The Biggest Threat to the Economy Could Come From Outer Space

Imagine waking up just after midnight to a sky so bright you swear it must be early morning. Imagine seeing the Northern Lights as far south as Cuba or Hawaii. Imagine that the same phenomena behind both has also generated electric fields in the ground strong enough to power small electronics. That's what happened in 1859, when the earth was struck by the most severe geomagnetic storm ever recorded.

Forget asset bubbles, recessions, or hurricanes—space weather could prove far more economically harmful. A severe geomagnetic storm—a sudden, violent eruption of gas and magnetic fields from the sun's surface—could prove particularly devastating. If the 1859 storm, known as the "Carrington event," were to recur today it could cause trillions of dollars in economic damage and take years to recover from, according to estimates.

The sun would sneeze and the economy could shatter.

That's a worst-case scenario, of course. NASA Administrator Charles Bolden was less dramatic at a space-weather conference hosted by the agency last week, though he did say that such events can be "just as punishing as a tornado" and are "a problem that crosses all borders." Magnetic storms can force Earth's magnetic fields to go temporarily haywire, overwhelming power grids.

The 1859 event didn't cause as much damage as it would today—electrical engineering was in its infancy—but it was globally felt. Here's how a 2008 space-weather report from the National Academy of Sciences described that year's storm:

From Aug. 28 through Sept. 4, auroral displays of extraordinary brilliance were observed throughout North and South America, Europe, Asia, and Australia, and were seen as far south as Hawaii, the Caribbean, and Central America in the Northern Hemisphere and in the Southern Hemisphere as far north as Santiago, Chile. Even after daybreak, when the aurora was no longer visible, its presence continued to be felt through the effect of the auroral currents. Magnetic observatories recorded disturbances in Earth's field so extreme that magnetometer traces were driven off scale, and telegraph networks around the world—the "Victorian Internet"—experienced major disruptions and outages.... In several locations, operators disconnected their systems from the batteries and sent messages using only the current induced by the aurora.

In other words, they literally ran the telegraphs from the electrical fields generated by the storm.

The 1859 event may be an extreme case, but there are more-recent examples of such space weather: in March 1989 a geomagnetic storm took down northeastern Canada's Hydro-Quebec power grid in just 90 seconds, leaving millions without power in the cold for up to nine hours. And a set of "Halloween" solar storms between October and November of 2003 sparked a National Academy of Sciences-led meeting on the societal and economic impact of space weather, which served as the basis of the report.

But it's not just scientists who are concerned about space weather. Lloyd's of London, the giant insurer, issued a report on the issue in 2010. In the foreword to the report, Lloyd's Tom Bolt warned of a scientist-predicted spike between 2012 and 2015. "In terms of cycles, we are in late autumn and heading into winter," he wrote then. A severe space-weather event could prove devastating, according to the Lloyd's report.

In the worst case it can permanently damage transformers. In most cases, systems protecting power grids will detect problems and switch off before serious damage occurs. However, this may lead to a cascade effect in which more and more systems are switched off, leading to complete grid shutdown. In these situations it will take many hours to restore grid operation, causing disruption to operations and services, and potential loss of income.

The 1989 storm permanently damaged a $12 million New Jersey transformer. In 1921, a storm 10 times as bad struck. Today, that storm would permanently damage roughly 350 transformers, causing blackouts that would affect as many as 130 million people, according to a Metatech estimate.

An outside analysis conducted by Metatech for the Electromagnetic Pulse Commission and the Federal Emergency Management Agency found that the effects of a severe geomagnetic storm would not only be widespread, but long-lived. Such an event has "not only the potential for large-scale blackouts but, more troubling ... the potential for permanent damage that could lead to extraordinarily long restoration times," Metatech's John Kappenman told the NAS report's authors.

In a globalized world, all kinds of sectors would be impacted by a power failure. Fuel, food, water, sanitation, communications, medical/health, finance, and transportation would all feel cascading effects. Many businesses rely solely on satellite navigation for transportation on land and sea, and cell phones would be vulnerable to interference.

"Impacts would be felt on interdependent infrastructures, with, for example, potable water distribution affected within several hours; perishable foods and medications lost in about 12-24 hours; and immediate or eventual loss of heating/air conditioning, sewage disposal, phone service, transportation, fuel resupply, and so on," the NAS report found.

Hurricane Katrina caused roughly $80 billion to $125 billion in damage, according to the report. A future geomagnetic storm like the 1859 event could cost 10 to 20 times as much and take up to a decade to fully recover from, according to Metatech's estimates.