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Tail Risk from Extreme Temperature in an Integrated Northeastern American Low- Carbon Electricity System

Author

Listed:
  • Anson T. Y. Ho

    (Toronto Metropolitan University)

  • Adrien Desroziers

    (LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne)

  • Kim P Huynh

    (LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne, Indiana University [Bloomington] - Indiana University System)

  • Marcel-Cristian Voia

    (LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne)

Abstract

Cross-border electricity trade in the Northeastern American grid helps U.S. markets mitigate structural deficits in low-carbon generation capacity. These deficits are partially offset by surplus exports from Québec (hydropower) and Ontario (nuclear generation). We use a Vine copula to assess the nonlinear interdependence of these markets.Using hourly data from 2019-2023, we estimate the joint lower tail of regional net lowcarbon surpluses. In the unconditional distribution, the 5% Value-at-Risk (VaR) indicates an aggregate deficit of -1.3% of low-carbon generation. Regional VaR estimates reveal pronounced asymmetries as U.S. shortfalls exceed local low-carbon generation by about 130-178%. While Canadian regions are substantially less exposed in the lower tail. On heat-wave days, the aggregate deficit is -1.8% with the U.S. regional shortfalls about 200-250%. As heat waves increase in frequency and intensity, there will be an increase reliance on fossil fuels during electricity shortfalls.

Suggested Citation

  • Anson T. Y. Ho & Adrien Desroziers & Kim P Huynh & Marcel-Cristian Voia, 2026. "Tail Risk from Extreme Temperature in an Integrated Northeastern American Low- Carbon Electricity System," Working Papers hal-05609949, HAL.
    • Handle: RePEc:hal:wpaper:hal-05609949
    DOI: 10.5281/zenodo.20007696
    Note: View the original document on HAL open archive server: https://hal.science/hal-05609949v1
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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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