Climate change is projected to have severe impacts on the frequency and intensity of peak electricity demand across the United States.
It has been suggested that climate change impacts on the electric sector will account for the majority of global economic damages by the end of the current century and beyond [Rose S, et al. (2014)Understanding the Social Cost of Carbon: A Technical Assessment]. The empirical literature has shown significant increases in climate-driven impacts on overall consumption, yet has not focused on the cost implications of the increased intensity and frequency of extreme events driving peak demand, which is the highest load observed in a period. We use comprehensive, high-frequency data at the level of load balancing authorities to parameterize the relationship between average or peak electricity demand and temperature for a major economy. Using statistical models, we analyze multiyear data from 166 load balancing authorities in the United States. We couple the estimated temperature response functions for total daily consumption and daily peak load with 18 downscaled global climate models (GCMs) to simulate climate change-driven impacts on both outcomes. We show moderate and heterogeneous changes in consumption, with an average increase of 2.8% by end of century. The results of our peak load simulations, however, suggest significant increases in the intensity and frequency of peak events throughout the United States, assuming today's technology and electricity market fundamentals. As the electricity grid is built to endure maximum load, our findings have significant implications for the construction of costly peak generating capacity, suggesting additional peak capacity costs of up to 180 billion dollars by the end of the century under business-as-usual.
Department of Agricultural and Resource Economics, University of California, Berkeley, CA 94720; auffhammer@berkeley.edu.|National Bureau of Economic Research, Cambridge, MA 02138.
Maximilian
M
Auffhammer
Center on Food Security and the Environment, Stanford University, Palo Alto, CA 94305.|Vancouver School of Economics, University of British Columbia, Vancouver, BC V6T 1L4, Canada.
Patrick
P
Baylis
National Bureau of Economic Research, Cambridge, MA 02138.|Ford School of Public Policy, University of Michigan, Ann Arbor, MI 48109.
Catherine H
CH
Hausman
climate change; economic impacts; electricity consumption; extreme events; peak load