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Analysis of institutional adaptability to redress electricity infrastructure vulnerability due to climate change

Author

Listed:
  • Foster, John
  • Bell, William Paul
  • Wild, Phillip
  • Sharma, Deepak
  • Sandu, Suwin
  • Froome, Craig
  • Wagner, Liam
  • Misra, Suchi
  • Bagia, Ravindra

Abstract

This non-technical summary presents the findings and recommendations from the project called ‘Analysis of institutional adaptability to redress electricity infrastructure vulnerability due to climate change’. The objectives of the project are to examine the adaptive capacity of existing institutional arrangements in the National Electricity Market (NEM) to existing and predicted climate change conditions. Specifically the project: identifies climate change adaptation issues in the NEM; analyses climate change impacts on reliability in the NEM under alternative climate change scenarios to 2030, particularly what adaptation strategies the power generation and supply network infrastructure will need; and assesses the robustness of the institutional arrangements that supports effective adaptation. The project finds that four factors are hindering or required for adaptation to climate change: fragmentation of the NEM, both politically and economically; accelerated deterioration of the transmission and distribution infrastructure due to climate change requiring the deployment of technology to defer investment in transmission and distribution; lacking mechanisms to develop a diversified portfolio of generation technology and energy sources to reduce supply risk; and failure to model and treat the NEM as a national node based entity rather than state based. The project’s findings are primarily to address climate change issues but if these four factors are addressed, the resilience of the NEM is improved to handle other adverse contingences. For instance, the two factors driving the largest increases in electricity prices are investment in transmission and distribution and fossil fuel prices. Peak demand drives the investment in transmission and distribution but peak demand is only for a relatively short period. Exacerbating this effect is increasing underutilisation of transmission and distribution driven by both solar photo voltaic (PV) uptake and climate change. Using demand side management (DSM) to shift demand to outside peak periods provides one method to defer investment in transmission and distribution. Recommendation 2 addresses investment deferment. The commodity boom has increased both price and price volatility of fossil fuels where the lack of diversity in generation makes electricity prices very sensitive to fossil fuel prices and disruptions in supply. A diversified portfolio of generation would ameliorate the price sensitivity and supply disruptions. Furthermore, long term electricity price rises are likely to ensue as the fossil fuels become depleted. A diversified portfolio of generation would also ready the NEM for this contingency. Recommendation 3 addresses diversified portfolios. This project makes four inter-related recommendations to address the four factors listed above. Chapter 10 discusses the justification for these recommendations in more detail.

Suggested Citation

  • Foster, John & Bell, William Paul & Wild, Phillip & Sharma, Deepak & Sandu, Suwin & Froome, Craig & Wagner, Liam & Misra, Suchi & Bagia, Ravindra, 2013. "Analysis of institutional adaptability to redress electricity infrastructure vulnerability due to climate change," MPRA Paper 47787, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:47787
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    References listed on IDEAS

    as
    1. Phil Wild & William Paul Bell & John Foster, 2012. "An Assessment of the Impact of the Introduction of Carbon Price Signals on Prices, Production Trends, Carbon Emissions and Power Flows in the NEM for the period 2007-2009," Energy Economics and Management Group Working Papers 4-2012, School of Economics, University of Queensland, Australia.
    2. Lee, Chien-Chiang & Chiu, Yi-Bin, 2011. "Electricity demand elasticities and temperature: Evidence from panel smooth transition regression with instrumental variable approach," Energy Economics, Elsevier, vol. 33(5), pages 896-902, September.
    3. Koch, Hagen & Vögele, Stefan, 2009. "Dynamic modelling of water demand, water availability and adaptation strategies for power plants to global change," Ecological Economics, Elsevier, vol. 68(7), pages 2031-2039, May.
    4. Mansur, Erin T. & Mendelsohn, Robert & Morrison, Wendy, 2008. "Climate change adaptation: A study of fuel choice and consumption in the US energy sector," Journal of Environmental Economics and Management, Elsevier, vol. 55(2), pages 175-193, March.
    5. Enrica De Cian & Elisa Lanzi & Roberto Roson, 2007. "The Impact of Temperature Change on Energy Demand: A Dynamic Panel Analysis," Working Papers 2007.46, Fondazione Eni Enrico Mattei.
    6. Bell, William Paul & Wild, Phillip & Foster, John, 2013. "The transformative effect of unscheduled generation by solar PV and wind generation on net electricity demand," MPRA Paper 46065, University Library of Munich, Germany.
    7. T. Heller & R. Huet & Bénédicte Vidaillet, 2013. "Introduction," Post-Print hal-00848256, HAL.
    8. Shafiee, Shahriar & Topal, Erkan, 2009. "When will fossil fuel reserves be diminished?," Energy Policy, Elsevier, vol. 37(1), pages 181-189, January.
    9. Taylor, James W. & Buizza, Roberto, 2003. "Using weather ensemble predictions in electricity demand forecasting," International Journal of Forecasting, Elsevier, vol. 19(1), pages 57-70.
    10. Pina, André & Silva, Carlos & Ferrão, Paulo, 2011. "Modeling hourly electricity dynamics for policy making in long-term scenarios," Energy Policy, Elsevier, vol. 39(9), pages 4692-4702, September.
    11. Feeley, Thomas J. & Skone, Timothy J. & Stiegel, Gary J. & McNemar, Andrea & Nemeth, Michael & Schimmoller, Brian & Murphy, James T. & Manfredo, Lynn, 2008. "Water: A critical resource in the thermoelectric power industry," Energy, Elsevier, vol. 33(1), pages 1-11.
    12. Skoufa, Lucas & Tamaschke, Rick, 2011. "Carbon prices, institutions, technology and electricity generation firms in two Australian states," Energy Policy, Elsevier, vol. 39(5), pages 2606-2614, May.
    13. John Foster & Liam Wagner & Phil Wild & William Paul Bell & Junhua Zhao & Craig Froome, 2011. "Market and Economic Modelling of the Intelligent Grid: Interim Report 2011," Energy Economics and Management Group Working Papers 11, School of Economics, University of Queensland, Australia.
    14. Tim Nelson & Paul Simshauser & Simon Kelley, 2011. "Australian Residential Solar Feed-in Tariffs: Industry Stimulus or Regressive Form of Taxation?," Economic Analysis and Policy, Elsevier, vol. 41(2), pages 113-129, September.
    15. Mideksa, Torben K. & Kallbekken, Steffen, 2010. "The impact of climate change on the electricity market: A review," Energy Policy, Elsevier, vol. 38(7), pages 3579-3585, July.
    16. Thatcher, Marcus J., 2007. "Modelling changes to electricity demand load duration curves as a consequence of predicted climate change for Australia," Energy, Elsevier, vol. 32(9), pages 1647-1659.
    17. Facundo Alvaredo & Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2013. "The Top 1 Percent in International and Historical Perspective," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 3-20, Summer.
    18. Steve Keen, 1995. "Finance and Economic Breakdown: Modeling Minsky’s “Financial Instability Hypothesis”," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 17(4), pages 607-635, July.
    19. Bell, William & Foster, John, 2012. "Feed-in tariffs for promoting solar PV: progressing from dynamic to allocative efficiency," MPRA Paper 38861, University Library of Munich, Germany, revised 28 Apr 2012.
    20. Sichao, Kan & Yamamoto, Hiromi & Yamaji, Kenji, 2010. "Evaluation of CO2 free electricity trading market in Japan by multi-agent simulations," Energy Policy, Elsevier, vol. 38(7), pages 3309-3319, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:

    1. Phil Wild & William Paul Bell & John Foster, 2014. "Impact of Operational Wind Generation in the Australian National Electricity Market over 2007-2012," Energy Economics and Management Group Working Papers 1-2014, School of Economics, University of Queensland, Australia.
    2. repec:kap:jbioec:v:19:y:2017:i:1:d:10.1007_s10818-016-9240-9 is not listed on IDEAS
    3. repec:eee:eneeco:v:67:y:2017:i:c:p:224-241 is not listed on IDEAS
    4. William Paul Bell & Phil Wild & John Foster, 2014. "Collinsville solar thermal project: Yield forecasting - Draft report," Energy Economics and Management Group Working Papers 5-2014, School of Economics, University of Queensland, Australia.
    5. Foster, John & Wagner, Liam & Liebman, Ariel, 2017. "Economic and investment models for future grids: Final Report Project 3," MPRA Paper 78866, University Library of Munich, Germany.
    6. Bell, William Paul & Wild, Phillip & Foster, John, 2014. "Collinsville solar thermal project: Yield forecasting – Final report," MPRA Paper 59647, University Library of Munich, Germany.
    7. Bell, William, 2012. "Reviewing the climate change adaptation readiness of the Australian national electricity market institutions," MPRA Paper 38112, University Library of Munich, Germany, revised 29 Feb 2012.
    8. Bell, William Paul, 2012. "The impact of climate change on generation and transmission in the Australian national electricity market," MPRA Paper 38111, University Library of Munich, Germany, revised 29 Feb 2012.
    9. Bell, William Paul & Wild, Phillip & Foster, John, 2014. "Collinsville solar thermal project: Energy economics and dispatch forecasting - Final report," MPRA Paper 59648, University Library of Munich, Germany.

    More about this item

    Keywords

    Climate change adaptation; Climate change mitigation; electricity demand; electricity generation; transmission; distribution; Australian National Electricity Market; Feed-in tariffs; FiT; solar PV; residential solar PV; reverse auction FiT; parity; Levelised cost of energy; LCOE; Diffusion of innovations; dynamic efficiency; allocative efficiency; Sustainable; Social progress; Environmental protection; Social inequity; DUOS; TUOS; smart meters; institutional adaptation;

    JEL classification:

    • H1 - Public Economics - - Structure and Scope of Government
    • H4 - Public Economics - - Publicly Provided Goods
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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