Adapting to Climate Change State of Play and Recommendations for the Electricity Sector in Canada

Starting in 2014, the Canadian Electricity Association (CEA), with support from Natural Resources Canada (NRCan), and ongoing participation from CEA’s Corporate Utility Members, developed the first national level discussion of climate change adaptation related to electricity generation, transmission, and distribution. Canada’s electricity sector is on track to spend approximately $350 billion between 2010 and 2030 to renew or replace aging infrastructure, with massive capital projects underway or planned in every part of Canada. Electricity infrastructure is already experiencing a range of minor and major impacts from climate change, which are likely to increase. Climate adaptation considerations must therefore inform this infrastructure renewal process. For the electricity sector, climate change may increase costs across all steps in the value chain. Costs may increase as a result of damaged infrastructure, higher insurance premiums, water constraints, increased regulatory obligations, and legal liabilities. Similarly, revenues may decrease through the increased frequency and/or duration of outages, reduced supply availability (especially hydro), and through reduced infrastructure efficiencies. Climate impacts for the electricity sector, including both risks and opportunities, may be inventoried into three areas: electricity demand, electricity generation, and electricity transmission, distribution and infrastructure. While increased electricity demand from the United States and changes in water availability may present opportunities, climate change presents considerable risk to service reliability. As such, CEA and its members provide a series of recommended adaptation actions for governments, regulators, electricity companies, system operators, electricity customers, and citizens.

Understanding and Assessing Impacts

Electricity infrastructure is already experiencing a range of minor and major impacts from climate change, which are likely to increase. Climate model data analysis completed by Ouranos for this report focuses on potential changes in mean temperature and precipitation for the 2041–2070 period, relative to data from 1976–2005. Under various modelling outcomes, average annual temperatures will increase by 2.0–3.5 degrees Celsius in southern parts of Canada. Under specific modelling assumptions, spring and fall seasons will see increases in precipitation of 5–15 percent across the country. There will also be a significant increase in mean winter precipitation across the country with some regions more strongly affected than others. In addition, the current scientific literature on extreme events stresses the increasing frequency and magnitude of warm days and heat waves, more frequent precipitation extremes, and potential drought changes (reduced aridity in winter, increased aridity in summer).
For the electricity sector, climate change may increase costs across all steps in the value chain: extraction, processing, generation, transmission and distribution. Costs may increase as a result of damaged infrastructure, higher insurance premiums, water constraints, increased regulatory obligations, and legal liabilities. Similarly, revenues may decrease through the increased frequency and/or duration of outages, reduced supply availability (especially hydro), and through reduced infrastructure efficiencies. Adaptation practices may help avoid these increased costs and reduced revenues. While some adaptation practices will have implementation costs, they will be lower than the costs of inaction.

Identifying Actions

This report is the first national level discussion of climate change adaptation related to electricity generation, transmission, and distribution. This report has three key objectives:

  1. To communicate the importance of climate change adaptation as a critical issue for the electricity sector.
  2. To provide a preliminary baseline understanding of current perspectives and practices with respect to adaptation in the electricity sector.
  3. To put forward key recommendations for how to improve climate change adaptation in the electricity sector, especially (but not exclusively) with reference to investment planning.

The report combines qualitative and quantitative inputs and is organized into chapters covering the following information:

  • Chapter II discusses temperature and precipitation, two parameters of climate change, and summarizes scientific literature discussing projections for extreme events in Canada.
  • Chapter III discusses climate change risks and opportunities for the electricity sector
  • Chapter IV provides the results of a CEA member survey on adaptation and electricity
  • Chapter V draws together the main themes of Chapters II–IV to propose climate change adaptation recommendations for the electricity sector and other stakeholders, and highlight immediate next steps for the 2016 CEA’s Adaptation Working Group.

The audience for these objectives includes utilities and the full range of electricity stakeholders, including governments, regulators, electricity companies, system operators, electricity customers, and citizens.

