Winter storms: the cost drivers and associated opportunities for investors

Between 1980 and 2024, there were more billion-dollar winter storms than billion-dollar wildfires (24 winter storms versus 23 wildfires). A winter storm might not be the first natural disaster you think of, but it can be costly, deadly, and massive.

A winter storm (or winter weather event) is a combination of heavy snow, blowing snow, and/or dangerous wind chills that impacts public safety, transportation, and/or commerce. It can also include sleet, ice, freezing rain, and cold temperatures.

A winter storm can cover a much larger area than a tornado, hurricane, or wildfire. It can sweep across the entire country, causing freezing temperatures from the Mexican border to the Canadian border.

The costs of a winter storm

Most of the direct damages from a winter storm come from damage to buildings, vehicles, and infrastructure, which NOAA factors into its official disaster costs. However, what’s included in this official calculation is an underreported figure: it does not factor in costs related to business interruptions, water contamination, the forgone economic impact from a loss of power, the loss of human life, and other human and social costs.

A winter storm with a direct-cost price tag of less than a billion dollars can cause multiple billions of dollars of losses when loss of life and interruptions in supply chains and business activity are incorporated. 

Winter Storm Uri: A Case-Study

Consider Winter Storm Uri as a case in point. In February of 2021, a deep freeze passed through the Midwest, overwhelming the electrical grid and leaving millions without power, heat, or access to clean water.

The reinsurance company Munich Re estimated Uri's total cost at $30 billion, and NOAA estimated its costs at $27.2 billion. But, by incorporating other indirect costs, one estimate put Uri’s total cost at $300 billion. Two other estimates came in at $195 billion and $196 billion, respectively. If those estimates are to be taken seriously, at the time, Uri was the most expensive natural disaster to hit the United States in its history.

In the state of Texas alone, where the majority of the damage took place, estimates ranged from $80 billion to $155 billion. In comparison, AccuWeather estimated the costs for the entire prior Atlantic basin hurricane season in 2020 to be $60-65 billion.

Geoff Roberts, chairman of the Beyond Storms Infrastructure Network Resilience Task Committee, which produced the report estimating Uri’s total cost at $300 billion, said, “To put these amounts in perspective, this is substantially greater than either of the two most costly hurricanes in U.S. history. Harvey had approximately $145 billion and Katrina approximately $161 billion.”

The damages caused by winter storms like Uri can be broken into two categories: direct damages and indirect damages. 

Direct damages

Most direct damages, of which only a portion tend to be insured, come from damages to buildings, infrastructure, and motor vehicle crashes. Winter storms can have high winds and blowing snow, but unlike hurricanes and tornadoes, most property damage from a winter storm stems from freezing temperatures.

For example, the loss of power and the failure of the electrical grid during Uri led to millions of buildings and people without power. Without power to heat buildings, water pipes froze and then burst, causing extensive damage. Icy roads led to unsafe driving conditions and multi-car wrecks. The claims management company Crawford said that 96% of claims from the storm came from issues related to freezing or water damage.

The confluence of cold temperatures and electrical grid failures can lead to extensive damages in critical infrastructure. During Uri, multiple water line breaks occurred throughout Texas’s water distribution system. The combination of frozen and burst pipes with power outages led to the failure of water treatment plants, and Texas imposed orders to boil water to kill water-borne pathogens.

Indirect damages

The indirect damages from winter storms include loss of life, forgone economic activity, and the estimated costs of not having uninterrupted power.

• Loss of life: NOAA does not include costs related to loss of life when tabulating the cost of disasters, but winter storms are particularly dangerous for vulnerable populations. Uri led to 246 deaths, two-thirds of which came from hypothermia. Across the U.S. from 2021 to 2024 (including Uri), 411 people have died from the effects of winter storms.
• Economic damages: Economic activity gets paralyzed during a winter storm. Planes are grounded, roads are too dangerous to drive on, the power is inconsistent or out entirely, supply chains stall, and agricultural losses pile up. During Uri, the petrochemical supply chain ground to a halt. The total damages (both direct and indirect) to the farming and ranching communities exceeded over a billion dollars. Ranchers lost cattle, and some farmers lost 60% of their crop.
• Grid failure: What made Uri so destructive was the prolonged failure of the electrical grid. The demand during the deep freeze led to a grid that first became overwhelmed and then failed. In Texas, 69% of Texans lost power during the storm, and 49% had disruptions in water service. Texas has an independent electrical grid; it is the only state in the continental U.S. not substantially interconnected with either the Eastern or Western Interconnection. This independence created a vulnerability: it became overwhelmed and couldn’t draw power from elsewhere. A report from after the storm found two main reasons for the grid failure: First, the Electric Reliability Council of Texas (ERCOT), which manages the grid, underestimated peak demand by 14%. Second, weather forecasts misjudged the severity and timing of the storm.

