A Framework for Integrating Climate Adaptation Planning and Risk Assessment into Corporate Sustainability and Reporting in the Electricity Utility Sector

Results from the risk identification and risk impact assessment phases will inform the risk prioritization phase which involves a process of ranking risks from the most to least critical should be developed. This still is critical in prioritizing and selecting the risk-reduction or control strategies. The prioritization scheme may consider whether the risk is immediate or longer term. Typically, immediate risks are considered higher priority. It is important to understand the management’s risk tolerance during this phase and may vary between different teams. In the selection of risk strategies, the goal is to control risks to within tolerance levels.

Risk Response strategies / Risk Mapping

The prioritization and selection of risk response strategies can be determined by mapping the risks on a heat map. Heat mapping provides a quick visual reference to relative priority. Risks that exhibit a high likelihood and high consequence and/or have weak controls are high priority. Inherent risks that rank high should have controls applied to reduce the risk to within management’s risk tolerance. Residual risks that continue to rank above management’s risk tolerance have inadequate controls in place. Electricity Canada notes that risks with a high negative consequence, but low probability may still require treatment even if they cannot be economically justified.

Electricity Canada provides guidance on the types and levels of action required to address risks. The type of risk strategy depends on the results of the risk prioritization process. Risk controls are applied to high and medium risks; low risks may be tracked/monitored on a watch list.

Risk treatment involves implementing one or more options to mitigate the risk. It is a cyclical process of assessing risk controls, determining the acceptability of residual risks, generating new risk treatment if residual risks are not tolerable, and assessing the effectiveness of the treatment.

Risk treatment options include:

• Avoidance: removing the risk source and/or eliminating involvement in activities that lead to the possibility of the risk being realized
• Sharing or transferring: shifting the burden of the risk to another party through vehicles such as insurance or through joint ventures
• Mitigation: applying appropriate techniques to reduce the likelihood of an occurrence, its consequences, or both
• Acceptance: accepting the consequences and likelihood of a particular risk where mitigation is either impossible, not cost effective, or resources are better directed to other higher profile risks

At predetermined points within the risk management process, utilities should evaluate the effectiveness of risk response strategies in mitigating risks within acceptable levels. In addition to monitoring the performance of the risk responses, it is also important to monitor factors that influence the risk profile.

Consideration should be given to such changes in the risk profile such as changes in: climate and weather projections, scientific information or methodologies, electricity infrastructure interdependencies, stakeholder expectations or the regulatory requirements. It The failure or ineffectiveness of a risk-treatment measure can introduce risk.

Monitoring and review processes must:

• Ensure that controls are effective and efficient both in design and operation (For all relevant climate parameters, the team must know the thresholds for infrastructure damage, operational failure, and maintenance decisions)
• Analyze and learn from events, changes, trends, successes, and failures • Detect changes that may require revision of the plan and priorities
• Detect changes that may require revision of the plan and priorities
• Identify emerging risks

In 2018, Electricity Canada conducted a baseline survey to identify where Canadian utilities were at in terms of their climate adaptation planning. In January 2021, the survey was repeated to track progress achieved throughout the duration of the three year project. The 2018 baseline survey results indicated that only 29% of respondents had made use of the content provided in guidance documents. The 2021 survey indicates that over 87% currently acknowledge the added value of the project deliverables.

With the Guidance document having been officially published in early 2021, Electricity Canada is providing this time for members to implement the guidance document. Once members have had sufficient time, Electricity Canada, in consultation with members, will determine the necessary next steps.

Link to Full Case Study

Additional Resources

• Electricity Canada and Climate Adaptation