Implementation

Recommended adaptation actions are provided in Chapter V of the report and are outlined by stakeholder type. Examples of actions include, but are not limited to:

  • Federal Government – Improve national understanding; the federal government should provide a strategic voice to support greater climate literacy among citizens, industry sectors, and regions.
  • Provincial and Territorial Governments – Update flood plain maps: To help lower risks in relation to extreme precipitation events, provincial governments should develop up-to-date flood plain maps. These maps could inform plans to locate and build new infrastructure and housing as well as improve adaptation measures for existing locations.
  • Municipalities – Pursue comprehensive energy efficiency actions: Cities are particularly vulnerable to increases in temperatures, which are exacerbated by the urban heat island effect. All cities should include comprehensive energy efficiency measures as part of their adaptation plans.
  • System Operators – Incorporate climate scenarios into load forecasts: System operators should consider climate sensitivities and their potential impact on future demand. They could collaborate with climate modelers to integrate climate change considerations into the determination of appropriate future reserve margins.
  • Electricity Companies – Exchange best practices in climate adaptation, including models and methods
  • Electricity Regulators – Encourage collaboration to facilitate cost-effective solutions
  • Customers and Citizens – Contribute to demand response: By reducing loads at peak hours and during extreme weather events, demand response can help electricity providers maintain grid reliability across current and future climate scenarios. Electricity providers can enhance the role of consumers in the electricity market by providing them with incentives to use electricity when it is cheapest and most plentiful.

Outcomes and Monitoring Progress

This report is the first national level discussion of climate change adaptation for the electricity sector in Canada. It has attempted to fulfill three objectives: communicating the importance of climate change adaptation for the electricity sector; providing a preliminary understanding of current adaptation perspectives and practices in the sector; and advancing key recommendations for stakeholders. There are three overarching findings:

  1. The Range of responses required to adapt to future climate scenarios is not limited to the electricity sector. Problems cut across sectors and geographies, solutions must be equally cross-cutting and holistic, involving a range of stakeholders. Governments at all levels, system operators, regulators and customers all have important roles to play.
  2. There is an opportunity and need for CEA and individual electricity companies to develop more programmatic approaches to climate change adaptation. It will take time to get this right, as the issue is complex, but the tools needed to begin the process are in place.
  3. Electricity companies need to improve the incorporation of climate change scenarios into corporate governance, project planning and risk management practices. A key priority for the sector is to ensure that the current $350 billion infrastructure spend is informed by a careful consideration and analysis of potential climate change impacts.

Next Steps

To the CEA, effective climate adaptation in electricity will require leadership, action, and coordination across multiple stakeholder groups, including: governments, regulators, electricity companies, system operators, electricity customers, and citizens. Furthermore, all stakeholders must be actors in a broader system in which cross-sector communication and collaboration are essential for optimal planning and action in response to current and future climate scenarios.


Understanding and Assessing Impacts

Electricity infrastructure is already experiencing a range of minor and major impacts from climate change, which are likely to increase. Climate model data analysis completed by Ouranos for this report focuses on potential changes in mean temperature and precipitation for the 2041–2070 period, relative to data from 1976–2005. Under various modelling outcomes, average annual temperatures will increase by 2.0–3.5 degrees Celsius in southern parts of Canada. Under specific modelling assumptions, spring and fall seasons will see increases in precipitation of 5–15 percent across the country. There will also be a significant increase in mean winter precipitation across the country with some regions more strongly affected than others. In addition, the current scientific literature on extreme events stresses the increasing frequency and magnitude of warm days and heat waves, more frequent precipitation extremes, and potential drought changes (reduced aridity in winter, increased aridity in summer).
For the electricity sector, climate change may increase costs across all steps in the value chain: extraction, processing, generation, transmission and distribution. Costs may increase as a result of damaged infrastructure, higher insurance premiums, water constraints, increased regulatory obligations, and legal liabilities. Similarly, revenues may decrease through the increased frequency and/or duration of outages, reduced supply availability (especially hydro), and through reduced infrastructure efficiencies. Adaptation practices may help avoid these increased costs and reduced revenues. While some adaptation practices will have implementation costs, they will be lower than the costs of inaction.

