Climate Change and the Vulnerability of Germany's Power Sector to Heat and Drought.

AuthorGolub, Alexander

    The link between climate change and increasingly frequent extreme weather is gaining the international recognition of policymakers and the attention of the scientific community. The IPCC special report defines extreme weather events as "risks/impacts to human health, livelihoods, assets and ecosystems from extreme weather events such as heat waves, heavy rain, drought and associated wildfires, and coastal flooding" (IPCC 2018, p. 11). Climate change is already posing new region-specific challenges for technological and socio-economic systems. The summer of 2018 provided a preview of possible adverse developments. Heat waves were observed in North America, Western Europe, and the Caspian Sea region, while rainfall extremes occurred in Southeast Europe and Japan (Kornhuber et al. 2019). The summer was characterized by an enduring heat wave accompanied by droughts in various regions throughout Europe that lasted until the end of autumn (EC 2019a). During this period, France and Germany reported cuts in nuclear and coal-based electricity generation. Wholesale market prices were highest in Italy and Spain, where weather forecasts predicted temperatures to rise (Platts 2018).

    In addition to being the largest contributor to greenhouse gas emissions in the EU, the electricity sector itself is vulnerable to climate change. While national and EU energy policies aim to increase the deployment of renewable energy capacities to reduce the [CO.sub.2] intensity of the energy sector, the availability of such capacities is highly dependent on weather conditions. Combinations such as cold spells and the lack of sun in February-March 2018 or wind lulls and high temperatures in July 2018 (Platts 2018) can present difficult tests for an energy system in transition that still relies on conventional generation capacities. The electricity supply risks during the transition process toward a more climate-friendly electricity supply system have become more severe, as a result of extreme weather. The stability of a power system with a high share of variable renewable energy generation depends on the existence of flexibility options and balancing capacities (Lund et al. 2015, Alizadeh et al. 2016). Thermal power sources like coal, natural gas, and nuclear power plants represent key options for providing flexibility and balancing capacities within the transition period. In hot seasons, these plants' functionality crucially depends on the supply of cooling water. Consequently, they are heavily affected by changes in cooling water temperature and availability.

    These challenges do not only arise in Europe. As van Vliet et al. (2016) showed, thermoelectric power plants worldwide will experience reductions in usable capacity of up to 84-86% by 2040-2069 due to insufficient cooling. This study aims to better understand the potential effects of high temperatures and droughts on power systems, thereby improving the electricity sector's risk-preparedness. The findings will highlight vulnerabilities in the operation of thermal generation capacities and identify assets that are subject to high risk. We conduct a literature research on how this problem is addressed by existing regulations and assessed in the recent scientific literature.

    We provide a holistic analysis of the increasing risk of droughts and high temperatures for thermal power plants in Germany by evaluating the climatic parameters--temperatures and precipitation at the attached sites. In contrast to studies analyzing long-term mean temperature increases, we focus on hot extremes, reflecting the higher probability of droughts and precipitation deficits highlighted in IPCC (2018). The issue of interdependencies between water availability and water use for producing fuels, generating electricity, and cooling power plants has received increased attention (Magagna et al. 2019). We use the soil moisture index (SMI) and temperature extremes as proxies for climate change hazards of various intensities across different parts of Germany. We also examine the difference in exposure levels, taking into account the locations of power generation facilities in Germany. By superimposing installed generation capacities over the hazard map, we quantify risk for specific locations across various generation technologies. We then examine data on forced power plant outages both during intermediate exposures of the energy sector to weather extremes and over the year.

    Using real options analysis, we provide estimates of current economic damages as the risk-adjusted cost of outages. This allows us to assess the risk-adjusted economic costs of climate change for the German electricity sector for the current composition of the electricity system. In our analysis, outages are quantitative indicators of vulnerability determined by hazard and exposure to extreme weather events. The risk-adjusted costs of power outages characterize the current economic damage caused to power generation by climate change. About 70 years of location-specific historical data on moisture helped us to reveal current trends and connect the deterioration of water resources with the global temperature increase.

    Until now, long-term plans for the transition of power generation capacities have focused on the decarbonization of energy production. Our research draws attention to the vulnerability of thermal power generation to climate change. Any long-term plans to rebalance generating capacities should take into account possible external shocks to the energy system as a result of climate change.

    Many studies have focused on long-term temperature-sensitive impacts on the demand side (Rivers and Shaffer 2020), impacts on wind and solar resources, the deterioration of the water supply for cooling, and the lowered potential of run-of-river generation (Cronin, Anandarajah, and Dessens 2018, Chandramowli and Felder 2014), or the impacts on transmission capacity (Woerman 2019). Since most of these studies emphasize uncertainty stretched decades into the future, we attract attention to a new aspect of interest for the study of electricity markets: the spatial dimension of short-term planning in the German power market. An assessment of installed generation capacities and their exposure to weather extremes can serve as a starting point for the planning and future design of the electricity sector, including investments, renovation, and phase-outs. Our analysis can be replicated for other countries depending on the availability, granularity, and transparency of weather and power system data.

    This study aims to provide a foundation for identifying measures that reduce the electricity system's overall vulnerability, thus supporting energy transition policies that account for current climate change effects. Our results can be applied when assessing the need to renovate or decommission old capacities, considering the costs of renovation. The results of our analysis are essential for the further calibration and estimation of economic damage functions for specific locations of thermal power plants, which are necessary to estimate the future costs from climate change. The paper attempts to provide a new methodological approach to parameterize the effects of extreme droughts and temperatures. The analysis requires meteorological and electricity market data with a high geographical and temporal resolution, therefore, the main limitation of the analysis results from the availability of data.

    The paper is organized as follows. In Section 2, we present the key challenges that climate change effects pose to power sector infrastructure. Section 3 describes the main datasets employed in this study. The analysis, methods applied, and results of the analysis are presented in Section 4. Section 5 highlights the main discussion points underlined in the study. We discuss policy in Section 6.


    2.1 Key power sector challenges posed by climate change effects

    Climate change affects all countries to varying degrees. Climate change puts additional stress on developing power systems in regions with more rigorous initial climate conditions. For example, immediate climate change effects are more potent in southern regions with existing water scarcity and hazards that reflect poor long-term land-use practices. This can be observed in the Sudan Sahel region of Nigeria (Umoh and Lugga 2019), Bangladesh (Khan, Alam, and Alam 2013), and Pakistan (Alkon et al. 2019). Adverse extreme events, such as heat waves and droughts, have become particularly intense in Northern and Central Europe over recent years (EDO 2015. 2018a, Magagna et al. 2019).

    Another important regional factor that affects electricity systems' resilience is the policy framework that sets targets, regulations, and emission reduction goals for the electricity sector. In this respect, Germany is a good example of a complex system that is on the path to a low-carbon future and is subject to climate change. This section will analyze the key aspects of a wide range of effects associated with climate change in the light of recent developments in policy and research. Our motivation for the analysis is driven by the findings described in the following paragraphs.

    2.2 Elements of the European policy framework addressing extreme events

    The European electricity system is becoming more internationally integrated, which requires higher resilience and cooperation between member states. However, this process also redistributes the risks of cross-border failures in generation and transmission capacities (EC 2016a). At the European level, the threats posed by extreme weather events are addressed in multiple ways. In June 2019, the EU adopted the regulation on risk-preparedness in the electricity sector, an important component of the EU's activities to counteract the risks of extreme events (EC 2019b). Under Article 5 of this regulation, the European Network of Transmission System...

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