Electromagnetic Events – GMD and HEMP

Based on our review of relevant studies and interviews with cognizant government and industry officials, there are differing opinions on the potential impact electromagnetic events could have on the electric grid and the risk of long-term, widespread damage. However, they generally agree that more study on the effects of electromagnetic events is needed. The following section describes (1) the nature and potential impact of GMD, U.S. efforts to monitor it, and the frequency of past occurrences; and (2) the nature and potential impact of HEMP events.

GMD – Description, Potential Impact, Monitoring, and Historical Occurrences

Naturally occurring solar weather events can create electromagnetic impacts—or GMD—of sufficient intensity that can adversely affect the electric power system. Solar weather events include, for example, large coronal mass ejections (CME), which are energetic eruptions in the sun’s atmosphere that can cause the release of a large mass of charged particles from the sun into space. When a large CME travels from the Sun to the Earth it can interact with and create disturbances in the Earth’s geomagnetic field, referred to as a geomagnetic storm; the resulting impact on Earth is commonly referred to as a geomagnetic disturbance, or GMD. Figure 4 illustrates how solar weather can create a GMD. Strong GMDs can create large geomagnetically induced current (GIC) on the grid. The degree to which GMD and accompanying GIC affect the electric power system depends on several factors, including the magnitude of the GMD, design and geomagnetic latitude of the power system, and geology of the local area, among other things. According to NERC, the most likely consequence of a strong GMD and the accompanying GIC is the loss of voltage stability, although GMD can also damage components of the system, including high-voltage transformers.

In the United States, the National Oceanic and Atmospheric Administration’s (NOAA) National Weather Service manages the Space Weather Prediction Center (SWPC), which is responsible for monitoring and providing services on space weather, including geomagnetic storms. SWPC uses a variety of ground and space-based sensors, as well as imaging systems, to monitor conditions on the Sun and to observe and forecast geomagnetic activity around the world. SWPC uses this information to issue Watches, Warnings, and Alerts for geomagnetic storms through e-mail and website postings to those who are impacted by space weather, such as owners and operators of the electric grid, spacecraft operations, users of radio signals, and others. In addition, SWPC provides immediate telephone notification and confirmation of imminent and ongoing geomagnetic storms to all NERC reliability coordinators through a NERC hotline.

To communicate the magnitude of geomagnetic storms (disturbances in Earth’s magnetic field) and to determine whether geomagnetic alerts and warnings should be issued, SWPC relies on a real-time estimate of the Planetary K-index (Kp-index), which ranges from Kp = 0, or quiet, to Kp = 9, or extreme storm intensity. (See appendix II for more information on SWPC’s notification system as well as their estimates of overall impact of geomagnetic storms to the electric power system, by storm level.) Figure 5 shows the range of planetary geomagnetic activity, by solar cycle and Kp level, from 1933 through 2017. As shown in this figure, recent activity—between 2007 and 2017, approximately equivalent to the average length of a solar cycle—exhibited the fewest occurrences of GMD events (minor, moderate, strong, severe, and extreme) of any solar cycle in nearly a century. -index) data show the maximum fluctuations in the magnetic field observed from a network of selected magnetometers—instruments that measure relative change of a magnetic field at a particular location—relative to a quiet day.

HEMP – Description and Potential Impact

According to the 2008 EMP Commission, a nuclear EMP is the burst of electromagnetic radiation that results from the detonation of a nuclear device, which can disrupt or destroy electronic equipment. The threat primarily focused on by the 2004 and 2008 EMP Commissions, and specifically addressed in this report, is the high-altitude EMP (HEMP). A HEMP event is caused by the detonation of a nuclear device above the atmosphere, from about 40 to 400 kilometers (approximately 25 to 250 miles) above the Earth’s surface. A HEMP attack does not cause direct physical impacts at the Earth’s surface, such as injury or damage directly from heat, blast, or ionizing radiation, but instead creates an intense electromagnetic pulse. The components of HEMP—commonly identified as E1, E2, and E3—can disrupt or damage critical electrical infrastructure, such as computers, electronics, and transformers. EMP can also be produced using nonnuclear weapons, but these generally have a short range and are not a focus of this report.

Electricity System Regulation and Oversight

Responsibility for regulating electricity is divided between states and the federal government. Most electricity consumers are served by retail markets that are regulated by the states, generally through state public utility commissions or equivalent organizations. As the primary regulator of retail markets, state commissions approve many aspects of utility operations, such as the siting and construction of new power plants, as well as approving the prices consumers pay and how those prices are set. Prior to being sold to these retail consumers, such as households and businesses, electricity is bought, sold, and traded in wholesale electricity markets by companies that own power plants, as well as utilities and other companies.

Wholesale interstate electricity markets are regulated by FERC. Historically, FERC-approved wholesale electricity rates based on utilities’ costs of production plus a rate-of-return that it determined to be reasonable. Beginning in the late 1990s, FERC took a series of significant steps to restructure the wholesale electricity markets to increase the role of competition—market forces of supply and demand— in setting wholesale electricity prices, a process referred to as electricity restructuring. Subsequently, FERC has provided authority for many entities—for example, independent owners of power plants—to sell electricity in wholesale markets at prices determined by supply and demand. These entities can now compete with existing utilities and one another to sell electricity in wholesale markets, but have no assurance that their costs will be recovered. While electricity restructuring has introduced a measure of market-based pricing to the generation of electricity, transmission (and distribution, regulated by states) are still subject to regulation on a cost-recovery basis. FERC has jurisdiction over transmission rates on the federal level, and state regulators have jurisdiction over the charges that utilities incorporate in customers’ rates in order to recover their transmission costs.

As part of the restructuring process, FERC also encouraged the voluntary creation of new entities called Regional Transmission Organizations (RTO) and Independent System Operators (ISO) to manage regional networks of electric transmission lines as grid operators—functions that, in these areas, had traditionally been carried out by local utilities. These RTOs, in many cases, established and manage wholesale electricity markets for electricity buyers and sellers to participate in. As grid operators, RTOs are also responsible for managing transmission in their regions, which includes establishing and implementing rules and pricing related to transmission, among other things. As we reported in 2003, 24 states also introduced retail competition to electricity markets they regulate and allow former utilities and new companies to compete to serve customers; since then, the states where retail competition is occurring have changed. In states with retail competition, in general, electricity rates for generators other than the original utility are not structured to guarantee recovery of generation-related costs.

In addition to its role in regulating aspects of the electricity market, FERC is also responsible for reviewing and approving standards to ensure the reliability of the bulk power system. FERC designated NERC to develop and enforce these reliability standards, subject to FERC review and approval. These standards outline general requirements for planning and operating the bulk power system to ensure reliability. (See appendix III for information on NERC reliability standards requiring electricity suppliers to address the potential impact of GMD on the reliable operation of the U.S. electric grid.) NERC and its Regional Entities, along with FERC, can all independently enforce reliability standards. Within the boundary of each regional entity, there are one or more NERC-certified reliability coordinators. Reliability coordinators are charged with the task of continuously assessing the reliability of the transmission system. The coordinator has the authority to direct stakeholders—transmission operators, generators, and others involved with the electric grid’s operations—to take action to preserve the reliability and integrity of the bulk power system.

U. S. and Canadian Electricity Suppliers We Contacted Have Identified Information about GMD Effects, but Have Less Information about HEMP Effects

Electricity Suppliers Have General Information about GMD Effects and Some Selected Suppliers Have Taken Steps to Evaluate Their Networks

U.S. and Canadian government and industry organizations have studied and publicly reported on potential GMD effects on the electric grid. These studies have covered the general threats to the nation’s electric grid from GMD but do not cover the unique aspects of individual suppliers’ generation and transmission networks that could potentially make them more or less vulnerable to GMD events. In addition, these studies typically identified areas in which more research is needed regarding the GMD threat and potential mitigation measures that would inform suppliers’ own assessments of the potential impact of GMD events on their unique networks.

