Extreme space weather due to Coronal Mass Ejections (CMEs) has the potential to cause considerable disruption to the global economy by destroying the Extra High Voltage (EHV) transformers required to operate electricity transmission infrastructure. This could lead to large numbers of firms and consumers being left without electricity.
Moreover, cascading failure can render other critical interdependent infrastructure systems inoperable affecting transport, digital communications, waste and water services. Yet, the direct and indirect economic costs posed by this threat remain under-researched. This is surprising given that insight into this subject is important for supporting the optimal allocation of limited resources across government and industry, especially for emergency response and mitigation planning. Moreover, these estimates can prove useful tools for stress testing the portfolio exposure of insurance companies under catastrophic scenarios as they bear the financial risk associated with business and supply chain interruption costs. In this paper a set of scenarios are developed to explore the uncertainty associated with EHV transformer damage levels in the USA.
Using the World Input Output Database, the direct and indirect economic costs are estimated to provide insight into how an extreme event may affect other nations, via supply chain linkages, outside of the geographic footprint of the storm. The paper contributes to our understanding of the economic impact of extreme space weather, as well as making a number of key methodological contributions relevant for future work. The results provide evidence to support the cost-benefit analysis of further investment into space weather forecasting.