Energize Weekly, January 29, 2020
From heat to humidity to severe storms investor-owned utilities across the U.S. will face particular regional climate change hazards, according to an analysis by Moody’s Investors Services.
A utility in the Southeast, such as Duke Energy, could face risk from heavier storms, floods and storm surges that could threaten plant operations and coal ash piles. In the West, a utility such as Xcel Energy, could face issues in obtaining adequate cooling water for thermal plants, as ambient river and lake water temperatures rise.
Greater humidity and heat in the Midwest could lead to surges in the demand for power for utilities, such as Ameren. The region’s coolest summer days were 24 percent hotter than average in 2019, according to the Moody’s investor note.
“As climate change increases both the frequency and severity of extreme weather events, it is important that utilities maintain some financial cushion and regulatory support to absorb the impact of these physical risks on their infrastructure,” Jairo Chung, vice president and senior analyst at Moody’s, said in a statement.
It isn’t only that higher temperatures could create higher demand – stressing the grid and leading to power curtailments and even brownouts and blackouts, shifting temperatures and humidity linked to climate change could lead to periods of sharp decline in demand.
Higher temperatures can reduce the efficiency of thermoelectric power generation by reducing a plant’s cooling capacity.
Data provided to Moody’s by the climate risk data firm, Four Twenty Seven, indicates that the Midwest and southern Florida face the highest levels of heat-stress risk.
“Climate risk data from our affiliate Four Twenty Seven enables us to quantify future relative gross exposure across a variety of hazards and risk levels,” Khalid Husain, vice president and senior analyst at Moody’s, said in a statement. “Investments in resilience and adaptation will be increasingly important to effectively manage these risks.”
In California and the Colorado River region, water stress poses an additional risk because of “the critical role that water plays in the economy and in cooling power plants,” the analysis said.
The most frequent cause of major power outages in the U.S. is severe weather, such as hurricanes. The damages from such weather events can boost costs and hurt a utility’s ability to generate revenues, Moody’s said.
The impact of hurricane risk, however, is likely to be mitigated by credit-supportive state regulations allowing investor-owned utilities to recoup storm recovery costs that are deemed to be prudent, the analysis said.