These select studies we identified included those performed by NERC, DOE, EPRI, and other private industry groups and generally examined the areas of vulnerability for the grid with respect to GMD events, potential impact on the grid from these events, possible mitigation measures, and areas needing further research. While noting the need for further research, some of these studies vary with regard to their assessment of the likelihood of long-term, widespread damage to the grid from these events. The following is a summary of some of these selected studies performed since 2010 and grouped by the entities responsible for performing them:

NERC. In June 2010, NERC issued a report, based on a joint effort with DOE, which included a plan to form a task force of government and industry efforts to examine GMD. This resulted in the formation of the NERC GMD Task Force consisting of government and industry officials to examine the GMD threat to the nation’s power grid. The task force’s work in evaluating the potential impact of GMD events resulted in NERC’s subsequent February 2012 report which outlined its plans for working with industry on new reliability standards for protecting the grid against GMD events. This report concluded, among other things, that the failure of a large number of transformers during a severe GMD event was unlikely, although certain older transformers, along with generator step-up transformers, could be particularly susceptible. As a result of this work, and as directed by FERC, NERC developed the EOP-010-1 and TPL-007-1 GMD reliability standards. Also, as a result of this work, NERC issued a GMD Planning Guide for electricity suppliers, which assists the suppliers in carrying out studies of their individual vulnerabilities to a GMD event.

DOE/National Labs. Since 2010, DOE has been engaged in a number of efforts regarding GMD. For example, in 2011, DOE enlisted the Pacific Northwest National Laboratory (PNNL) to study the potential effect of GMD on long, high-voltage transmission lines and associated mitigation measures that could potentially be employed. Also, in April 2014, DOE reported on the results of its study of the vulnerabilities of large power transformers to GMD and other threats and the challenges facing the replacement of these transformers in the wake of such events.

EPRI. In conducting research for its private industry membership, the Electric Power Research Institute engaged in a number of studies from October 2010 to March 2014. These efforts began with an effort to examine potential impacts from GMD through an assessment of various risk factors. EPRI’s later efforts involved the development of approaches for modeling the impacts from GMD on the grid to allow suppliers to better protect their networks from these events.

Other private industry. Private entities conducted studies in January 2010 and November 2011 for Oak Ridge National Laboratory and DHS, respectively, that examined prior GMD events and assessed the potential future impact of these events on the grid along with areas of vulnerability and potential mitigation measures. Other private studies included those examining which regions of North America are most vulnerable to GMD events in addition to the potential impact on the insurance industry and society in general from these events.

See appendix IV for additional details on these and other select studies performed by government and industry regarding protection of the grid from GMD events.

These past research efforts have generally identified the degree to which the electric power system is affected by a GMD event. The level of impact from these events can depend on various factors including, among other things, magnitude of the event, design and geomagnetic latitude of the power system, and geology of the local area. Further, these studies identified that GMD can have a broad range of impacts when it is introduced to a power system, ranging from minor events such as radio interference and control malfunctions to wide-scale disruptions. NERC has identified two predominant risks to the system: (1) potential voltage instability in the transmission system caused by insufficient reactive power support and (2) possible damage to system components.

The first risk and, according to NERC, the most likely consequence of a strong GMD event and accompanying GIC, is the insufficient reactive power support, which can lead to voltage instability and power system collapse. Reactive power support is necessary to stabilize the transfer of electricity through the electric power system, from generation to consumption. With regard to the second risk, several components of the electric system are susceptible to damage from GMD and GIC, but government and industry officials agree that the vulnerable components with the greatest potential consequence in the event of loss are transformers, which typically exist at substations throughout suppliers’ transmission networks. High-voltage transmission lines act as “antennae,” allowing GIC to enter the electric power system, disrupting normal operations and, in some cases, damaging equipment. Transformers, in turn, run the risk of overheating during a GMD event. According to NERC, restoration times for these two risk scenarios are significantly different. Restoration time from voltage collapse—i.e., system blackout—would be a matter of hours to days, while the replacement of transformers, as previously discussed, could take months or potentially years. Therefore, the failure of large numbers of transformers, while less likely, would have considerable impacts on portions of the electric power system.

While general information on the potential impact of GMD events on the electric grid is available from the aforementioned government and industry reports, individual suppliers must assess the potential impact on their own, unique networks. For example, of the 13 selected suppliers we spoke with, 11 reported performing analyses to evaluate the potential impact of GMD on their specific generation systems or transmission networks. The 11 suppliers that had performed these analyses did so in advance of all suppliers being required to analyze the vulnerabilities of their networks as part of their compliance with NERC’s second-stage GMD reliability standard TPL-007-1. The nature of the analyses the 11 suppliers engaged in required the use of modeling software to determine the specific vulnerabilities of their networks which further allowed them to design their own mitigation measures, if warranted, to address any vulnerabilities identified and prevent equipment damage or power outages. Suppliers we contacted noted that potential GMD mitigation measures included installation of specific equipment to assist with network stability and voltage regulation.

As noted previously, past research efforts have indicated that GMD events can have a variety of impacts ranging from minor malfunctions to wide-scale disruptions. For example, 3 of the 11 suppliers we contacted that had performed an analysis of their networks’ potential vulnerabilities had also reported prior impacts on their networks from a GMD event. Of these three suppliers, two (including Hydro-Quebec) reported major power interruption or equipment damage from the event. The remaining supplier reported a brief power outage on one transmission line during the same 1989 GMD event that caused a major power outage for Hydro- Quebec; however, this power outage did not result in any significant loss of electricity to the supplier’s customers. Outside of the 1989 event, this same supplier reported minor power fluctuations and voltage drops from smaller GMD events.

Most suppliers we contacted that had assessed their networks’ vulnerabilities to GMD expressed confidence in their ability to avoid major damage or power interruptions from future GMD events. Specifically, 6 of the 11 selected suppliers that had performed analyses of their networks’ vulnerabilities to GMD reported that, going forward, they expected that any effects from a future GMD event on their networks would likely be minimal (i.e., no significant damage or power interruption). Six suppliers also thought that procedures and technology currently in place afforded better protection from these events than in the past. For example, one northern U.S. supplier we contacted had, after acquiring new GMD analysis software, studied its system and concluded that it could easily withstand the GMD “benchmark event” established by NERC in its TPL- 007-1 reliability standard and that its current technology and procedures were adequate to deal with the threat. Also, another supplier studied its system and is using the results to inform future decisions on transformer purchases to obtain technology that is more resistant to GMD.

Government and Industry Are Taking Steps to Better Understand Effects of HEMP on the Grid

According to U.S. government and industry officials we spoke with, completed research and available information on the vulnerability of the grid to HEMP, along with its potential effects, is less extensive and lags behind industry understanding of GMD. These officials noted that the understanding of HEMP and how it can affect the electricity system is general in nature and not specific to the commercial electric grid. Specifically, the Department of Defense has developed information regarding the potential effects of HEMP on military assets and facilities. According to DOE, the most detailed HEMP testing has been performed on military communication and weapons systems, not on the commercial electric grid. In a number of studies since 2010, both government and private industry have examined the HEMP threat to the grid while also noting the need for further research to fully understand the specific threats to components of the grid that would allow suppliers to protect against these events. While noting the need for further research, some of these studies vary with regard to their assessment of the likelihood of long-term, widespread damage to the grid from HEMP. See appendix IV for additional details on government and industry studies on the threat to the grid from EMP events including HEMP.

The government and private industry studies generally note the threat to the grid presented by the E1, E2, and E3 pulse components of HEMP as follows:

E1. The E1 pulse is capable of destroying microelectronics (such as computers), communication and control systems, and other electronic equipment that can disrupt the grid and other critical sectors. According to DOE, E1 can also generate very large and damaging voltage surges in power lines. Figure 6 depicts the potential impact from an E1 pulse, and shows the higher the altitude the greater the potential radius of the impact from an E1 pulse.

E2. The E2 pulse, similar to lightning, has an ability to impair or destroy control features that are not protected from lightning. However, the grid typically has protections in place to address the lightning threat to major components.

E3. The E3 pulse is similar to GMD and also creates similar disruptive currents in transmission lines which can cause grid instability and heating that damages transformers.

