Reimagining Utility Climate Risk Planning

This briefing by RMI outlines a four-step framework for utilities and regulators to integrate physical and transition climate risks into long-term planning to ensure grid reliability and affordability. It argues that current utility planning often silos climate risk or ignores transition risks, leading to higher costs for ratepayers, particularly in disadvantaged communities.

• RMI proposes a four-step utility climate risk planning process: identifying climate risks and their business impacts, quantitatively assessing those impacts, mitigating exposure and impacts, and distributing remaining risks among stakeholders such as ratepayers and investors.
• Climate risks are categorized into physical risks—which include acute extreme weather events and chronic conditions like rising sea levels—and transition risks, which involve policy, legal, technological, market, and reputational challenges associated with moving to a zero-carbon economy.
• A robust climate risk assessment requires two specific types of datasets: an hourly multi-year utility-specific weather dataset for operational timelines and a 30+ year utility-specific climate dataset to capture long-term variability and extreme events, such as the El Niño Southern Oscillation (ENSO) cycle.
• Current utility planning often suffers from siloed processes and data asymmetry, where separate analyses are conducted for different modeling exercises (e.g., load forecasts vs. natural gas pipeline schedules) with differing time horizons and audiences.
• In a quantitative example comparing a gas-heavy portfolio to a renewable portfolio, the gas scenario costs exceeded the renewable scenario costs by 68% when exposed to climate risks, with carbon taxes, CCS retrofits, and natural gas prices being the primary cost drivers.
• Regulators can mitigate climate risks by adding risk assessment requirements to planning processes, creating financial incentives for utilities to move away from fossil assets, and establishingSSSS exploring self-insurance funds to distribute catastrophic risk.
• Climate risks disproportionately affect disadvantaged communities; for example, over 25 million people in Justice40 communities are projected to face at least 48 health-threatening heat days per year by 2050.

APA

RMI (2024). Reimagining Utility Climate Risk Planning. https://rmi.org/resources/reimagining-utility-climate-risk-planning/

Chicago

RMI. Reimagining Utility Climate Risk Planning. 2024. https://rmi.org/resources/reimagining-utility-climate-risk-planning/.

Wikipedia

{{cite report |author=RMI |title=Reimagining Utility Climate Risk Planning |date=29 October 2024 |url=https://rmi.org/resources/reimagining-utility-climate-risk-planning/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2024reimagining, author = {{RMI}}, title = {{Reimagining Utility Climate Risk Planning}}, institution = {RMI}, year = {2024}, month = oct, url = {https://rmi.org/resources/reimagining-utility-climate-risk-planning/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }