Uncovering the Hidden Economic Impact of Power Outages

The day after a major winter storm swept across the US, hundreds of thousands of homes and businesses remained without electricity, and the prospect of more outages loomed amid frigid temperatures. One early estimate suggested the storm could result in $24 billion in total economic losses.

However, a new analysis by RMI, a clean energy nonprofit, indicates that current methods for calculating the damages from power outages likely underestimate their impact—especially during similar storms.

The report reveals that existing insurance metrics focus too narrowly on physical property damage, neglecting the “non-linear compounding losses” that occur when the grid remains down. These losses include spoilage of food and medicine, as well as transportation disruptions that can extend far beyond the outage area. Traditional estimating tools, such as the Value of Lost Load (VoLL), fail to capture the full reality of a multi-hour blackout, particularly beyond a specific time frame or geographic area, according to the authors.

“The methodologies that go into power outage data are often based on survey data collected after storms at a specific point in time, which can lead to underestimating the systems-wide impacts that occur,” said co-author Elizabeth Harnett, a research and impact expert at RMI’s Center for Climate-Aligned Finance.

This gap in understanding may be substantial. In the aftermath of Hurricanes Sandy and Harvey, one study found that business interruption losses were 800% to 900% higher than actual property damages. Even if business interruptions added just 30% to 50% to direct totals, the RMI authors noted, it would imply at least an additional $35 billion per year that are not captured in US disaster-loss calculations.

The RMI authors propose two alternative tools based on VoLL but with enhancements. One, developed by the Lawrence Berkeley National Laboratory (LBNL), assesses outage costs by customer class—such as residential, commercial, and industrial—and is particularly useful for estimating localized and shorter-term events. The other, created by LBNL and the University of Southern California, combines behavioral survey data with a computer model to evaluate economy-wide “disequilibrium” effects, including evacuation, supply-chain disruption, and recovery costs.

The authors emphasize the need for new, forward-looking methods that rely less on historical data and survey responses.

The costs associated with winter weather in the US are escalating. According to reinsurer Swiss Re, annual insured losses from winter storms averaged $7 billion from 2021 to 2025, more than triple the average from 2011 to 2020. Ultimately, failing to accurately assess the chaos of a blackout hinders the investments necessary to mitigate it—investments in resilience.

“If we were better able to put a higher price on the impact,” Harnett stated, “doing grid hardening or fortifying roofs against these kinds of storms, or improving transport resilience, would be much more likely to be invested in at both individual and community levels, as well as by local governments.”

Photo: A “Closed No Power” sign at a Starbucks location following a winter storm in Austin, Texas, on Feb 3, 2023. Photographer: Jordan Vonderhaar/Bloomberg

Copyright 2026 Bloomberg.

The day after a major winter storm swept across the US, hundreds of thousands of homes and businesses remained without electricity, and the prospect of more outages loomed amid frigid temperatures. One early estimate suggested the storm could result in $24 billion in total economic losses.

However, a new analysis by RMI, a clean energy nonprofit, indicates that current methods for calculating the damages from power outages likely underestimate their impact—especially during similar storms.

The report reveals that existing insurance metrics focus too narrowly on physical property damage, neglecting the “non-linear compounding losses” that occur when the grid remains down. These losses include spoilage of food and medicine, as well as transportation disruptions that can extend far beyond the outage area. Traditional estimating tools, such as the Value of Lost Load (VoLL), fail to capture the full reality of a multi-hour blackout, particularly beyond a specific time frame or geographic area, according to the authors.

“The methodologies that go into power outage data are often based on survey data collected after storms at a specific point in time, which can lead to underestimating the systems-wide impacts that occur,” said co-author Elizabeth Harnett, a research and impact expert at RMI’s Center for Climate-Aligned Finance.

This gap in understanding may be substantial. In the aftermath of Hurricanes Sandy and Harvey, one study found that business interruption losses were 800% to 900% higher than actual property damages. Even if business interruptions added just 30% to 50% to direct totals, the RMI authors noted, it would imply at least an additional $35 billion per year that are not captured in US disaster-loss calculations.

The RMI authors propose two alternative tools based on VoLL but with enhancements. One, developed by the Lawrence Berkeley National Laboratory (LBNL), assesses outage costs by customer class—such as residential, commercial, and industrial—and is particularly useful for estimating localized and shorter-term events. The other, created by LBNL and the University of Southern California, combines behavioral survey data with a computer model to evaluate economy-wide “disequilibrium” effects, including evacuation, supply-chain disruption, and recovery costs.

The authors emphasize the need for new, forward-looking methods that rely less on historical data and survey responses.

The costs associated with winter weather in the US are escalating. According to reinsurer Swiss Re, annual insured losses from winter storms averaged $7 billion from 2021 to 2025, more than triple the average from 2011 to 2020. Ultimately, failing to accurately assess the chaos of a blackout hinders the investments necessary to mitigate it—investments in resilience.

“If we were better able to put a higher price on the impact,” Harnett stated, “doing grid hardening or fortifying roofs against these kinds of storms, or improving transport resilience, would be much more likely to be invested in at both individual and community levels, as well as by local governments.”

Photo: A “Closed No Power” sign at a Starbucks location following a winter storm in Austin, Texas, on Feb 3, 2023. Photographer: Jordan Vonderhaar/Bloomberg

Copyright 2026 Bloomberg.