Few electricity suppliers we contacted reported taking steps to examine how HEMP could impact their systems. Specifically, 3 of 11 selected suppliers who responded to our inquiry on this topic reported performing a study of the potential impact of HEMP events on their network infrastructure. Two of these three suppliers reported studying the potential impact of HEMP events on their network in conjunction with these suppliers’ design of hardened control centers expected to be resistant to HEMP and other hazards. One of the two suppliers that designed control centers resistant to HEMP did so due to a concern over being able to maintain power to certain critical customers for which the loss of power would have national security implications. The other supplier that had designed an HEMP-resistant control center did so as part of an “all hazards” approach to protecting its transmission infrastructure. The third supplier that had studied the potential impact of HEMP on its system did so as part of a combined study, required by its state legislature, on the threats posed by both GMD and HEMP. Specifically, this supplier examined the potential impact of the HEMP E3 pulse on its system which is similar to GMD, and, therefore, is expected to involve similar mitigation measures. The supplier stated that the lack of available modeling and analysis tools prevents them from fully understanding the potential impact of all components of HEMP— particularly the E1 and E2 pulses.

Four of the 8 suppliers we contacted who stated they had not studied the potential impact of HEMP on their networks indicated a desire to see EPRI complete its ongoing EMP research before engaging in studies of their own networks. Further, all eight suppliers who stated they had not performed any studies of the potential impact of HEMP on their networks also noted a lack of key information on the nature and risk of the HEMP threat that would allow them to complete studies of their networks and develop corresponding mitigation measures. Six of the suppliers cited the classified nature of much of the available information maintained by the federal government on the EMP threat—particularly HEMP—as a contributing factor to the industry’s lack of needed information on the threat. In addition, according to NERC officials, while they have developed reliability standards directing suppliers to study the vulnerabilities of their networks to GMD and establish procedures for dealing with those events, it has yet to produce similar standards for EMP or HEMP due to the lack of information available to industry on the EMP threat and how it may impact the grid.

According to DOE, more research is needed to fully investigate and evaluate how an electric utility could protect itself from, or mitigate the effects of, HEMP on its systems. DOE also noted that government and industry have ongoing research efforts to better understand these potential effects and develop possible mitigation measures. For example, DOE has three ongoing research efforts related to HEMP. First, DOE is collaborating with DHS to advance the understanding of HEMP effects on the grid through research at the Los Alamos National Laboratory. Second, DOE has funded efforts underway at the Idaho National Laboratory focused on developing potential HEMP strategies, protections, and mitigations for the electric grid—including hardening of infrastructure, blocking of currents, developing a strategy for stocking and prepositioning of spare parts, as well as developing operational and emergency planning tools. Finally, DOE has enlisted the Oak Ridge National Laboratory in analyzing the vulnerability of the grid to a HEMP event, along with the potential damage from such an event, and how it would impact on the reliability and delivery of electric power. The analysis will examine resilience options such as hardening some facilities, stockpiling some parts, and contingency planning. In addition to these research projects, DOE officials told us both Los Alamos National Laboratory and Lawrence Livermore National Laboratory are working to produce unclassified information on the characteristics of the electromagnetic signals associated with HEMP that could be shared with electricity suppliers to better inform their planning efforts.

In addition to its ongoing research efforts, DOE and industry have taken steps to enhance understanding of HEMP issues. In particular, DOE and industry issued the Joint Electromagnetic Pulse Resilience Strategy (Joint Strategy) in July 2016 to study HEMP and improve the sharing of information on HEMP that would be useful to industry. According to DOE, central to development of the Joint Strategy was an effort to enhance shared government-industry understanding of the current status of risks from, and preparedness for, HEMP events. DOE added that this effort is important because what is currently known about HEMP effects to the grid has been developed from computer models designed for other purposes (e.g., understanding Department of Defense system effects), or is classified and thus difficult to share with industry. Specifically, the Joint Strategy includes five strategic goals to guide DOE and industry in minimizing HEMP impacts and improving resilience of the grid to these events. These strategic goals are (1) improving and sharing understanding of HEMP: threat, effects, and impacts, (2) identifying priority infrastructure, (3) testing and promoting mitigation and protection approaches, (4) enhancing response and recovery capabilities relating to a HEMP attack, and (5) sharing best practices across government and industry both nationally and internationally.

Following development of the Joint Strategy, both DOE and EPRI (working with DOE, on industry’s behalf) committed to developing separate, but coordinated, action plans that would implement the five strategic goals for studying HEMP and providing needed information to industry. DOE’s Electromagnetic Pulse Resilience Action Plan (DOE Action Plan), issued in January 2017, delineates the steps that DOE will take to address HEMP risks and emphasizes the federal government’s ability to clarify and communicate HEMP threats and impacts, reduce HEMP vulnerabilities, and facilitate the energy sector’s response and recovery after HEMP events. DOE stated that its Action Plan also considers the over 90 recommendations made in the 2008 EMP Commission report and at least partially addresses 10 of the 15 recommendations directly related to the electric power system made by the EMP Commission in their report. See appendix V for additional detail on the DOE Action Plan, including its relationship to the EMP Commission’s work.

As noted in the Joint Strategy, EPRI’s industry action plan—initiated in April 2016—is a complement to the DOE Action Plan and includes research to be performed to (1) detail the potential impacts of HEMP on the bulk power system, (2) examine potential industry actions to mitigate HEMP risks, and (3) inform industry investment decisions regarding those mitigation options. According to DOE and EPRI, the research that is outlined in the industry action plan is ongoing and scheduled for completion over a 3-year period with the first two reports being issued in September 2016 and February 2017. EPRI officials added that this research is intended to provide the electric industry with what it needs— specifically, an unclassified, science-based approach to HEMP with regard to (1) threat characterization, (2) testing results, (3) modeling and simulation, and (4) recommended strategies for mitigating the impacts of HEMP including prudent and practical hardening and recovery options. To meet these goals, EPRI, together with participating suppliers, have undertaken this 3-year long research effort and expect to complete this work in 2019. This research effort is comprised of the following tasks:

HEMP threat characterization. For the first part of this task, EPRI is identifying the state of knowledge of unclassified HEMP research for all three components of the HEMP environment (i.e., the E1, E2 and E3 pulse components of HEMP). This portion of EPRI’s research was achieved by the issuance of the aforementioned September 2016 report. The remaining two components of this task are ongoing and include (1) identifying characteristics of the electromagnetic signals associated with HEMP that can be used to assess the potential impacts on bulk power system components, and (2) investigating the physics of HEMP’s transmission to, and impact on, power system infrastructure.

Electric infrastructure EMP vulnerability. This task involves identifying the vulnerability of transmission systems and support assets (e.g., protection and controls systems, communications, transformers, etc.) exposed to the HEMP threat by performing laboratory tests. EPRI will test various infrastructure components at two EMP test labs by subjecting them to E1 pulses. According to EPRI, initial results for this task are possible by the end of 2017.

Electric infrastructure impacts. For this task, EPRI is assessing the potential impacts of a HEMP attack on the bulk power system by combining the system modeling-related efforts in the first task above with the equipment testing results of the second task above. Under this task, EPRI is also developing assessment techniques, models, and tools for assessing the impacts of a HEMP attack. The aforementioned February 2017 report assessing the potential effects of the E3 pulse component of HEMP on U.S. bulk-power transformers represents a portion of the work under this task. In this report, EPRI found that a small number of geographically-dispersed transformers (14 out of the tens of thousands included in EPRI’s analysis) were potentially at risk for thermal damage from the E3 pulse. EPRI produced a companion report assessing the potential impacts of the E3 pulse on the stability of the bulk-power system (i.e., the potential for voltage collapse) in December 2017 to be followed by the results of the first E1 pulse assessment at a later date.

Mitigation, hardening, and recovery. Under this task, EPRI is assessing various mitigation and hardening approaches that can be employed to reduce the impacts of HEMP on bulk-power system reliability—including examinations of potential unintended consequences of these approaches and cost effectiveness. As an initial step, EPRI is developing interim guidance on hardening substations based on military and international standards that is scheduled to be completed by the third quarter of 2017.

