  Extreme events, exacerbated by climate change, pose significant risks to the
energy system and its consumers. However there are natural limits to the degree
of protection that can be delivered from a centralised market architecture.
Distributed energy resources provide resilience to the energy system, but their
value remains inadequately recognized by regulatory frameworks. We propose an
insurance framework to align residual outage risk exposure with locational
incentives for distributed investment. We demonstrate that leveraging this
framework in large-scale electricity systems could improve consumer welfare
outcomes in the face of growing risks from extreme events via investment in
distributed energy.
