Four ways wildfires are affecting the utility industry


Wildfires have caused catastrophic damages to the utility industry over the past decade. With an average of 68,000 wildfires reported in the US every year and climate change impacts getting worse, the utility industry is under tremendous pressure to plan and prepare for what’s coming.

Scientific forecasts almost unanimously suggest significant climate-change-driven increases in wildfire activity and intensity across the United States by the end of the century. The United States government’s Fourth National Climate Assessment, released in November 2018, notes that the annual area burned in the United States could increase from two to six times from the present, depending on the geographic area, ecosystem and local climate. Many regions are likely to face growing danger, notably the Southeast and Northwest parts of the country; with losses mounting up higher than billions of dollars. Hence, there has been no greater need than now for utilities to step up and take charge of the situation.

Why are wildfires a cause of concern?

The United States Forest Service continuously studies wildfires across the United States and their recent statistics demonstrated how dangerous and destructive frequent wildfires are. The state of California is the epicenter of wildfires, although every single state is at risk. A number of sources can cause wildfires, but humans are by far the largest contributing factor. Natural wildfires typically occur during times of drought combined with lightning strikes that ignite dry grass or brush, but this scenario accounts for less than 10% of all wildfires. 9 out of 10 wildfires are caused by humans. Every year wildfires destroy thousands of homes and lead businesses all over the United States to bankruptcy. This is why it is so important to be aware of the potential of wildfires and to always take steps to prevent a fire from spreading.

Four major reasons why frequent wildfires need to be prevented

  1. Power_outagesPower outages – Power outages are one of the major reasons why frequent wildfires need to be prevented. Wildfires pose a serious threat to reliable electricity service. While the fires themselves can disrupt electricity service in the affected areas, a new and emerging trend has further underscored the problem: preventative power shutoffs. One of the tools California is now using to combat wildfire ignitions is its Public Safety Power Shutoff (PSPS) program, in which the state’s utility companies preemptively shut off electricity service when high-risk weather conditions suggest a heightened possibility of electrical equipment wildfire ignition leaving the whole area in utter darkness. In an effort to reduce wildfire risk, utility companies have recently implemented these preventative blackouts, cutting power to millions of customers on several occasions in the fall of 2019.


  2. Damage to utility infrastructure – Wildfires can cause massive damage to utility companies by causing physical damage to energy infrastructure and disrupting power service. Burnt debris and trees may fall directly on utility infrastructures, such as power lines and substations causing physical damage to them which may take long periods of time to recover fully. That’s not it. Wooden poles burn easily in the event of wildfires. The longer poles are exposed to elevated temperatures, the more likely they are to be damaged or destroyed. Older, more weathered poles are more likely to burn than newer ones.  The spark for the 2018 CampFire, the costliest wildfire in U.S. history, was caused by utility infrastructure.


  3. Climate change – Wildfires are one of the biggest contributors to climate change. Climate_changeThe huge clouds of smoke instigated by wildfires lead to massive air pollution eventually leading to global warming and climate change. From 1985 to 2017, climate change is responsible for nearly doubling the average wildfires we might otherwise expect in normal conditions. A 2019 paper from BlackRock Investments details climate risks to the utility sector, noting that as a result of climate change, storm surge, high windsand flooding from hurricanes pose increased risks to several categories of utility assets, including power plants and transmission and distribution networks. 
  4. Massive expenses – Wildfires present a unique financial threat to US power and utility companies because they are the one type of climate-related disaster that such companies may be shown to have directly caused. In most states (with California as a notable exception), if a utility company is found to have oLossperated its system prudently, any resulting property damage and other costs are typically borne by private insurance companies and property owners rather than the utility itself.

    If a utility is found to have operated its system imprudently, however, the company could be held liable for such damages, which are likely to be in the billions of dollars. Damages of this magnitude can bankrupt a utility company, as we’ve seen with PG&E. In either case, climate-change-driven wildfire activity will increase costs to utility-sector stakeholders, including investor-owned utilities, state and local governments, ratepayers and taxpayers.

    These increased costs will in turn place financial stress on utility companies and crowd out essential investment in renewable energy and grid upgrades. Over the past 50 years, excluding the last four, wildfires averaged about the same in direct damages: $1 billion per year, adjusted for inflation. But the last few years have seen a huge leap in damages, including this one, fires have resulted in damages in excess of $10 billion.

Besides far-reaching effects on the environment and people of the surrounding areas, a spark could lead to a massive fire which in turn may lead to the absolute bankruptcy of a company. Hence, utilities should cease to use laggard technology and update to satellite imagery coupled with AI. Utilities need to have complete visibility of operations and the ability to remotely monitor and inspect for any signs of a spark or fire, our groundbreaking satellite-powered Disaster and Disruptions Management System (DDMS) designed exclusively for power utilities and other core industries gives complete visibility of hazard locations via a web dashboard and mobile app. To know more, please write to us at