Risk-based decision support. For this task, EPRI is developing methodologies and tools to support risk-informed decisions regarding the implementation of HEMP hardening and mitigation measures.

Trial implementation. Once hardening measures have been identified, EPRI’s supporting member utilities will have the opportunity to evaluate implementation of these measures on aspects of their networks. This task will develop a collection of leading industry practices with regards to HEMP mitigation and hardening. EPRI is to communicate the effectiveness of these measures including lessons learned.

Project member and stakeholder communication. Under this task, EPRI will communicate the results of its research project to its supporting members and stakeholders in order to share new learning in a timely manner.

U.S. and Canadian Electricity Suppliers Have Made Improvements to Provide Protection against GMD and HEMP Events, Including Some That NERC Requires and Monitors

Selected Suppliers Have Made Technology Improvements Primarily to Enhance Overall Network Reliability which Can Also Help Protect Against GMD and HEMP Events

Overall, 10 of the 13 selected suppliers we contacted reported making technological improvements to provide a range of system reliability benefits, some of which can also provide collateral benefits for protecting against GMD and HEMP events. These 10 suppliers purchased and maintained their own transmission-related equipment, while the remaining three suppliers were reliability coordinators who did not purchase or own their equipment. Various examples of these technological improvements for improved system reliability—that had the added benefit of protecting against GMD or HEMP events—were reported by the suppliers we contacted and include the following:

Replacement of older transformers for various reasons, including susceptibility to GMD. Overall, 7 of the 13 suppliers we contacted noted that transformer replacement occurs for a variety of reasons, including increased efficiency. However, seven of the ten suppliers that purchased their own equipment added that, when they acquire new transformers, they generally selected models that have the added benefit of being more resilient to the effects of GIC during a GMD event. These seven suppliers reported that their specifications for the acquisition of new transformers specifically included qualities to make them more resilient to GIC. The suppliers also told us they are adhering to these specifications whenever they replace an older, less resilient, transformer as part of ongoing system upgrades. One supplier reported that they have undertaken a broad review of the transformers used in their system and taken steps to systematically reduce the number of unique units as part of a broader effort to make their system more consistent. They told us they have worked, to the extent possible, to standardize their transformer designs since implementing a new transformer purchasing program in 2008 which included upgrades such as more stringent specifications for protection against GMD. This supplier told us these efforts would also make it easier and less costly to maintain spares and to replace individual transformers that could be damaged from GMD or HEMP events.

Participation in spare transformer programs to facilitate timely recovery of suppliers’ networks after transformer failures, including those caused by GMD and HEMP events. Of the 10 selected suppliers we contacted who purchased their own equipment, 6 reported having participated in at least one spare transformer program. For example, five of these suppliers participated in the Edison Electric Institute’s (EEI) Spare Transformer Equipment Program (STEP) which was intended as a coordinated approach to developing a shared inventory of spare transformers and streamlining the process of sharing transformers with affected companies. This program requires participating utilities to maintain a specific number of transformers up to 500 kV to be made available to other utilities in case of a critical substation failure. According to program documentation, any investor-owned, government-owned, or rural electric company in the U.S. or Canada may participate in the EEI STEP. The sixth supplier did not participate in an outside spare transformer program such as EEI’s, but, instead, maintained its own, in-house program.

Investment in series capacitors to enhance network efficiency. Eight of the 10 selected suppliers we contacted, who purchased their own equipment, stated that they had added series capacitors to their networks. Seven of these eight suppliers told us they had acquired series capacitors to enhance the efficiency of their networks and help with network stability and voltage regulation. These suppliers stated that these devices offer the added benefit of mitigating the impacts of GMD and HEMP events because series capacitors block GIC, therefore preventing GIC from affecting certain parts of the transmission system. For example, one Canadian supplier, whose customers were almost totally dependent on electricity for heat during the winter, reported installing these technologies to improve overall network reliability but recognized the benefits of the technology for helping alleviate the threat of GMD events—which, according to DOE, is particularly acute at its far northern latitude.

Installation of digital relays with enhanced functionality. Four of the 10 suppliers we contacted who acquired their own equipment had replaced, or were in the process of replacing, older electro- mechanical protective relays used in their grid control systems with newer digital relays. Unlike electro-mechanical relays—which can fail to operate properly under certain conditions resulting from a GMD event—digital relays can be programmed to properly respond to these conditions. FERC officials confirmed that digital relays may offer some degree of protection during GMD events, but cautioned that they are likely more susceptible than the older electro-mechanical relays to the E1 pulse of HEMP events.

Construction of hardened control centers to protect against a variety of threats, including HEMP. Two of the 10 suppliers we contacted that purchased their own equipment had built, or were planning to build, control centers specifically designed to be resilient to the effects of EMP and other threats. For example, one electricity supplier’s customers included critical national security agencies and others in the Washington, D.C. area—resulting in the supplier’s desire to protect against the HEMP threat. The second supplier was in the process of designing its own hardened control center to guard against both EMP and other threats posed by extreme weather events occasionally occurring in its area of the country.

In addition to technological improvements to provide a range of system reliability benefits, some suppliers are considering investments in technology specifically focused on blocking harmful GIC produced during GMD events. This GMD mitigation technology is referred to as a “GIC blocking device” and is still being tested. Since this technology is for the sole purpose of blocking GIC produced during GMD events, its cost may be directly attributed to GMD mitigation. One of our 13 selected electricity suppliers had installed such a prototype device on its high- voltage transmission system as part of an ongoing field trial to assess its performance and overall system impact in order to determine the effectiveness of the device under different operating conditions. Four selected suppliers expressed concern that GIC blocking devices can have unintended consequences on the stability or reliability of their transmission networks which could limit their overall benefits. Two of these suppliers stated that, before considering the installation of these blocking devices, they would perform analysis to determine their effectiveness in suppressing GIC at the system level and the impact on the functioning of their transmission system.

Suppliers Have Developed Operating Procedures for the Initial GMD Reliability Standard and Recognize They May Need to Take Further Steps for the Next Standard

NERC’s initial reliability standard EOP-010-1 requires certain suppliers to have GMD operating procedures to mitigate the potential effects of GMD events on the reliable operation of the transmission networks for which they are responsible. As of May 2017, the 13 suppliers we contacted told us they were all subject to the requirements of the EOP-010-1 standard and had GMD operating procedures in place to comply with the standard. Moreover, three of the 13 suppliers functioned as reliability coordinators and told us that all of the suppliers they oversaw in their territory also had operating procedures in place in accordance with EOP- 010-1. Officials with the reliability coordinators stated they reviewed their suppliers’ operating procedures to ensure they did not conflict with the procedures of other electricity suppliers in the coordinators’ geographic areas of responsibility.

In addition, NERC’s Compliance Registry indicates that 188 electricity suppliers in the United States and Canada are potentially subject to the EOP-010-1 standard. NERC officials stated that, based on audit reports reviewed from its Regional Entities that included EOP-010-1, suppliers with transformers fitting the criteria specified in EOP-010-1 have developed the operating procedures required by the standard. NERC officials also stated that the EOP-010-1 standard requires electricity suppliers’ operating plans and procedures to mitigate the effects of GMD events on the reliable operation of the grid—as well as for the reliability coordinators to coordinate these plans and procedures within their area of responsibility. NERC officials stated that, as part of their compliance review for the standard, the NERC regions will assess the reasonableness of these plans and procedures. According to NERC, the standard provides the suppliers the flexibility to develop the procedures they think they need for their respective networks. NERC officials added that the quality of the measures put in place to address vulnerabilities to GMD would be further addressed under NERC’s second-stage GMD standard, TPL-007-1.

NERC’s initial GMD-related reliability standard, EOP-010-1, went into effect in April 2015. NERC’s next reliability standard, TPL-007-1, includes requirements that will be phased in over a 5-year period from July 2017 to January 2022. The TPL-007-1 standard lists a total of seven requirements of which all but one are directed at planning coordinators and transmission planners whose planning area includes certain high- voltage transformers. In general, these requirements detail further steps suppliers must take to periodically model their networks and assess the vulnerable points of their networks to GMD.

