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

Author

Listed:
  • John Foster

    (Department of Economics, University of Queensland)

  • William Paul Bell

    (Department of Economics, University of Queensland)

  • Phil Wild

    (Department of Economics, University of Queensland)

  • Deepak Sharma

    (Centre for Energy Policy, University of Technology, Sydney)

  • Suwin Sandu

    (Centre for Energy Policy, University of Technology, Sydney)

  • Craig Froome
  • Liam Wagner

    (Department of Economics, University of Queensland)

  • Suchi Misra

    (Centre for Energy Policy, University of Technology, Sydney)

  • Ravindra Bagia

    (Centre for Energy Policy, University of Technology, Sydney)

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

  • John Foster & William Paul Bell & Phil Wild & Deepak Sharma & Suwin Sandu & Craig Froome & Liam Wagner & Suchi Misra & Ravindra Bagia, 2013. "Analysis of institutional adaptability to redress electricity infrastructure vulnerability due to climate change," Energy Economics and Management Group Working Papers 6-2013, School of Economics, University of Queensland, Australia.
    • Handle: RePEc:qld:uqeemg:6-2013
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    File URL: https://www.uq.edu.au/eemg/docs/workingpapers/2013-06.pdf
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    References listed on IDEAS

    as
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    Citations

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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. William Paul Bell & John Foster, 2017. "Using solar PV feed-in tariff policy history to inform a sustainable flexible pricing regime to enhance the diffusion of energy storage and electric vehicles," Journal of Bioeconomics, Springer, vol. 19(1), pages 127-145, April.
    3. Bell, William Paul & Wild, Phillip & Foster, John & Hewson, Michael, 2017. "Revitalising the wind power induced merit order effect to reduce wholesale and retail electricity prices in Australia," Energy Economics, Elsevier, vol. 67(C), pages 224-241.
    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 & Liebman, Ariel & Wagner, Liam, 2014. "Project 3: Economic and Investment Models For Future Grids Deliverable 2: The Scenarios," MPRA Paper 89474, University Library of Munich, Germany.
    6. 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.
    7. Bell, William Paul & Wild, Phillip & Foster, John, 2014. "Collinsville solar thermal project: Yield forecasting – Final report," MPRA Paper 59647, University Library of Munich, Germany.
    8. 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.
    9. 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.
    10. 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.

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    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;
    All these keywords.

    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
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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