When a series of snowstorms rocked Texas in February 2021, widespread power outages knocked out electricity service for more than 10 million people, some for more than three days. The state suffered economic losses estimated to be as high as $130 billion.

Power companies and regulators aiming to prevent or mitigate major blackouts like that one can now make better-informed choices thanks to research led by the USC Price School of Public Policy, Boston University and Lawrence Berkeley National Laboratory.

Typically, studies evaluating the economic impacts of power outages focus on direct costs, primarily from lost power and spikes in electric prices causing reductions in activity by business customers and their supply chains.

In the journal Nature Communications, the research team produced a more-comprehensive estimate by also evaluating indirect costs from the actions businesses and people take to adapt during long blackouts.

Known as “resilience tactics,” these indirect costs include expenses such as obtaining and operating a portable generator, and hotel stays and meals for those who evacuate.

Before, resilience tactics were notoriously difficult to put a number on. Not anymore.

“We have a tool for quickly assessing the various economic impacts of long-term power outages,” said co-author Adam Rose, Professor (Research) at USC Price and the USC Viterbi School of Engineering, and Director Emeritus and Senior Research Fellow at the USC Center for Risk and Economic Analysis of Threats and Emergencies, or CREATE.

“Knowing what losses can happen, and what could potentially prevent those losses, helps utilities and regulators justify expenditures to do something about it.”

The new method in the study combines surveys of residential and business customers with innovative computer simulations, building on a line of research that Rose has pioneered at CREATE for 20 years. Partnering with Commonwealth Edison, the largest electricity provider in Illinois, the study authors modeled potential outages of up to 14 days affecting the company’s service area.

Previously hidden costs make up the bulk of impact

The findings showed that resilience tactics have a far bigger economic impact than the direct costs of a blackout: A two-week outage could cause a hit to the gross domestic product of the greater Chicago metropolitan area as high as $17.1 billion, with more than 70% of those costs coming from resilience tactics.

Although the extended, widespread blackouts in the study were hypothetical, the 2021 Texas power crisis offers a sobering example of the potential for real-world consequences.

“The problem of long-term power outages is getting to be more serious,” Rose said. “We’re going to see more of them, given climate change driving extreme temperatures, larger snowfalls, larger rainfalls and stronger winds.”

One cost of adapting that can turn to benefit

At high enough levels, resilience adjustments for backup power generation actually help bring overall costs down. Surveys showed that 71% of large enterprises had some backup capacity, compared to only 22% of small businesses and 12% of residential customers. The researchers estimated that doubling the number of customers with generation capacity could reduce losses to gross domestic product by up to 14%.

“You have to find the sweet spot,” Rose said, “but based on our findings, backup generation is probably a worthy investment.”

The analysis also indicated that lower-income residents would bear a disproportionate burden from long blackouts.

“If you’re middle-class or well-to-do, you get in your car and drive somewhere,” Rose said. “If you don’t have a car, public transportation systems for relocation will not have adequate capacity. You can less afford the cost of going elsewhere, and at the same time you lose pay due to business interruption.”

Rose, his co-authors and his colleagues at CREATE will follow up on this study by adding into their model the benefits of resilience adjustments such as evacuation, including reducing adverse health effects and dampening deterioration to quality of life.

They are also refining the simulation software under development at Lawrence Berkeley National Laboratory, and adapting their technique for other disasters such as interruptions to water or transportation.