Depending on the vulnerabilities suppliers identify in conducting future assessments in accordance with TPL-007-1, suppliers will be required to develop corrective action plans, starting in January 2022, to ensure their generation or transmission networks meet certain performance requirements during a GMD event (e.g., no cascading blackouts). According to NERC, corrective actions in each plan may include (1) operational procedures, (2) enhanced training, (3) installation of devices (e.g., GIC blocking devices), (4) modification of devices (e.g., modifying equipment for greater GIC resilience), (5) removing vulnerable devices (e.g., old transformers), and (6) spare transformer programs. See appendix III for additional detail on TPL-007-1’s 7 requirements for certain electricity suppliers along with implementation dates for each.

NERC Has a Process to Verify Compliance with Reliability Standards, Including Those Related to GMD

NERC has an established process to verify electricity suppliers’ compliance with reliability standards, including EOP-010-1 and TPL-007- 1. Annually, NERC identifies and prioritizes risks based on the potential impact to reliability across its eight North American regions and the likelihood that such an impact might be realized. This process results in an annual compilation of risk elements for the coming year that are reflected in NERC’s implementation plan for compliance monitoring of reliability standards throughout its eight regions. In this implementation plan, NERC obtains input from the regions on risks inherent in their geographic areas of responsibility, and NERC links these areas of risk with specific reliability standards. For example, since becoming effective in 2015, NERC officials stated that the EOP-010-1 standard has been an annual area of focus in the implementation plan under the “extreme physical events” risk area.

NERC’s overarching implementation plan provides a template for the regions to follow in developing their own regional implementation plans. NERC’s eight Regional Entities build on NERC’s guidance on risks facing all regions by assessing risks to the reliable operation of the bulk power system in their specific geographic areas of responsibility and identifying the reliability standards associated with those local areas of risk that they will focus on in their compliance monitoring efforts for the upcoming year. Further, according to NERC officials, each NERC Regional Entity performs individual risk assessments for each of the electricity suppliers in their areas of responsibility which further inform their approach to compliance monitoring for each of these suppliers—including which tools to use when assessing compliance. According to NERC, these individual risk assessments, along with the overarching and region- specific risks, inform the regions compliance monitoring oversight plan for each supplier. At the end of this planning process, NERC approves each region’s implementation and audit plans and submits the audit plans to FERC.

As of August 2017, NERC’s regions had conducted 63 compliance audits of suppliers that included the EOP-010-1 reliability standard out of the total of 188 electricity suppliers potentially subject to the standard in the United States and Canada. According to NERC officials, the EOP-010-1 reliability standard went into effect in April 2015, and, as noted previously, NERC Regional Entities conduct compliance audits of individual suppliers—including those that must comply with EOP-010-1—at least once every 3 years. Therefore, due to this reason and the fact that these audits are just one of several options for NERC to consider in compliance monitoring, not every supplier subject to EOP-010-1 has been the subject of a compliance audit that included that standard in its scope as of the date of this report. NERC regions conducted these compliance audits on both reliability coordinators and transmission operators registered in the U.S. that were subject to EOP-010-1. As of September 2017, NERC had reported a total of two instances of non-compliance with the EOP-010-1 standard since its inception in April 2015. Electricity suppliers self-reported these two instances of non-compliance to NERC, and they were not the result of a compliance audit. NERC concluded that these incidents posed minimal risk to the reliability of the bulk power system. The two suppliers engaged in mitigation activities (e.g., training of personnel and modification of procedures) to address their non- compliance with the standard, which was verified by NERC’s Regional Entities. NERC concluded that no further action was needed in these two cases.

Selected Suppliers Reported that Costs for Protecting against GMD and HEMP Events Have Been Relatively Small to Date, and Most U.S. Suppliers Are Expected to Be Able to Recover Costs through Charges to Electricity Customers

Selected Suppliers Told Us Costs for Protecting against GMD and HEMP Events Have Been Relatively Small to Date, but Costs May Increase as Suppliers Comply with Future NERC Requirements

Selected electricity suppliers told us the costs they have incurred to date for protecting against GMD and HEMP events have been small relative to their overall system costs. One supplier said that the costs they have incurred are generally associated with projects that provide broader system reliability or other benefits not specific to GMD or HEMP events. Based on interviews with selected suppliers, there are several types of projects that protect against GMD and HEMP events at different levels of costs:

Projects providing collateral GMD or HEMP protection at no specific, incremental cost. As noted previously in this report, selected suppliers have installed several types of equipment for the purposes of transmission efficiency or benefits of general stability, and this equipment also provides collateral protection against GMD or HEMP events. This equipment has included series compensation systems installed on transmission lines, replacement of older electro- mechanical protective relays used in the suppliers’ grid control systems with newer digital relays, and acquisition of spare transformers or participation in shared spare transformer programs which improves their ability to quickly restore transmission systems from any cause, including GMD or HEMP events. Total project costs may vary widely depending on the amount and type of equipment suppliers choose to install, but according to suppliers we interviewed and information from transformer manufacturers, costs for this equipment can range from thousands of dollars per digital relay to tens of millions of dollars for a series compensation system.

Projects providing supplemental GMD or HEMP protection at minimal added cost. As also noted previously in this report, some suppliers we interviewed said they have added specifications for improved protection against GMD or HEMP events as part of larger equipment procurement or construction projects and that this improved protection typically came at a relatively small increase in total project price. For example, several suppliers told us that transformers and other transmission equipment used to control voltage levels can be made more resistant to GIC by using certain designs or materials, and one supplier said this would increase equipment costs by 2 to 3 percent or less. In addition, the two suppliers we interviewed who have designed new control centers that are to be hardened against a range of hazards—including extreme weather (earthquakes, tornadoes, hurricanes, lightning), physical attacks, and HEMP events—told us that adding HEMP protection to the design of new control centers has increased total project costs from about 5 to approximately 20 percent.

Projects built primarily for GMD or HEMP protection. As also noted previously in this report, one supplier has installed a prototype GIC-blocking device, designed specifically to protect against GMD events, as part of a pilot effort to test its operational impacts. The costs of deploying these devices are expected to be better understood after the pilot effort is completed, but based on its initial results, the supplier expects that the total cost for a well-designed GIC-blocking device would be at least $500,000, excluding installation and other costs and one device could be required to protect each transformer.

Suppliers we interviewed told us they have also developed plans or procedures to mitigate for GMD. According to suppliers, in general these plans emphasize reducing the (1) level of power provided by individual power plants and (2) amount of power flowing over power lines to levels below their operating limits. For example, the plan for one coordinator—a grid operator—requires that they immediately take action to reduce the transfer of power down to GMD Operating Plan-designated limits; if these limits are approached or exceeded, selected power plants are directed to reduce the levels of power provided and, if necessary, the grid operator modifies the levels of power flowing through the system until designated transfer limits are reached. According to suppliers, lowering these power levels can reduce the temperatures of key equipment such as transformers and provide for greater flexibility to operate the system during an event. In some cases, such plans can require increased use of power plants that are more costly to operate, potentially increasing overall system costs. The costs of emergency operating procedures implemented in response to electromagnetic events are likely to vary considerably on a case-by-case basis, depending on such factors as the level of demand and the generation resources available during the event.

In terms of customer costs, U.S. suppliers we interviewed said that the costs they have incurred for GMD or HEMP protection thus far would represent a negligible increase in rates paid by customers. For example, one supplier we interviewed serves about 4.5 million retail customers, and officials from that supplier estimated the cost of hardening a planned control center against HEMP to be at least $10 million. If this cost is fully passed on to customers and paid for in a single year, we calculated that it would amount to a total of about $2 for the average customer’s electric bill for that year.