Uri was so expensive because it was a perfect storm: a prolonged freeze combined with vulnerabilities in critical infrastructure—namely, an electrical grid that was unable to meet the swelling demand. In terms of size, severity, and cost, Uri is not representative of the majority of winter storms. But it serves as a useful illustration of the common cost drivers for winter storms—no matter how big the price tag gets.

The drivers that make winter storms costly and deadly

Three drivers contribute to costly and deadly winter storms:

1. An old and vulnerable power grid can easily be overwhelmed with demand or can freeze in cold temperatures. Consistent electricity is critical during a winter storm; its absence can lead to hypothermia for vulnerable people, freezes, burst pipes, and ensuing water damage in vulnerable buildings.
2. Assets and properties that have not been winterized to withstand snow, freezing temperatures, high winds, and ice are most vulnerable. An analysis of the most common types of winter storm damage to property identified the following common failures: frozen and burst pipes, drain backups, ice damming (ice accumulation on your roof can prevent melting snow from draining properly, gutter damage due to snowfall, and wind damage to a structure’s exterior. 
3. An unprepared response from local officials to anticipate a winter storm can cost lives and add unnecessary expenses. This includes failures to fortify roads and other infrastructure when winter weather hits, or provide adequate emergency response when a storm strands people in the cold. A study by IHS Global Insight found that states can lose between $70 million to $700 million per day in lost wages, retail sales, and tax revenues when winter weather halts economic activity and commerce. 

However, these three drivers are not equal. By far, the biggest driver contributing to the enormous price tags of billion-dollar winter storms is a vulnerable, old, and un-winterized power grid. Even with reliable power, pipes will still freeze, and water damage will occur, but a failed grid exponentially increases the likelihood of such direct costs. 

When the price tag of a winter storm incorporates indirect costs like loss of life and forgone business activity, the reliability of the electrical grid is still the most influential upstream driver of many downstream costs—from snow plows to emergency response services. If there is one driver of massive costs from winter storms, it’s unreliable and vulnerable power. Nothing else even comes close.

The levers to reduce the costs of winter storms

A winter storm in Buffalo, New York that dumps feet of snow will require a different response from a winter storm that casts a multi-state freeze across the southeast United States. But the levers—and opportunities for investors—to reduce their costs are similar.

1. Invest in grid winterization and resilience, modernization, and renewable energy production.
2. Invest in more winter-resilient materials to protect assets.
3. Invest in solutions and technologies that improve the response of local officials.

Invest in grid winterization and resilience, grid modernization, and renewable energy production

As The Epicenter wrote about recently in a briefing on electric grid resiliency, an old grid is not only a dirty grid but also a vulnerable one. The three solutions outlined in that briefing represent levers to reduce the costs of winter storms:

1. Modernize grid infrastructure to withstand winter storms: New “gridtech” (like advanced conductor cables and dynamic line ratings) can prepare the grid in anticipation of a winter storm and fortify it when it hits. 
2. Install more microgrids to reduce grid vulnerability: Municipalities across the country are adopting microgrids to build resiliency into power generation during winter storms that have the potential to knock out the grid. In Texas alone, microgrid growth is up nearly 20x in the last 10 years.
3. Roll out more renewable energy to reduce fossil-fuel dependence: A fossil-fuel-powered grid is particularly vulnerable during cold temperatures and winter storms. In 2022, during Winter Storm Elliott in the eastern U.S., 70% of the outages were caused by failing gas plants, and 16% were caused by failing coal plants. But while the fossil fuel fleet struggled, wind resources outperformed, providing critical support while gas plants were down.

But there is a fourth lever to build grid resilience specific to winter storms: 

4. Winterize the grid: Diversifying energy sources away from fossil fuels is one way to winterize the grid (as wind power tends to perform better in colder temperatures), but there are other winter-specific solutions:

• Installation of insulation on critical components throughout the grid (e.g. facilities, transmission lines, etc.)
• Construction to reduce the impact of windchill like permanent or temporary windbreaks, additional housing and structures, and barriers around critical equipment.
• Guidelines for the removal of ice and snow from critical equipment.
• Instructions for using temporary heat systems on localized freezing problems (e.g. heating blankets, catalytic heaters, or fuel line heaters).

Private companies like Prisma Photonics have fiber optic sensors, tech-enabled monitoring that detects ice build-up, and data-driven predictive maintenance so grid operators can harness the latest technology to winterize the grid. 

An economic analysis by the Federal Reserve Bank of Dallas found that winterizing the grid is cost-effective compared to the hundreds of billions of dollars of damages from a storm like Uri.

