Utilities seeking financing for environmental upgrades should look to the markets for debt and equity, rather than trying to securitize those costs.
The Growing Footprint of Climate Change
Can systems built today cope with tomorrow’s weather extremes?
The extreme weather of 2012, which exposed a number of limitations in the nation’s grid infrastructure, was a climate change wake-up call for the electric power industry. Two nuclear power plants in New England were forced to shut down due to the temperature of their cooling water supplies. 1 Drought in Texas led the North American Electric Reliability Corp. to report concerns about the state’s ability to maintain adequate reserve margins. 2 Then there was Superstorm Sandy. In addition to devastating the Long Island coastline, New York City boroughs, and New Jersey coastal areas, the storm disrupted power supplies for millions of residences and businesses.
These events are a harbinger of what can be expected in the decades ahead. While the details will vary from place to place, in general climate change will lead to more extreme heat waves, higher water temperatures, more severe droughts, and more extreme storms. 3 These events will increasingly stress an aging power grid that was designed largely on the assumption that future weather would be similar to that of the past. Moreover, climate change isn’t occurring in isolation but is accompanied by technological advances, an evolving regulatory environment, and long-term trends in the supply, demand, and prices of different fuels.
We have an opportunity to increase the resilience of the nation’s energy system by accounting for climate change during the ongoing modernization and build-out of the nation’s grid infrastructure. However, to do so, there’s an urgent need for new, more integrated tools that account for the complex interactions among climate, water, energy, and other systems.
Higher Temperatures are Worry Enough
Perhaps the most direct and obvious impacts of climate change on the electric power sector stem from increasing temperatures. The long-term increase in global temperatures is now well documented and can be attributed largely to greenhouse gas emissions associated with human activities, especially burning fossil fuels. 4 Substantial warming also has occurred over most of the United States, as shown in Figure 1. This warming hasn’t been spatially uniform due to a combination of natural variability and regional differences in topography, land use change, sulfate emissions, and other factors. On average, the United States has warmed by 1.5°F since 1895 with more than 80 percent of this increase occurring since 1980. 5