In the future, suppliers could face increased costs for protecting against GMD, depending on the corrective actions needed to address vulnerabilities, which suppliers are to identify in accordance with reliability standard TPL-007-1. The standard does not require suppliers to complete vulnerability assessments and develop corrective action plans until 2022, and suppliers told us it is too early to know what types of corrective actions may be required. However, the costs associated with some types of potential actions could be high. In particular, examples of potential corrective actions provided in the standard, such as installing new equipment or modifying existing equipment for improved GIC resilience, could be costly according to some suppliers we interviewed. For example, high-voltage transformers can cost tens of millions of dollars each. If suppliers identify multiple transformers that are vulnerable to thermal impacts from GIC flows, replacing or modifying them would be costly. Similarly, a supplier may need to install GIC-blocking devices throughout their network to effectively protect against a GMD event because the devices re-direct GIC flows elsewhere in the network. Therefore, a blocking device strategy could be costly if suppliers determine that large numbers of their transformers are vulnerable.

Based on our prior review of federal efforts to enhance electric grid resiliency and federal emergency management programs, and interviews with agency and industry representatives, there are no sources of direct federal funding specifically to reimburse suppliers for costs they incur for protecting against GMD or HEMP events. DHS officials told us there are two DHS grant programs that could be used to indirectly support suppliers’ efforts to prepare for GMD or HEMP events. However, DHS directly awards these grants to state, local, or tribal governments, and DHS officials told us that it is rare for these grant funds to be passed through to private companies and they have no record of instances in which electricity suppliers received funding for grid preparedness efforts.

Regulated U.S. Suppliers’ Costs for Protecting against GMD are Generally Recoverable, but Cost Recovery is Less Certain for HEMP Events

Federal and State Regulators Have Made Specific Assurances about Recovering GMD-Related Costs

At the federal level, in FERC’s September 22, 2016, order approving NERC’s TPL-007-1 reliability standard, FERC stated that cost recovery for prudent costs associated with or incurred to comply with the standard would be available to suppliers for whom FERC approves rates. Two suppliers we interviewed said that because FERC requires suppliers to comply with the standard and has provided specific assurance that prudent costs will be recoverable, they do not expect challenges recovering such costs. According to FERC officials, FERC determines whether suppliers’ investments are prudent on a case-specific basis, in part by considering whether the supplier acted reasonably given industry norms. FERC officials also stated that for most transmission rates, it does not conduct in-depth reviews of the reasonableness and prudence of each cost item unless a stakeholder such as a ratepayer advocacy group, large customer, or state public utility commission challenges the suppliers’ rate filing with FERC. FERC officials told us they were not aware of any cases in which stakeholders challenged GMD-related costs.

Some suppliers we interviewed said that the revisions to TPL-007-1 that FERC required in Order 830—particularly, revisions to the benchmark GMD event suppliers must use in their vulnerability assessments—could result in added costs for suppliers. For instance, one supplier expressed concern that they could have to begin work to assess vulnerabilities and protect against the first version of the benchmark event, and that the revised standard would require them to re-do such work using a new benchmark event, at additional cost. In response to such concerns, FERC stated that it could not yet determine what impacts the revisions might have on the actions suppliers would have to take to comply, because NERC had not yet developed or proposed the revisions. However, FERC re-affirmed that cost recovery for prudent costs associated with or incurred to comply with reliability standard TPL-007-1, and future revisions to the standard, will be available to regulated suppliers.

Representatives from the state regulators we interviewed said they allow recovery of prudent generation or distribution costs for regulated utilities for improvements needed to meet federally-required reliability standards, such as NERC’s GMD reliability standards. In addition, some of the selected suppliers told us that they use federally-required reliability standards to justify necessary investments when filing a rate case with state regulators. As with FERC, state regulators we interviewed said they determine the prudence and reasonableness of costs on a case-specific basis.

Suppliers’ Ability to Recover Future HEMP-Related Costs is Uncertain Due to Limited Understanding of HEMP Risks and Mitigation Efforts

To the extent suppliers and regulators determine that HEMP events pose a risk to bulk power system reliability, FERC may allow recovery of prudent costs for protecting against EMP events. However, according to FERC officials, determining prudence for costs associated with new, emerging areas such as HEMP mitigation could be challenging because regulators and suppliers have limited understanding of HEMP risks. In 2004, FERC publicly assured suppliers that it will allow for recovery of prudent costs necessary for ensuring the reliability of the bulk power system. Specifically, FERC issued a policy statement assuring public utilities that FERC will approve applications to recover prudently-incurred costs necessary to ensure bulk power system reliability, including prudent expenditures for compliance with good utility practices—practices engaged in or approved by a significant portion of the electricity industry or that could be expected to accomplish the desired result at a reasonable cost. Two suppliers we interviewed said that they expect FERC would allow them to recover transmission costs they deemed necessary for protecting against HEMP events. FERC officials told us that they are not aware of any cases to date where suppliers have sought recovery of transmission costs associated with HEMP protection through FERC-approved rates, so they do not know what challenges they might encounter in determining whether these costs are prudent. Also, unlike GMD events, suppliers and electricity industry stakeholders told us there are not yet tools for assessing suppliers’ vulnerability to HEMP events, standards for protecting against these events, or tools for assessing the effectiveness of protective remedies.

Suppliers and state regulators we met with said more information is needed to understand HEMP risks and mitigation efforts in order to determine to what extent costs would be recoverable. Electricity industry stakeholders and suppliers told us that they are sensitive to the fact that their costs are typically borne by customers, and more complete knowledge of HEMP risks would allow them to invest responsibly in HEMP protection from both a reliability and cost perspective. Similarly, one state regulator we interviewed has not yet received any rate filings from suppliers that include costs associated with HEMP protection. However, one supplier said that their state regulators prioritize reliability, and they expect the regulators would allow recovery of costs for HEMP protection if suppliers determined such protection was needed. As with FERC, state regulators said that when rate filings involve new technologies or practices, there is more uncertainty regarding costs and benefits and it can be more difficult for regulators to determine prudency. For example, one state regulator told us that DHS is doing work to understand risks associated with HEMP events, and what protections such events may necessitate. The regulator said they would like to see the results of this work before suppliers invest in mitigation equipment, so there can be more certainty that the costs will be considered prudent.

Independent Generators May Face Challenges Recovering Costs for Protecting Against GMD and EMP Events

Independent generators—generators that sell power in wholesale electricity markets and are not part of an integrated utility—do not have a mechanism assuring cost recovery for reliability improvements, including such as GMD and HEMP protection. FERC officials stated that these generators sell electricity at prices determined by supply and demand in markets that FERC has determined are sufficiently competitive or that have adequate procedures in place to mitigate the effect of companies to manipulate prices, such as could be the case for a company with a large market share. As such, according to electricity industry and FERC officials, independent generators do not have the assurances of cost recovery that traditionally-regulated suppliers do. If they invest in protecting their facilities from the potential effects of GMD and HEMP, the prices independent generators obtain for selling electricity so as to be competitive in the wholesale markets may be too low to allow them to fully recover their costs. According to data from DOE’s Energy Information Administration, independent generators represented nearly 47 percent of electric generation facilities and generated about 39 percent of utility- scale electricity in the U.S. in 2015.

FERC officials said they recognize that independent generators could face challenges recovering costs for step-up transformers—generator equipment which, if it is vulnerable to GMD, may need to be replaced or modified in accordance with NERC standard TPL-007-1. Independent generators must balance the need to recover costs associated with these transformers with the need to offer prices for their electricity that are competitive in wholesale markets. According to suppliers, until studies are completed to identify how companies will comply with TPL-007-1 it is unclear the extent of the risk to step-up transformers owned by independent generators and the extent of the challenges of paying for steps to mitigate those risks.

Agency Comments

We provided a draft of this report to DOE, DHS, NOAA, NRC, FERC, and NERC for their review and comment. DOE, DHS, NRC, FERC, and NERC provided technical comments, which we incorporated as appropriate.

We are sending copies of this report to the Secretaries of Commerce, Energy, and Homeland Security, the Chairmen of the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission, and the Chief Executive Officer of the North American Electric Reliability Corporation. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact Chris Currie at (404) 679-1875 or curriec@gao.gov or Frank Rusco at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI.