Invest in more winter-resilient materials to protect assets

Because the majority of the insured, direct damages from winter storms are property-related, more resilient and fortified building materials and construction practices can ensure buildings and plumbing can withstand even the coldest freezes or power outages. 

The credit rating company Moody’s has produced a new risk model that more effectively prices in the risks and potential damages of winter storms. The model identifies reduced risks when buildings adopt the latest building codes that specify insulation levels, snow loads, and plumbing protection. For example, meeting the most stringent standards for plumbing installation (like ice-dam prevention requirements that are required by the National Roofing Contractors Association) can reduce the risk of freeze-related plumbing disasters. 

The market for tech-enabled plumbing leak detection systems continues to grow. Wifi-enabled water alarms and leak detectors can surface a nascent leak before it becomes a big one, and companies that are building Internet of Things (IoT) devices and sensors can seize opportunities in markets with high risks of frozen pipes.  

Invest in solutions and technologies that improve the response of local officials

An effective response by state and local officials can also reduce costs and prevent damages. The solutions outlined in this section are wide-ranging—everything from better communication during a winter storm to unexpected road de-icing options like cheese brine—but this lever is modest compared to those described above.

Solutions that enable effective communication during emergencies and disasters:

Whether it’s a wildfire or a winter storm that’s immobilized a power grid and cut power, local officials need to be able to reach their constituents. Poor communication from local officials was an issue during Uri and the recent California wildfires. Regardless of the disaster, new technologies can help make sure people have the information they need to care for their families and property. Before a winter storm, well-timed messages can help residents ensure their plumbing is insulated and reduce the risk of line breaks and burst pipes.

In partnership with the state of Florida, Futuri, an AI-powered software company, developed the Broadcast Emergency Alerting and Communication Operational Network, or BEACON. BEACON uses AI to convert text into speech for AM radio broadcasts, allowing government officials and emergency personnel to craft important public alerts quickly and monitor how key messages are distributed (and to whom).

Communication access is also important. For example, translation of alerts into different languages is of particular importance, especially where translation solutions, such as the models highlighted by Just Solutions, can enable the timely and accurate dissemination of critical information. Meanwhile, solutions like AccesSos can provide emergency communications for people who are deaf or hard of hearing. 

Solutions that make roads safer:

Icy, snowy roads are dangerous roads, and the damages from a winter storm can be reduced by investing in road resilience and safety.

• De-icing additives like Winterpave lower the freezing point of the water on asphalt (essentially an anti-freeze for the road). When the temperature drops and the snow falls, Winterpave prevents snow and ice from sticking to the road.
• De-icing alternatives like cheese brine and potato skins might sound like strange substitutes for putting salt on icy roadways, but they’re effective. Potato juice, a byproduct of making vodka, is an effective de-icer. In Wisconsin (obviously), local officials are swapping out traditional road salt for cheese brine as a de-icer. 
• Solar-powered roads that melt snow like Borehole Thermal Energy Storage (BTES) can prevent the build-up of ice and snow on roads. A BTES system captures solar heat during the summer months and stores it underground. In winter, the stored heat is transferred to the road’s surface, warming the pavement. As with many resiliency solutions, BTES systems may have higher upfront costs but the long-term savings potential is significant, especially when cities like Vancouver spend as much as $280,000 annually on road salt, and the whole of Canada can spend $350 million annually.
• Advanced snow plows can also keep costs low and roads safe. Tech-enabled snowplows facilitate more precise applications of salt and other road-clearing materials. Digital snowplow systems can continuously monitor and detect changing road conditions, allowing operators to remotely adjust treatments to be better suited for specific road conditions.

Conclusion

One theme from our disaster briefings in The Epicenter is that only a small fraction of tornadoes, wildfires, heat waves, and severe storms become billion-dollar disasters. Every year, tens of thousands of small-scale weather events occur that cause damage but don’t rise to the level of newsworthy. The same Pareto Principle is true for winter storms. Multiple winter weather watches, warnings, and advisories will be issued at any given time during the winter months (from October to April). However, only a tiny number produce significant damage. 

At a scale that matters, there are no silver bullet solutions for the private sector to adopt to dramatically reduce the costs of winter storms. The biggest lever to bring costs down exists in modernizing and winterizing the grid—an endeavor that will require substantial technological, mechanical, and financial investments. The long-tail of other levers and solutions can lessen the costs, reduce the damage, and hopefully save lives, but keeping the costs manageable for the inevitable winter storm means focusing on investments in a resilient, modern, and winterized grid.

For more on winter storms and extreme cold, check out this article from our friends at Disaster Philanthropy and this comprehensive report on winter storm resilience by the American Society of Civil Engineers.