Business Blackout: When the Lights Go Out

In most parts of the world, power outages are relatively rare. However, extreme weather events are making them more frequent, and when they do happen, blackouts can disrupt daily activities and bring business operations to a halt, highlighting the need for a robust business continuity plan.

Key insights

The disruption a countrywide blackout in Spain caused is a reminder of the wide-ranging impacts of cascading power outages.
Climate change and extreme weather increase the risk of blackouts by damaging infrastructure and disrupting power generation operations.
For companies, blackouts are an issue because they disrupt daily life and business operations.
Aging grid infrastructure heightens vulnerability and is under additional pressure from growing demand for power from AI data centers.
The rapid growth of off-grid renewables is a sign that businesses are taking bold steps in business continuity.

When a 10-hour outage impacted Spain, Portugal and parts of Southern France in 2025 — costing the Spanish economy an estimated €400 million¹ — businesses everywhere were reminded of their vulnerability to disruption. Across the Iberian Peninsula, transportation systems came to a standstill and daily activities were disrupted, with phone networks, internet services and electronic payment systems all down.

The incident highlighted the vulnerabilities produced by an evolving energy mix, aging grid infrastructure and extreme weather. It was a reminder of our reliance on digital technologies and the shrinking capacity of analog contingencies to fill the void.

According to the Spanish government, a voltage surge that began in southern Spain caused the blackout, prompting a chain reaction of protective shutdowns. The grid operator said extreme temperature variations had caused anomalous oscillations in very-high-voltage lines.²

While the solutions to build grid resilience may seem out of businesses' control, they can mitigate the impact that future blackouts have on their operations by building in robust contingencies as part of their business continuity plans.

Five ways extreme weather tests blackout resiliency

The 2025 Spain blackout was extreme but not unique. In the last quarter century, 80% of major power outages in the US reported by utility companies have been weather related.³

Floods, wildfires and severe convective storms can damage physical infrastructure. Heat waves can cause equipment to fail, and droughts can make it more difficult to generate hydroelectric power or ensure adequate cooling water for power plants and nuclear reactors.

The impact of climate change and extreme weather on the incidence of blackouts can be broadly grouped into five areas:

Direct impact of extreme heat and cold

The power stations, substations, transformers and transmission lines that comprise our electrical power infrastructure weren't designed to withstand today's extreme weather and energy needs. Increased demand for electricity during heat waves and cold snaps can overload transmission systems, which — when coupled with extreme external temperatures — can cause catastrophic failures.

In Texas during the winter of 2021, nearly half of the grid's generating capacity failed due to record cold temperatures during Storm Uri, coupled with a lack of winterization and grid redundancies. It led to rolling blackouts that impacted 4.5 million homes and businesses and limited access to water, food and heat for several days.

Transformers are also susceptible to failure in heat waves if they exceed maximum operating temperatures. "With some of these legacy transformers and substations, their optimal operability starts to reduce significantly when the temperature exceeds 55 degrees Celsius (131 degrees Fahrenheit)," says Jon Parker, executive director, head of Power, Gallagher Specialty. "While that sounds extremely high, in parts of the Middle East it regularly gets to 50 degrees Celsius in the summer months."

Pre-emptive blackouts in wildfire zones

In the past decade, utility firms have faced substantial liability claims for wildfires. Faulty power lines are more likely to ignite wildfires during hot and dry conditions, which can precipitate blackouts when fire damages the electrical infrastructure.

Scheduled, or pre-emptive, blackouts during peak wildfire conditions are becoming more prevalent as power utilities seek to lower the risk of accidental ignitions by transmission infrastructure. Since California's Public Utilities Commission ruled that firms can enact Public Safety Power Shutoff orders to reduce wildfire risk, these orders have been enacted up to up to five times a year, some lasting up to 48 hours.

Disrupted cooling for power plants

Nuclear and thermal power plants often rely on nearby waterways for cooling. Lakes and rivers drying up or overheating in extreme weather can significantly impact cooling systems, forcing plants to reduce their output or even shut down completely.

In France, where nuclear power plants produce nearly 65% of electricity,⁴ energy firms have had to reduce output in summer months for several years in a row, due to the impact of extreme weather on cooling.

Impact of drought on hydropower output

The depletion of water from lakes, rivers and reservoirs is preventing hydropower plants from operating at full capacity.

