Studies from University of Wisconsin Reveal New Findings on Smart Grids (An Extreme Value Theory-based Catastrophe Bond Design for Cyber Risk Management of Power Systems): Energy – Smart Grids

NewsRx Policy and Law Daily

2022 APR 04 (NewsRx) -- By a News Reporter-Staff News Editor at NewsRx Policy and Law Daily -- Fresh data on Energy - Smart Grids are presented in a new report. According to news reporting originating in Milwaukee, Wisconsin, by NewsRx journalists, research stated, “Cybersecurity is emerging as one of the most critical issues for the power system operation in recent years. The most recent studies have shown that cyber-insurance can be an effective solution for the cyber risk management of power grids.”

Financial support for this research came from National Science Foundation (NSF).

The news reporters obtained a quote from the research from the University of Wisconsin, “In these early attempts, actuarial frameworks and premium schemes were designed for the insurance companies to cope with the risks on power system cybersecurity. However, due to the potentially catastrophic consequences of malicious cyberattacks on power grids, the tail risk events may expose the insurance companies to undue financial risks even if applicable premiums have been designed and collected, which will demotivate the insurance companies from entering the market and providing insurance to the power system stakeholders. In this paper, a Catastrophe (CAT) bond scheme is proposed for insurance companies to address the tail risk of power system cybersecurity by seeking protection from the capital market. The CAT bonds are designed based on the extreme value theory (EVT) to quantify the underlying risk of tail cybersecurity events in power systems. A stochastic model is developed and used in this paper to evaluate the potential losses of power system stakeholders due to malicious cyberattacks on the grids. An example on the IEEE Reliability Test System (RTS-96) was conducted and analyzed to demonstrate the validity and performance of the proposed EVT based CAT bond scheme.”

According to the news reporters, the research concluded: “The results of the example show that the proposed CAT bond design can effectively manage the insolvency risk of insurers when providing cyber insurance to various stakeholders in power systems.”

This research has been peer-reviewed.

For more information on this research see: An Extreme Value Theory-based Catastrophe Bond Design for Cyber Risk Management of Power Systems. IEEE Transactions on Smart Grid, 2022;13(2):1516-1528. IEEE Transactions on Smart Grid can be contacted at: Ieee-inst Electrical Electronics Engineers Inc, 445 Hoes Lane, Piscataway, NJ 08855-4141, USA. (Institute of Electrical and Electronics Engineers - http://www.ieee.org/; IEEE Transactions on Smart Grid - http://ieeexplore.ieee.org/xpl/RecentIssue.jsp?punumber=5165411)

Our news correspondents report that additional information may be obtained by contacting Lingfeng Wang, University of Wisconsin, Dept. of Electrical Engineering and Computer Sciences, Milwaukee, WI 53211, United States. Additional authors for this research include Zhaoxi Liu and Wei Wei.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1109/TSG.2021.3131468. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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