Last month, the social, political and economic crisis in Venezuela rose to new levels as power outages left more than 70 percent of the country without power. Whereas the exact cause of these outages remain disputed, the disruption was indisputable. Simply put, few types of infrastructure as critical to our lives and economies as electricity.
Globally, governments and utilities are investing $750 billion annually into electrical generation and supply, more than any other area of the energy sector. Smart technologies are vital to this investment, helping transform traditional electricity systems into intelligently connected networks – smart grids. Smart grids have the potential to boost resiliency and catalyse the efficient and sustainable use of electricity. Real-time access to supply and demand platforms, enabled by smart grids, could deliver a value of $632 billion to society – higher than any other individual digital initiative. This value derives primarily from cost savings to the customer and from reduced carbon emissions.
The risk of cyberattacks
But, as electricity grids increasingly become smart – and interdependent – the impact of a cyberattack also becomes more severe and wide-reaching. The World Economic Forum’s Global Risk Report 2019 suggests that large-scale cyberattacks rank fifth among risks most likely to happen in the next ten years. The cost of a cyberattack on the US smart power grid is estimated to be $1 trillion – roughly eight times the cost of the Fukushima nuclear disaster clean-up. A six-hour winter blackout in France could result in over $1.7bn in damages. Negative externalities of a cyberattack on smart electricity grids can be immense as just about everything depends on availability of electricity, including water supply, transport and communication.
The utility and energy sector ranks second highest in terms of predicted losses per company from a cybercrime, with an estimated $17.2 million per company per year. The financial services industry takes the top spot with an estimated $18.2 million in losses per company per year from cybercrime. Experts agree that society often bears the cost of cascading effects resulting from cyberattacks.
To help companies plan for and prevent cyber risks, the World Economic Forum’s Smart Grid Risk Snapshot highlights three ways businesses can mitigate cyber risk.
- Balance priorities. Priorities need to balance innovation, adaptability, agility and efficiency with safety, investment, resiliency and security. A lopsided approach will result in increased risk. These eight priorities have been highlighted by industry experts who contributed to the research.
- Implement proactive safeguards and internal risk management: Proactive safeguards and internal risk management for IoT technology, including top-level accountability and information sharing, is necessary as companies develop increasing dependences on data-driven automated systems.
- Create an organizational culture of awareness. Insurance data shows two-thirds of cyber insurance claim incidents are the direct result of employee behaviour, for example, negligence leading to lost devices. Talent shortages, skill deficits and employee engagement also contribute to the bulk of financial losses so far from cybercrime. All-level employee education of cyber risk, not just building firewalls, will prevent most of the strain currently on the industry, according to the report.
The urgent need for collective action
Safe and responsible IoT deployment across the electricity grid can lead to a reduction in greenhouse gases, better resource management, increased resilience and consumer cost savings. But, the industry needs to collectively address the risks to ensure that innovation can scale and accelerate the benefits for all of society.
To help address this challenge, the Forum’s Centre for the Fourth Industrial Revolution is recruiting leading companies, governments, organizations and experts to pilot new industry-wide best practices and market incentive schemes to ensure safety and security in an increasingly smarter world.
The demand for Internet of Things (IoT) technology in the electricity sector is rising as the smart grid benefits become hard to ignore. Worldwide spending on the Internet of Things is forecast to reach $1.2 trillion in 2020 – more than half what the world is forecasted to spend on defence ($2 trillion) and over double the spend on digital advertising ($500 billion). Utilities rank fourth amongst the industries spending the most on this technology. Without securing these new technologies, the risks may make people question if they outweigh the benefits.