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3.2.3. Economic assessments of climate change impacts on the energy system

Several studies have conducted economic assessments of climate change impacts and adaptation needs on the energy system.

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One of the first comprehensive assessments of the impact of climate change on the EU power sector was a study carried out for the Directorate General for Energy of the European Commission (Rademaekers et al., 2011). An updated summary was later published as a journal paper (Lise and van der Laan, 2015). This study was used as an input for a Commission Staff Working Document accompanying the EU strategy on adaptation to climate change (EC, 2013a). The study used a combination of literature review, stakeholder interviews and quantitative modelling to estimate the investment needs for adaptation in the EU power sector for different technologies, regions and time horizons. Among others, the study includes assessments of the benefits and costs of a wide range of adaptation measures. The results suggest that the most severe impacts for most power technologies would result from flooding, that sea level rise could have a severe impact on offshore wind and that increasing air temperatures and storms could have a severe impact on grids. It also found that further investment would be needed in climate change adaptation for hydropower in southern Europe to account for lower average precipitation. However, some key results, such as that overall investment needs are dominated by climate-proofing offshore wind power against the impacts of sea-level rise, are not supported by other studies.

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Another early assessment of adaptation challenges for the whole European energy sector was provided in a research report of the ToPDad project (Aaheim et al., 2013, Chapter 2). This study looked specifically at the adaptation needs of a decarbonizing energy system up to 2100, considering foreseen change in supply and use technology as well as societal factors. The most important vulnerabilities to climate change in the energy sector included: transmission infrastructure from extreme weather events; cooling water shortages for thermal power generation; and variability in renewable energy generation under changing weather conditions. However, more recent assessments are now available, drawing on improved climate projections and impact assessments.

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Two studies from the ClimateCost project used a modified version of the POLES energy model to analyse the impact of climate change on the European energy system (Dowling, 2013; Mima and Criqui, 2015). On the demand side, this study considered changes in heating and cooling demand; on the supply side, changes in the efficiency of thermal power plants, and changes in hydro, wind and solar PV electricity output. According to these studies, demand side impacts are larger than supply side impacts. However, this study considered neither possible change in extreme weather events nor decarbonisation scenarios.

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The recently concluded PESETA III project of the Joint Research Centre (JRC) assessed economic impacts of climate change on several European sectors, including energy (Ciscar et al., 2018; Despres and Kitous, 2018). Changes in heating and cooling energy demand were assessed to have an overall beneficial welfare effect.

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Another recent JRC study conducted within the ENHANCE project combined model-based projections of changes in multiple climatic hazards with sensitivity assessments of different types of critical infrastructure in Europe (EU28 plus Iceland, Norway and Switzerland) based on an expert survey (Forzieri et al., 2018). The study suggests that the expected annual damage (EAD) from climate extremes on critical infrastructure in Europe, including 10 types of energy infrastructure, would rise sharply as a result of climate change. The strongest rise in multi-hazard damage is projected for infrastructure in the energy sector, for which the baseline EAD of €0.5 billion per year could rise to €1.8 billion (€1.1-2.8 billion), €4.2 billion (€3.0-6.7 billion) and €8.2 billion (€5.0-10.7 billion) per year by the 2020s, 2050s, and 2080s, respectively. These damages, and the resulting adaptation needs, are dominated by the impacts of droughts and heatwaves whereas other hazards play only a small role. However, short-onset hazards such as floods and storms can lead to blackouts with wider societal and economic impacts, which were not considered in this study.

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The following sections assess the main impacts of climate change on the European energy system in more detail.

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