fully weatherized might not be able to dispatch at full capacity during extreme weather events. Similarly, hydropower and pumped hydro storage might not be able to operate at full capacity during drought years. System operators could revise capacity credits for intermittent renewables and other resources by using a more conservative calculation that bases projections on future forecasts of resource availability. They could also take a stricter view of what constitutes reliable output based on historical performance, as described below. 2. Evolve resource planning to address changing supply and demand. At the moment, many system operators’ plans rely on historical data to forecast peak demand (for example, driven by extreme weather events). But as weather increasingly deviates from historical patterns, these data become no longer reliable for either supply or demand. ERCOT used the most recent 15 years of weather figures for its load forecasting model, 36 and the California ISO uses the most recent 20 years of data. 37 Recent events such as winter storm Uri in 2021 and the 2020 and 2022 heat waves in California demonstrated how resource planning failures due to extreme weather events can result in grid outages. Such weather events, which are likely to dramatically increase load and decrease supply, are becoming more frequent as a result of climate change. For example, under a 2.0°C warming scenario, the number of heat waves 38 in Texas and California would increase by about 20 and 30 percent a year, respectively. 39 During
these events, the impact on power generation systems is projected to lead to lowered supply. For example, wind farms may not be able to produce electricity at typical levels when demand is at its peak because the large high-pressure systems that most often cause heat waves can bring lulls in high-velocity winds. This occurred during the early July 2022 heat wave in Texas, when wind power was at 8 percent of potential output. 40 In addition, solar production is lower when ambient temperatures are higher, 41 and thermal plants operate at lower efficiencies with higher intake air temperatures. Drought-related shortages of water carry a risk of shutdown because water is needed to cool these facilities. Low-water conditions can also result in hydropower shutoffs, further exacerbating energy supply problems. Moreover, many system operators rely on imported power as a source of firm supply, and this added power may become urgently necessary during extreme weather events. However, neighboring regions might be facing the same weather events, limiting their availability to provide necessary imports, as was the case in California in August 2020 when rolling blackouts occurred. 42 In response to these challenges, system operators could evolve market scenarios to capture more of the nuances of intermittent supply, including a broader range of acute and chronic physical climate risks and the resulting changes in generation. They could also reform capacity markets to focus on net load, capturing the variation across both demand and intermittent supply hourly.
36 2022 ERCOT system planning: Long-term hourly peak demand and energy forecast , Electric Reliability Council of Texas, January 18, 2022. 37 2022 summer loads and resources assessment , California ISO (CAISO), May 2022. 38 Heat waves are defined as a minimum of three consecutive days when temperatures maintain a high of 35ºC or above. 39 McKinsey Climate Analytics analysis. 40 Sneha Dey and Mitchell Ferman, “Texas grid operator urges electricity conservation as heat waves drive up demand,” Texas Tribune , July 2022. 41 Amelia Razak et al., “Investigation of the effect temperature on photovoltaic (PV) panel output performance,” International Journal on Advanced Science, Engineering and Information Technology , October 2016, Volume 6, Number 5. 42 “Preliminary root cause analysis: Mid-August 2020 heat storm,” CAISO, January 2021.
Accelerating the journey to net zero
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