Experts Say Power Outage Costs Vastly Underestimated

New analysis finds current methods fail to capture full economic impact of grid failures

Jan. 27, 2026 at 1:15pm

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A new report by the clean energy nonprofit RMI suggests that current insurance metrics and estimating tools significantly undercount the true economic damage caused by power outages, often missing the 'non-linear compounding losses' that occur when the grid stays down for extended periods. The authors argue that traditional approaches like the Value of Lost Load (VoLL) fail to capture the broader systems-wide impacts, and they point to alternative models that could provide a more accurate assessment of the costs.

Why it matters

Accurately pricing the full economic impact of power outages is crucial for driving investments in grid resilience and hardening infrastructure to withstand extreme weather events, which are becoming more frequent and severe due to climate change. Underestimating these costs prevents communities from making the necessary upgrades to their power systems.

The details

The report finds that current insurance metrics focus too narrowly on physical property damage while ignoring broader economic disruptions like food and medicine spoilage, transportation issues, and supply chain impacts that can extend well beyond the outage area. In the aftermath of Hurricanes Sandy and Harvey, one study found that business interruption losses were 800% to 900% higher than actual property damages. The authors suggest two alternative models developed by the Lawrence Berkeley National Laboratory and the University of Southern California that incorporate more comprehensive economic factors.

  • The report was published on January 27, 2026.
  • The analysis was conducted in the aftermath of a major winter storm that left hundreds of thousands without power across the U.S.

The players

RMI

A clean energy nonprofit that conducted the analysis on the economic impacts of power outages.

Elizabeth Harnett

A research and impact expert at RMI's Center for Climate-Aligned Finance and co-author of the report.

Lawrence Berkeley National Laboratory (LBNL)

A U.S. Department of Energy research laboratory that developed models to better assess outage costs by customer class and economy-wide impacts.

University of Southern California

A university that collaborated with LBNL on a model combining behavioral survey data and computer simulations to evaluate the broader disequilibrium effects of power outages.

Swiss Re

A reinsurance company that found annual insured losses from winter storms in the U.S. more than tripled from 2011-2020 to 2021-2025.

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What they’re saying

“The methodologies that go into power outage data in particular are often based on survey data, taken after the storms at a specific point in time, and often, as a result, underestimate the kind of systems-wide impacts that occurred.”

— Elizabeth Harnett, research and impact expert at RMI's Center for Climate-Aligned Finance

“If we were better able to put a higher price on the impact, doing grid hardening or fortifying roofs against these kind of storms, or improving transport resilience, would be much more likely to be invested in both at an individual level, at a community level, but also by local governments.”

— Elizabeth Harnett, research and impact expert at RMI's Center for Climate-Aligned Finance

What’s next

The report's authors suggest that developing new, forward-looking methods less reliant on historical data and survey responses could provide a more accurate assessment of the economic costs of power outages and spur greater investment in grid resilience.

The takeaway

This analysis highlights the need for more comprehensive and forward-looking approaches to measuring the true economic impact of power outages, which are becoming more frequent and severe due to climate change. Accurately pricing these costs is crucial for driving the necessary investments in infrastructure hardening and resilience at the individual, community, and government levels.