Brazil, which produces nearly three-quarters of its renewable energy supply using hydro, was forced to cut production in the north of the country, due to prolonged drought in 2024.⁵

Similarly, severe drought in China in 2022 caused river levels to drop and curbed hydropower output, most notably in the Yangtze River basin, where hydropower supplies Sichuan province with around 80% of its energy.

Storm damage

Severe weather can bring down transmission wires and poles. Prolonged outages are also more likely, as weather conditions and damage to transportation infrastructure may hamper recovery efforts.

Damage from Hurricane Maria (Category 5) in 2017 and Hurricane Fiona (Category 1 on landfall) in 2022 triggered power outages in Puerto Rico, for instance. The storms cut off electricity supply for its 1.5 million customers and resulted in a combined loss of about $113.3 billion.⁶

Why aging infrastructure is more vulnerable to climate extremes

Aging electrical infrastructure is more vulnerable to disruption from extreme weather and to volatility as the energy mix shifts. Aging infrastructure is a particular issue in developed countries. In the US, for instance, over 70% of transmission lines in the electrical grid are more than 25 years old, and some haven't been upgraded since they were built in the 1930s.

Older transformers, power lines and other components are more vulnerable to the more extreme and frequent weather events we see today. Aging infrastructure is also struggling to keep up with energy demands it was never designed to handle.

The shifting energy mix adds another dimension, as older grids weren't set up for such a fast-paced energy system. Lacking physical capacity to accommodate renewable energy systems, they're more vulnerable to network instability.

According to research published in Nature Communications,⁶ blackouts induced by climate extremes aren't only the failure of transmission networks, but also of more vulnerable and extensive distribution networks and environment-sensitive renewable generation capacity.

"In the UK, the National Grid has historically supported relatively small numbers of large power stations," says Will Peilow, executive partner, Energy, Power and Renewables, Gallagher Specialty.

Older centralized grid systems were designed to manage a few large-scale power sources, rather than support the diverse and distributed energy landscape we see today.

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The UK National Grid is now being challenged to integrate large numbers of small power generation installations, but with infrastructure that isn't yet capable of supporting the diversity of solutions and number of facilities.

"We are still heavily reliant on carbon-intensive electricity production from gas and oil-fired power stations, and the infrastructure simply isn't ready for a full transition," says Chris Noah, managing director for Gallagher UK's Retail and Renewable Energy practice. "Even if we produce large amounts of renewable energy, the real challenge lies in the National Grid's ability to handle 100% zero-carbon electricity reliably.

"The rise of inverter-based technologies — like wind, solar, and storage — puts the inherent stability of the network at risk," he adds. "That's why the National Grid must implement systems that ensure stability while still meeting net-zero targets."

The AI data center power grab

The rising demand for power from AI data centers adds further layers of complexity and interconnected risk. Aging grids are being challenged to support the growth of artificial intelligence and cryptocurrencies, alongside broader electrification trends.

Brazil, for instance, has 60 data centers in operation across the country and 46 more either under construction or in planning. There are concerns that power-hungry demands from data centers will clash with already stretched energy resources for public consumption.⁷

"While data centers have focused on improving efficiency to reduce power usage for servers and cooling systems, the level of capacity needed to manage the AI revolution is no longer an efficiency issue but a power generation issue," says Stefan Szulc, executive director, Energy, Gallagher.

How to reduce business interruption with effective continuity planning

Today's realities call for investment in modern and resilient grid systems

Recent blackouts underline the importance of modernizing global power infrastructure to mitigate future risks.

Technology and innovation are a key part of the solution, in the form of smart grids, renewable generation and effective off-ramps for renewable power. While solutions for automating and digitizing the grid aren't yet in widespread use, when they arrive, they'll make it easier to incorporate energy from renewable sources. Smart grids allow operators to better handle load volatility and changes.

Upgrading and futureproofing power infrastructure will take a concerted approach from different stakeholder groups, Szulc says. "In particular, there needs to be innovation in the form of collaboration between data center owners and renewable energy developers, to distribute power in the smartest way."

Such collaboration may involve an increased number of power purchase agreements, where offtake agreements with data centers could drive financing of new renewable projects.

It's not a matter of if, but when, a power outage impacts your business, either directly or indirectly through your suppliers. Disruption to critical infrastructure operations and loss of productivity from power outages can cause prolonged business interruption, in addition to impacting staff safety and ability to travel to work.