Appendix I: Scope and Methodology

In conducting our work, we interviewed representatives from 13 of the 181 U.S. and Canadian electricity suppliers—entities that own or operate generation or transmission infrastructure—subject to the North American Electric Reliability Corporation’s (NERC) 2014 geomagnetic disturbance (GMD) reliability standard and which conduct planning and generation, transmission, and distribution operations. We selected these 13 electricity suppliers based on input from the U.S. Department of Energy (DOE), NERC, industry associations, and research institutions as to which suppliers had taken steps to prepare for and mitigate impacts from electromagnetic events. We also considered, among other things, the following supplier preparedness and mitigation actions and characteristics: (1) efforts or plans to install mitigation equipment or technology; (2) efforts or plans to develop specific mitigation processes, procedures, or other operational actions; (3) infrastructure, such as length and voltage of transmission lines; (4) high-voltage equipment, including transformers over 230 kilovolts (kV); (5) geomagnetic latitude; and (6) experience with GMD-related service disruptions. We included 3 Canadian electricity suppliers among the 13 suppliers we interviewed due to their (1) experiences with past geomagnetic disturbance (GMD) events, (2) research on the impacts of GMD, and (3) actions taken to prepare for and mitigate GMD events.

We conducted site visits to 6 of the 13 suppliers to better understand their experiences with past GMD events and identify actions they have taken to prepare for and mitigate GMD and High-Altitude Electromagnetic Pulse (HEMP) events, among other things. During these visits we met with organization officials; observed operations and facilities, such as control centers hardened to mitigate effects from HEMP events; and viewed equipment potentially vulnerable to GMD, such as high-voltage transformers. While we cannot generalize the information we learned from these selected suppliers to all U.S. and Canadian suppliers, they provided insight on what electricity suppliers may know regarding the potential impacts of electromagnetic events on the electric grid, as well as steps suppliers may be taking to prepare for and mitigate such impacts. The selected U.S. suppliers also identified opportunities available to them for recovering costs for protecting against electromagnetic events. Based on input from DOE, NERC, supplier, and industry officials, and because of these organizations’ specialized knowledge and experience with the electricity industry, we also interviewed representatives from six industry organizations—five industry associations and one industry research organization—two transformer manufacturers, one software modelling company specializing in simulations of high-voltage power system operations, and one designer of a prototype geomagnetically induced current (GIC)-blocking device.

To determine the extent to which U.S. and Canadian electricity suppliers have identified information about the effects of GMD and HEMP on the electric grid, we reviewed selected U.S. and Canadian government studies issued—or commissioned by—DHS, DOE, U.S. National Laboratories, Natural Resources Canada, the Federal Energy Regulatory Commission (FERC), and NERC since 2010 regarding, among other things, the vulnerability of transmission and generation infrastructure and equipment to GMD and HEMP events, possible measures to mitigate the effects of GMD and HEMP, and areas requiring further research. We also reviewed relevant studies published since 2010 from the Electric Power Research Institute (EPRI) and private contractors referred to us by government, supplier, and industry representatives. We identified these studies based on feedback from all entities listed above and through references in reports and other documentation. While we did not compile a comprehensive list of all studies of the effects of GMD and HEMP on the U.S. and Canadian electric grid, industry experts indicated that we had identified relevant studies published on this subject since 2010. We also interviewed knowledgeable officials from these U.S. and Canada government agencies, national laboratories, and industry organizations to clarify our understanding of the issues addressed in these studies. We assessed the methodologies used in the relevant reports and determined them to be sufficiently rigorous to provide information about the potential effects of GMD and HEMP events on the electric grid.

To better understand the effects of solar weather on the electric grid, how GMD is measured, and mechanisms in place for notifying electricity suppliers of potentially dangerous solar storms, we interviewed representatives from the National Oceanic and Atmospheric Administration’s (NOAA) National Weather Service, the U.S. Geological Survey (USGS), and the National Aeronautics and Space Administration (NASA). We also reviewed relevant documentation on processes and procedures. -index) is a near real-time estimate of the official Planetary K-index maintained by the GFZ German Research Centre for Geosciences. events occurring from 1933 through 2016. We also interviewed Department of Homeland Security (DHS) officials regarding the Department’s efforts to address requirements in the National Defense Authorization Act for Fiscal Year 2017.

To obtain perspectives on efforts individual electricity suppliers have taken to better understand the effects of GMD and HEMP, we interviewed officials from 13 U.S. and Canadian suppliers regarding the extent to which they had evaluated the impact of electromagnetic events on their specific generation systems or transmission networks and what they had learned from these evaluations. With respect to ongoing efforts to research the effects of HEMP, we reviewed DOE and EPRI’s Joint Electromagnetic Pulse Resilience Strategy and the U.S. Department of Energy Electromagnetic Pulse Resilience Action Plan and interviewed relevant DOE and EPRI officials regarding these plans. Further, we interviewed officials from various national laboratories regarding their ongoing efforts to fully investigate and evaluate how an electric utility could protect itself from, or mitigate the effects of, HEMP on its systems. We also interviewed officials from the Nuclear Regulatory Commission (NRC) regarding efforts to assess the ability of a nuclear power plant to achieve safe shut down following a GMD or EMP event and the extent to which plants are required to implement strategies or guidelines in the event of a prolonged loss of offsite power, similar to what could be caused by a GMD or EMP event. Finally, we reviewed the 2008 Commission to Assess the Threat to the United States from Electromagnetic Pulse Attack (EMP Commission) report with recommendations on preparing for and recovering from a possible EMP attack. In October 2017, we also requested an interview with a representative from the EMP Commission but did not receive a response to our requests.

To identify steps selected U.S. and Canadian electricity suppliers have taken to protect against GMD and HEMP events and understand how NERC has monitored these efforts, we reviewed FERC orders and NERC reliability standards that require certain suppliers to take steps to assess and prepare for GMD impacts. We interviewed FERC and NERC officials to discuss these standards and reviewed public comments submitted by stakeholders during the FERC rulemaking process. We also interviewed officials from 13 U.S. and Canadian electricity suppliers to identify steps they had taken to comply with NERC reliability standards as well as any additional actions to prepare for and mitigate potential GMD and HEMP effects, such as replacement of older equipment or investment in spare transformer programs. Additionally, we reviewed relevant federal guidance on preparing for GMD and HEMP events, such as DHS’s Electromagnetic Pulse protection guidelines and NERC’s Geomagnetic Disturbance Planning Guide.

To identify the extent to which NERC has monitored electricity suppliers’ steps to comply with NERC reliability standard EOP-010-1, we reviewed NERC monitoring processes, including procedures for developing an annual, nationwide implementation plan for conducting monitoring activities. NERC officials provided the number of compliance audits conducted between April 2015—when NERC, through Regional Entities to which it has delegated enforcement authority, first began reviewing suppliers for compliance with EOP-010-1—and August 2017 that included the EOP-010-1 reliability standard. We contrasted the number of compliance audits with the total number of suppliers potentially subject to NERC’s GMD reliability standard EOP-010-1. We assessed the reliability of the data on the total number of suppliers subject to EOP-010-1 by interviewing agency officials regarding data sources, system controls, and any quality assurance steps performed by officials before the data were provided; we found the data to be sufficiently reliable to provide the number of suppliers subject to EOP-010-1 since it went into effect. We also discussed with cognizant NERC officials the organization’s processes for collecting and reporting comprehensive data on the status of their overall compliance monitoring efforts.

To identify what opportunities exist for U.S. electricity suppliers to recover costs for protecting against GMD and HEMP events, we reviewed FERC regulations and orders related to cost recovery, such as suppliers’ costs for spare transmission equipment services. We also interviewed FERC officials and representatives of selected state regulators whose jurisdictions include suppliers we interviewed, regarding procedures available to electricity suppliers to recover costs for actions taken to prepare for and mitigate GMD and HEMP effects. We asked these officials to discuss previous, current, and potential future regulatory actions—orders or rate cases they have overseen—involving recovery of costs for actions taken to protect against GMD and HEMP events. Further, we interviewed cognizant DHS and DOE officials to identify the extent to which financial incentives—such as preparedness grants—are available to U.S. electricity suppliers to offset the costs of preparation and mitigation efforts. As part of our review of actions taken by ten selected U.S. electricity suppliers to prepare for and mitigate the impact of electromagnetic events, we interviewed officials regarding the extent to which they had recovered costs expended on preparedness and mitigation efforts and what, if any, options they were considering to recover such costs in the future. While the information provided by these selected electricity suppliers is not generalizable to the U.S. industry, it illustrates examples of actions selected suppliers have taken to recover costs for GMD and HEMP mitigation and preparedness efforts. In addition, we interviewed representatives from various trade associations to identify challenges suppliers face in recovering costs for mitigation and preparedness efforts.

