Building the business case for climate resilience in the Caribbean:

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1 Building the business case for climate resilience in the Caribbean: An illustrative case study Adam Borison Senior Vice President Nathan Associates Inc.

2 Background and motivation There is widespread recognition that energy and related infrastructure in the Caribbean is too big to fail and something must be done to improve climate resilience. At the same time, there is little rigorous analysis of alternative resilience-oriented investments, and few tools for developing the business case for the right investments. This presentation describes such a tool, built largely with available data, and illustrates its application in a specific case study. International donors, multilateral banks, insurance companies, regional government, private developers and the Caribbean people can all benefit. 2

3 Puerto Rico a case study Hurricanes Irma and Maria had a dramatic effect on healthcare in Puerto Rico primarily due to failure of the energy infrastructure. Hospitals were without grid power, and out of backup power due to lack of fuel, hardening and maintenance. The storms resulted in an estimated 40,000 patient days without power, out of 2 million total annual patient days. In addition, hospital staff members were without gasoline to get to hospitals, and factories producing critical hospital supplies (intravenous fluids) were without grid power or adequate backup. Going forward, what energy infrastructure investments are advisable to help ensure a resilient healthcare system? Note: This is an illustrative example focused just on healthcare impacts. 3

4 Puerto Rico potential solutions Strategy A distributed fuel and fossil generation Hospital backup generation installation, hardening and spare parts/maintenance program On-site and regional self-powered hardened diesel storage Strategy B distributed solar and storage Hospital solar/storage installation, hardening and spare parts/maintenance program On-site and regional self-powered maintenance and spare parts facilities Strategy C grid hardening T&D upgrading near hospitals 4

5 The climate resilience investment evaluation model A five-stage model can be used to evaluate the costs and benefits of alternative resilience-oriented investments. Events Perils Asset Damage System Disruption Value Metrics 5

6 Events Extensive historical information is available on climate related events in the Caribbean, particularly storms. Source: NOAA 6

7 Perils Historical event information, appropriately adjusted via expert judgment, can be converted into formal probability distributions on key perils or direct causes of damage such as wind, rainfall and storm surge year return Period Source: World Health Organization Note: Hurricane Maria had reported gusts of 175 mph. 7

8 Asset damage Peril probability distributions can be converted in turn into damage estimates for individual assets: power plants, transmission lines, distribution systems; buildings, airports, seaports, telecom towers; roads, pipelines, telecom lines. Source: OAS USAID Caribbean Disaster Mitigation Project 8

9 System disruption Asset damage can then be scaled up to system disruption based on asset interdependencies, and existing response capabilities. Hospital H Fuel Depot Source: Google maps 9

10 Value metrics System disruption can then be converted into actionable value metrics that people really care about: access to energy, food, healthcare, telecom, transport and water. Source: Nathan Associates analysis Note: This is an illustrative example using just one health-related metric. 10

11 This model can be used to evaluate alternative strategies, and build the business case for the right one. Status Quo Investment Cost (equivalent):: $0 (incremental) Annual Impact: 5% chance of more than 20,000 patient days without power Strategy A distributed hardened fuel and fossil generation Investment Cost (equivalent): $300 million Annual Impact: <1% chance of more than 20,000 patient days without power Strategy B distributed hardened solar and storage Investment Cost (equivalent): $200 million Annual Benefit: <1% chance of more than 20,000 patient days without power Strategy C grid hardening Investment Cost (equivalent) :$250 million Annual Benefit: 2% chance of more than 20,000 patient days without power In this example, Strategy B is dominant. It has the same or better resilience benefits as the other strategies but is less costly and more sustainable. Note: This is an illustrative example not a formal recommendation. 11

12 Conclusion A 2013 study examined Puerto Rico s climate vulnerability and concluded that coastal communities of Puerto Rico, critical infrastructure, wildlife and ecosystems are all vulnerable to various impacts associated with changes in global, regional, and island weather and oceanographic conditions. It did not include any quantitative analysis of risks or impacts. Puerto Rico s State of the Climate : Assessing Puerto Rico s Social-Ecological Vulnerabilities in a Changing Climate, Puerto Rico Climate Change Council, A 2017 study examined the impact of the hurricane season and recommended $17 billion in rebuild investments It did not include any quantitative analysis of the benefits of the recommended investments, nor any analysis of alternative amounts and types of investments. Recommendations were guided instead by collective experience and professional judgment. Build Back Better: Reimagining and Strengthening the Power Grid of Puerto Rico, Puerto Rico Energy Resiliency Working Group, December In order to provide the greatest value to the people of the Caribbean and elsewhere, we need: Informed rigorous analysis of alternative resilience-oriented investments, and a clear and compelling business case for the right ones. Typically, formal analysis costing <1% of the investment cost will return at least 10-20% in increased benefit from improved decisions. 12