In terms of secondary impacts, transport and logistics delays and inventory shortages due to power cuts can disrupt supply chains, which can cascade through other regions and territories. Power outages can disrupt other critical services like healthcare, essential infrastructure such as water and transportation, and emergency response, with cascading effects.

In 2011, following the devastating Tohoku earthquake and tsunami in Japan, level 7 meltdowns at the Fukushima Daiichi nuclear reactor prompted rolling blackouts across the Kanto prefecture, including megacity Tokyo. The power outages further contributed to the disaster, prompting a slowdown in economic activity, with impacts felt across global supply chains.

The increasing frequency and intensity of climate-driven outages call for robust business continuity planning that enables a business to maintain critical operations and recover quickly once systems are restored, mitigating the impact during power outages.

An effective plan can reduce the amount of thinking time needed following a disruptive incident. It should provide a framework for incident management and decision-making, identifying critical staff and altered/alternative workspaces that can be quickly leveraged in the event of a crisis.

Where possible, firms may want to consider shifting to manual payment systems and alternative processes. It's important to consider the impact beyond your organization's four walls, including how an outage might impact key suppliers and their inventory systems.

A business continuity plan reduces the operational impact of an incident by directly targeting the recovery of an organization's value drivers — those business processes that directly drive revenue and reputation — and enables an organization to recover more efficiently and effectively following a major business disruption.

The best continuity plans are those that are regularly reviewed against a range of scenarios. By including a prolonged power outage within scenario planning, businesses can map the potential impacts and stress test how their business interruption insurance might respond.

Regularly testing continuity plans and designating roles and responsibilities is an essential part of strategic risk management. It improves a company's ability to respond and for business leaders to make decisions under pressure.

Building energy resilience into business continuity plans

More than 70% of companies that don't have a comprehensive business continuity plan fail to recover from a significant business interruption. Having one in place is one way to reduce the impact of a power outage. This plan could include:

Alternative sites. Identify backup locations to shift operations if needed.
Backup power. Acquire generators or battery storage solutions to maintain critical functions.
Onsite renewables. Consider solar or wind systems as costs decline.

Businesses considering onsite energy generation and storage facilities should consult with experts who can advise on the impacts to people, property and liability risks. While the safety and quality of technologies such as solar panels and lithium-ion batteries are improving all the time, they do change a business's risk profile and may impact insurance coverage and premiums.

The need to consider risk is especially relevant given that, in the US, the commercial solar market grew by 8% during 2024,⁸ signaling that more firms are weighing the trade-offs between resilience, sustainability and risk.

Energy resilience is a key pillar of operational continuity. To ensure resilience is effectively embedded within a broader strategy, consider the elements in this business continuity plan checklist — each one supports a comprehensive approach to ensuring operational resilience.

Assess impact. Identify critical functions and evaluate how disruptions could affect them.
Understand risks. Analyze internal and external threats to operations.
Develop a plan. Outline recovery steps, assign roles and document procedures.
Prepare for crisis. Establish communication protocols and leadership structures.
Test and train. Run simulations and ensure staff are familiar with their roles.
Review regularly. Update the plan as risks, operation, and technologies evolve.

Published September 2025

Sources

¹Domènech, Josep Mestres, and Zoel Martín Vilató. "The Economic Impact of the Blackout in Detail," CaixaBank Research, 18 Jun 2025.

²"Spain Will Take 'All Necessary Measures' to Prevent Another Blackout, Says PM," BBC News, 28 Apr 2025.

³"Weather-Related Power Outages Rising," Climate Central, 24 Apr 2024.

⁴"Energy System of France," IEA, accessed 16 Jul 2025.

⁵Fucuchima, Leticia. "Northern Brazil Cuts Hydro Power Use With Prolonged Drought," Reuters, 8 Aug 2024.

⁶Xu, Luo, et al. "Quantifying Cascading Power Outages During Climate Extremes Considering Renewable Energy Integration," Nature Communications, 16 Mar 2025.

⁷Lima, Thiago. "Power Struggle: Will Brazil's Booming Datacentre Industry Leave Ordinary People in the Dark?" The Guardian, 4 Mar 2025.

⁸"REPORT: Solar Adds More New Capacity to the Grid in 2024 Than Any Energy Technology in the Past Two Decades," Solar Energy Industries Association (SEIA), 11 Mar 2025.