Identifying Actions

This report is the first national level discussion of climate change adaptation related to electricity generation, transmission, and distribution. This report has three key objectives:

  1. To communicate the importance of climate change adaptation as a critical issue for the electricity sector.
  2. To provide a preliminary baseline understanding of current perspectives and practices with respect to adaptation in the electricity sector.
  3. To put forward key recommendations for how to improve climate change adaptation in the electricity sector, especially (but not exclusively) with reference to investment planning.

The report combines qualitative and quantitative inputs and is organized into chapters covering the following information:

  • Chapter II discusses temperature and precipitation, two parameters of climate change, and summarizes scientific literature discussing projections for extreme events in Canada.
  • Chapter III discusses climate change risks and opportunities for the electricity sector
  • Chapter IV provides the results of a CEA member survey on adaptation and electricity
  • Chapter V draws together the main themes of Chapters II–IV to propose climate change adaptation recommendations for the electricity sector and other stakeholders, and highlight immediate next steps for the 2016 CEA’s Adaptation Working Group.

The audience for these objectives includes utilities and the full range of electricity stakeholders, including governments, regulators, electricity companies, system operators, electricity customers, and citizens.

Implementation

Recommended adaptation actions are provided in Chapter V of the report and are outlined by stakeholder type. Examples of actions include, but are not limited to:

  • Federal Government – Improve national understanding; the federal government should provide a strategic voice to support greater climate literacy among citizens, industry sectors, and regions.
  • Provincial and Territorial Governments – Update flood plain maps: To help lower risks in relation to extreme precipitation events, provincial governments should develop up-to-date flood plain maps. These maps could inform plans to locate and build new infrastructure and housing as well as improve adaptation measures for existing locations.
  • Municipalities – Pursue comprehensive energy efficiency actions: Cities are particularly vulnerable to increases in temperatures, which are exacerbated by the urban heat island effect. All cities should include comprehensive energy efficiency measures as part of their adaptation plans.
  • System Operators – Incorporate climate scenarios into load forecasts: System operators should consider climate sensitivities and their potential impact on future demand. They could collaborate with climate modelers to integrate climate change considerations into the determination of appropriate future reserve margins.
  • Electricity Companies – Exchange best practices in climate adaptation, including models and methods
  • Electricity Regulators – Encourage collaboration to facilitate cost-effective solutions
  • Customers and Citizens – Contribute to demand response: By reducing loads at peak hours and during extreme weather events, demand response can help electricity providers maintain grid reliability across current and future climate scenarios. Electricity providers can enhance the role of consumers in the electricity market by providing them with incentives to use electricity when it is cheapest and most plentiful.

Outcomes and Monitoring Progress

This report is the first national level discussion of climate change adaptation for the electricity sector in Canada. It has attempted to fulfill three objectives: communicating the importance of climate change adaptation for the electricity sector; providing a preliminary understanding of current adaptation perspectives and practices in the sector; and advancing key recommendations for stakeholders. There are three overarching findings:

  1. The Range of responses required to adapt to future climate scenarios is not limited to the electricity sector. Problems cut across sectors and geographies, solutions must be equally cross-cutting and holistic, involving a range of stakeholders. Governments at all levels, system operators, regulators and customers all have important roles to play.
  2. There is an opportunity and need for CEA and individual electricity companies to develop more programmatic approaches to climate change adaptation. It will take time to get this right, as the issue is complex, but the tools needed to begin the process are in place.
  3. Electricity companies need to improve the incorporation of climate change scenarios into corporate governance, project planning and risk management practices. A key priority for the sector is to ensure that the current $350 billion infrastructure spend is informed by a careful consideration and analysis of potential climate change impacts.

Next Steps

To the CEA, effective climate adaptation in electricity will require leadership, action, and coordination across multiple stakeholder groups, including: governments, regulators, electricity companies, system operators, electricity customers, and citizens. Furthermore, all stakeholders must be actors in a broader system in which cross-sector communication and collaboration are essential for optimal planning and action in response to current and future climate scenarios.

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