We conducted this performance audit from May 2016 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Appendix II: National Oceanic and Atmospheric Administration (NOAA) Notifications for Geomagnetic Disturbances

In the United States, the National Oceanic and Atmospheric Administration’s (NOAA) National Weather Service manages the Space Weather Prediction Center (SWPC), which is responsible for monitoring and providing services on space weather, including geomagnetic storms. SWPC uses a variety of ground and space-based sensors, as well as imaging systems, to view and estimate geomagnetic activity around the world, and to issue Watches, Warnings, and Alerts for geomagnetic storms through e-mail and website postings to those who are impacted by space weather. Additionally, in the event of imminent geomagnetic storms, SWPC issues immediate voice notification and confirmation to all North American Electric Reliability Corporation (NERC) reliability coordinators through a special hotline. is a “range index”—a measure of variation that saturates at K= 9—Dst is an unbounded measure of solar storm effects on the Earth’s magnetic field. In this report, we use the K- index, the history of which spans three solar cycles more than the Dst-index. = 9 (extreme)—to determine whether geomagnetic alerts and warnings should be issued.

SWPC’s primary notifications include:

Watches: Watch forecasts for impending geomagnetic storms— coronal mass ejections (CME)—are issued when the highest predicted Kp-index for a day is between K = 5 or higher and are posted approximately 1 to 2 days before a storm reaches Earth. According to SWPC, Watch forecasts are less reliable in predicting storm intensity and timing than other types of forecasts, but are considered useful for longer-range notification. Watch forecasts are based primarily on space and ground-based solar observations as well as modelling predictions.

Warnings: Warnings of geomagnetic storms are issued when estimated K-indices of K = 4 or higher are expected; they are generally issued 20 to 40 minutes in advance and are based on real- time observations of the solar wind conditions affecting earth. SWPC considers Warning notices as more reliable than Watch forecasts in terms of measuring storm intensity and timing. -index to determine the G-scale level (G1 through G5), in which “K= 5” corresponds to “G1” and “K= 9” corresponds to “G5.” A K of 0 to 4 is below storm levels and is labeled as “G0.” For purposes of consistency, we use the K- index in this report.

Alerts: Alerts are near real-time indications that a specific storm threshold—K = 4 or above—is reached; they are based on SWPC’s minute-by-minute estimate of GMD activity. Alerts are derived from ground-based magnetometer observations from eight locations around the world.

According to SWPC, Watches, Warnings, and Alerts are to be issued as activity occurs and therefore can be issued very frequently during high- activity intervals and not at all during quiet periods. SWPC issues these notifications when storm levels reach a specific estimated K level. Table 1 shows the estimated K-indices that trigger each SWPC notification product as well as the estimated impacts to the electrical power system.

Appendix III: North American Electric Reliability Corporation (NERC) Geomagnetic Disturbance (GMD) Reliability Standards

In May 2013, the Federal Energy Regulatory Commission (FERC) directed NERC to develop reliability standards requiring electricity suppliers to address the potential impact of GMD on the reliable operation of the U.S. bulk power system. In June 2014, FERC approved standard EOP-010-1, submitted by NERC, requiring that certain suppliers prepare for the effects of GMD events by developing contingency operating plans, procedures, and processes. FERC approved a second standard—TPL- 007-1—in September 2016, also submitted by NERC, requiring certain suppliers to assess the vulnerability of their transmission systems to GMD events; suppliers that do not meet certain performance requirements must develop a plan to achieve the performance requirements. Table 2 summarizes the specific requirements in NERC’s stage 1—EOP-010-1— and stage 2—TPL-007-1—standards, the electricity industry entities responsible for them, and their effective dates for the requirements.

Appendix IV: Select Government and Industry Studies on Electromagnetic Events

An electromagnetic event can result from a naturally occurring, large- scale geomagnetic disturbance (GMD), caused by severe solar weather, or from human-made sources, such as the high-altitude detonation of a nuclear device to create a high-altitude electromagnetic pulse (HEMP). Table 3 provides details on a select number of geomagnetic-related studies performed since 2010 with respect to their objectives, findings, and recommendations. These studies include details on (1) areas of vulnerability for the grid with respect to GMD events, (2) potential impact on the grid from these events, (3) possible mitigation measures, and (4) areas needing further research. For example, as shown in the table, the North American Electric Reliability Corporation’s (NERC) and the Department of Energy’s (DOE) June 2010 report included a plan to form a task force of government and industry efforts to examine GMD. This resulted in the formation of the NERC GMD Task Force, consisting of government, industry, and academic experts, to examine the GMD threat to the nation’s power grid. The task force’s work in evaluating the potential impact of GMD events resulted in NERC’s subsequent February 2012 report (also shown in table 3) which outlines its plans for working with industry on new reliability standards for GMD events, among other things. As a result of this work, and as directed by the Federal Energy Regulatory Commission (FERC), NERC developed the EOP-010-1 and TPL-007-1 GMD reliability standards. Also as a result of this work, NERC issued a GMD Planning Guide for electricity suppliers, which assists the suppliers in carrying out studies to assess the effects of GMD on their individual networks.

Table 4 provides details on a select number of unclassified HEMP-related studies performed since 2010 with respect to their objectives, findings, and recommendations. These studies include details on (1) areas of vulnerability for the grid with respect to HEMP events, (2) potential impact on the grid from these events with respect to all three HEMP pulses (E1, E2, and E3), (3) possible mitigation measures, and (4) areas needing further research.

Appendix V: Details on the U.S. Department of Energy’s (DOE) Electromagnetic Pulse (EMP) Resilience Action Plan

DOE’s EMP Action Plan (DOE Action Plan), issued January 2017, describes 19 actions to be taken by September 30, 2021, to enhance the resilience of the electric power grid to high-altitude electromagnetic pulse (HEMP) effects. DOE stated that its Action Plan considers the over 90 recommendations made in the 2008 Commission to Assess the Threat of the United States from Electromagnetic Pulse (EMP) Attack (EMP Commission) report and at least partially addresses 10 of the 15 recommendations directly related to the electric power system made by the EMP Commission in their report. See table 5 for these 10 EMP Commission recommendations from 2008 and corresponding components of DOE’s 2017 Action Plan.

As of November 2017, based on our review of implementation dates for specific actions in DOE’s plan, the agency had yet to complete 15 of the 19 actions detailed in the Action Plan but had initiated efforts under the plan to identify gaps in HEMP knowledge and coordinate government and industry information sharing with the electricity sector and other critical industry sectors. Future work DOE expects to address under the plan will include (1) evaluating existing models used to estimate EMP impacts to the grid, (2) the adequacy of backup power generation in the wake of an EMP event, (3) establishing a national capability for conducting EMP testing of existing grid components, (4) identifying and evaluating mitigation and protection measures for various grid components, and (5) assessing the feasibility of testing different hardening techniques for substations for EMP scenarios. The DOE Action Plan includes deliverables and due dates for the 19 action items detailed in the plan which, according to DOE, are subject to the availability of necessary funding. See table 6 for details on these deliverables, and associated dates, for each action item.

Appendix VI: GAO Contacts and Staff Acknowledgments

GAO Contacts

Staff Acknowledgments

In addition to the individuals named above, Jon Ludwigson (Acting Director), Ben Atwater (Assistant Director), and Barbara Guffy (Analyst-in- Charge) managed this assignment. Frederick K. Childers, Jonathan Felbinger, Daniel Friess, Alexandra D. Gebhard, Michael Harmond, Eric Hauswirth, Richard Hung, Miles Ingram, and Heidi Nielson made key contributions to this report.