By James Heath, CEO, National Infrastructure Commission
Building resilience into our economic systems, infrastructure and supply chains is important. Whether it’s the concentrations of risk we saw come to a head in the global financial crisis, our reliance on imports of natural gas, or the realisation of how reliant the world’s shipping systems are on the Suez Canal – events have taught us that sectors or networks which lack diversity and spare capacity are more vulnerable to shocks and single points of failure.
Are we becoming more or less resilient as a nation? The answer is almost definitely less resilient. That’s because the risk profile is growing and our response is not keeping pace with the urgency and scale of the challenge.
However, it’s hard to give a precise answer to my question - partly because we don’t systematically measure our level of exposure and vulnerabilities to risks. In almost all cases, infrastructure operators will need to consider multiple threats and pressures in the round, including climate change, population growth and supply chain disruption.
Furthermore, we haven’t defined what good resilience looks like for our infrastructure systems in these areas. How much resilience do we want and how much would it cost to meet effective standards of resilience?
What we do know is the risks are growing. The Climate Change Committee’s most recent Adaptation Progress Report, for example, documented the increased level of climate risk facing the UK. The impacts from extreme weather events over the last year or so – whether record breaking temperatures, widespread drought conditions and frequent storms – shows the UK’s critical exposure and vulnerability today.
There is an urgent need to adapt our economic infrastructure sectors – energy, water, digital and transport – to the effects of climate change and to other risks. This concerns not just how we build new infrastructure, but also how we adapt and retrofit the installed base of infrastructure that will be here for decades to come.
A case in point is the resilience of our electricity system, which will become increasingly important as we electrify domestic heat and transport to meet net zero targets. There are both physical risks to electricity grids from extreme weather – like what happened during Storm Arwen in 2021 when nearly one million UK homes were left without power due to storm damage. But there are also questions about how electricity generation based on a high level of renewable energy can balance supply and demand in prolonged periods of very low wind or no sunshine.
There have been some recent and welcome steps forward on resilience planning, including the publication of the Government’s National Resilience Framework in December 2022. However, significant gaps remain in delivering climate resilient infrastructure. Reductions in climate exposure and vulnerability are not happening at the rates needed to manage risk.
How we mitigate the risk of cascading failures in interconnected systems is also becoming a pressing issue. We saw this during the August 2019 power interruption – originally caused by a lighting strike on an electricity circuit - which led to a cascade of impacts resulting in trains being stranded for hours, alongside other impacts. We need better mechanisms for cross-government or cross-regulator collaboration that enable more systematic assessment of interdependency risks across infrastructure.
In a recent joint letter to Government from the National Infrastructure Commission and the Climate Change Committee, we emphasised the need for Cabinet-level oversight of interdependencies, a recommendation supported by the Joint Committee on the National Security Strategy in its recent inquiry into climate adaptation and critical national infrastructure.
One of the main reasons we are in this position is that we don’t yet have an overarching policy framework that sets clear objectives and targets on resilience. And we don’t yet have a policy system with incentives that ensures resilience is properly valued and invested in by both government and the private sector.
At the Commission, we have made recommendations to the Government on what needs to happen to close the resilience gap. First, the Government should develop and publish a set of outcome-based resilience standards for infrastructure sectors, providing clarity on what households and businesses can expect – and which progress is measured against. An example might be building flood defence to deliver standards on the annual probability of properties being flooded; or standards for how quickly water or energy supplies should be restored in the event of a supply loss. Some of these standards are already in place – but we need to fill in the gaps and ensure standards are up to date. We should be prepared to have an open conversation about how much resilience do we want and what are we willing to pay to get it.
Our second recommendation was that all relevant economic regulators (Ofgem, Ofcom and the Office of Road and Rail) should be given explicit statutory duties to promote resilience, including ensuring that price review decisions are consistent with standards being met by operators. Between now and 2029 there will be new price controls for electricity, gas, twice for water and a new control period for Network Rail. Adaptation and resilience policy needs to be aligned with these regulatory cycles. If new resilience standards are not developed until 2030 – which is what the Government’s new Framework suggests – then every one of those cycles will be missed and the investment window to meet those standards will be pushed back until the 2030s.
Our third recommendation is that infrastructure operators should develop long-term resilience strategies and carry out regular stress tests to identify vulnerabilities and improve preparedness. This exercise should be overseen by the regulators in a similar way to the model adopted by the financial sector after the 2008 crisis. While governments will always tend to get involved when there are serious failures, it’s also important that commercial operators – who are, and should be, responsible for ensuring their services are resilient – are exposed to the costs of failures.
Government has forthcoming opportunities to embed better infrastructure resilience in these ways – through how it takes forward its National Resilience Framework and by showing greater ambition in the Third National Adaptation Programme. It must take them.