New Research at the Bank of Israel: Global Warming Effects on Electricity Demand in Israel
· This research is based on two global warming scenarios derived from climate change simulations in the international Cordex project. They were adjusted by the Israel Meteorological Service to the coordinates and topography of the meteorological stations in Israel.
· In Israel, the temperature sensitivity of electricity demand is relatively high, compared to other countries. Reducing the sensitivity, for example by differential intra-daily pricing, will reduce the impact of climate change on peak daily loads and will make it possible to reduce the required investment in electricity production capacity.
The global warming process has been reflected in recent decades by an increase of 1.4 degrees Celsius in the earth’s mean temperature. The warming impacts on the scope of worldwide demand for electricity, particularly on peak demands for electricity, as the weather is the main factor in determining them. New research by Tanya Suhoy and Maayan Tropper-Wachtel of the Bank of Israel Research Department tried to connect various scenarios for the magnitude of the global warming that will occur in the coming years and the peak daily demand for electricity expected in Israel.
Main inputs for carrying out the research were two Representative Concentration Pathways that were examined and adopted as reference scenarios by the UN’s Intergovernmental Panel on Climate Change. The climatological data for them were taken from the Cordex international project and were adjusted by the Israel Meteorological Service to Israel’s coordinates and topography. Based on the moderate climate change scenario, the mean temperature in Israel will increase by 0.9 degrees by 2050, while according to the severe scenario, it will increase by 1.2 degrees.
In order to assess the magnitude of the impact of these scenarios on electricity demand, the researchers examined hourly electricity data in seven areas in Texas and five areas in Australia—all areas that are hotter than Israel. The examination indicated that in Israel, the variance in demand for electricity over the course of the day is relatively high, particularly compared to Australia. Moreover, the sensitivity of daily peak loads to rising temperatures is relatively high in Israel (Figure 1). It may be that these findings are explained by the price of electricity for most consumers in Israel being fixed and not being dependent on demand. Mechanisms that increased the price of electricity during hours in which demand is particularly high, and reduce prices during hours when demand is low, will contribute to reducing the effect of global warming on peak demand loads and thus reduce the need to make excess investments in electricity production capacity. As a preliminary step to imposing a variable electricity tariff, there should be investment in the distribution of digital meters, and in the manner of operative implementation of the tariff it is important to avoid an asymmetrical adverse impact on electricity consumers from weaker backgrounds.
Given the current sensitivity of peak electricity demands to weather conditions, the research showed that if the severe global warming scenario develops, by 2050 global warming on its own is expected to contribute to growth of peak daily demands for electricity in the summer months (April–September) of approximately 4.1 percentage points. The statistical confidence band that derives from examining the range of models indicates that the impact in this scenario ranges from 3.2 to 5.2 percentage points. In contrast, if the less severe scenario develops, the warming will contribute about 2.5 percentage points to the growth of peak demand, with a bootstrapping band that ranges from 1.9 to 3.7 percentage points (Figure 2).
The research also indicated that global warming is expected to contribute to a decline in peak daily demand for electricity in the winter, as cooling needs will decline. The importance of all the information that derives from the research lies in the preparation of assessments for future demand for electricity. These assessments are necessary for the long-term planning of production capacity required to meet that demand.