The Effects of Climate Change on Interregional Electricity Market
Dynamics on the U.S. West Coast
Abstract
The United States (U.S.) West Coast power system is strongly influenced
by variability and extremes in air temperatures (which drive electricity
demand) and streamflows (which control hydropower availability). As
hydroclimate changes across the West Coast, a combination of forces may
work in tandem to make its bulk power system more vulnerable to physical
reliability issues and market price shocks. In particular, a warmer
climate is expected to increase summer cooling (electricity) demands and
shift the average timing of peak streamflow (hydropower production) away
from summer to the spring and winter, depriving power systems of
hydropower when it is needed the most. Here, we investigate how climate
change could alter interregional electricity market dynamics on the West
Coast, including the potential for hydroclimatic changes in one region
(e.g. Pacific Northwest (PNW)) to “spill over” and cause price and
reliability risks in another (e.g. California). We find that the most
salient hydroclimatic risks for the PNW power system are changes in
streamflow, while risks for the California system are driven primarily
by changes in summer air temperatures especially extreme heat events
that increase peak system demand. Altered timing and amounts of
hydropower production in the PNW do alter summer power deliveries into
California but show relatively modest potential to impact prices and
reliability there. Instead, our results suggest future extreme heat in
California could exert a stronger influence on prices and reliability in
the PNW, especially if California continues to rely on the PNW for
imported power to meet late summer demands.