Climate Change Will Cost Utilities Millions if Not Addressed

by | Sep 19, 2022 | Education, Gas Infrastructure

Climate change spells lowered efficiency, increased expenses and more outages – the only thing customers dislike more than rate increases – and as the demand for energy increases, the problems around climate change only loom larger.

The decade between 2000 to 2010 was the warmest on record and extreme weather events like heat waves and droughts have increased during the past 40 to 50 years. In 2020, there were 30 named storms, millions of acres burned in wildfires and major flooding, all of which are impacted by climate change. In the past decade, there have been more than 130 climate change related events that have cost billions in damages. This month, it was reported that the Thwaites Glacier in Antarctica may collapse into the ocean by 2031, resulting in a two-foot rise in the world’s oceans.

Despite this, some utilities are continuing to build in at-risk locations where weather events and wildfires put those assets at risk. Utilities also are wrestling with the fact that assets that would have been considered resilient a few decades ago are no longer up to the task and our grid is rapidly aging.

In Canada, many power plants are deliberately built close to bodies of water to access that resource, and when storms like Hurricane Fiona come ashore, those plants are flooded and must either shut down or reduce service. Meanwhile, those same storms knock down distribution poles and damage transmission structures, further limiting utilities’ ability to provide service.

Climate change is putting pressure on utilities in other ways as temperatures condition to rise, increasing demand during the warmer months. Due to its Northern location, Canada experiences climate change at twice the rate of the global average, with the Canadian Arctic experiencing climate at change at triple the global average rate. 

Costs due to extreme weather are also rising rapidly, with the average cost per event quadrupling from an average of $44 million in the early 1980s to $175 million from 2010 to 2019 for 23 events. Utilities will typically see $3.1 billion in savings annually in storm damage and lost revenues by modernizing energy grids, but must spend about $293.8 billion to make the needed upgrades through the end of the century. 

A kitchen sink approach would also include decentralization and incorporating more renewable technology in addition to hardening the existing grid.

Canada has ten connected provincial electric grids, and a majority of the grid lines are more than 50 years old. In addition to the high costs of hardening the existing systems, the country’s dedication to eliminating all emissions by mid-century will add a staggering increase. Estimates are $1.9 billion annually to reduce emissions. Updating aging transmission and distribution infrastructure with an eye to flood protection and reinforcing transmission assets does double duty.

Investing in tandem in decentralization with a number of smaller facilities placed closer to population centres and battery storage can not only improve resiliency by operating independently at need, but also help balance loads and allow utilities to defer or even avoid construction of plants.

Decentralization not only makes the grid more flexible, but it can also be incredibly profitable. As an example, the Hornsdale Wind Farm in Australia, constructed to support the power grid during peak demand and more easily integrate renewable energy, earned $20.7 million in its first full year of operation – nearly a third of its $63.25 million price tag.

The Smart Renewables and Electrification Pathways Program (SREPs) provides $1.8 billion for direct funding, loans and loan guarantees over eight years to increase investment in renewable energy, and is expected to significantly reduce greenhouse gas emissions over the next decade.

Unfortunately, as utilities innovate and invest in a more resilient future, 6 to 19 percent of Canadian households, including a disproportionately large percentage of low-income households, report that it is difficult for them to pay their energy bill and adequately heat or cool their home. As utilities improve energy efficiency, their customers are falling behind in the one place that utilities can’t touch – private homes.

When a home’s HVAC consumes half of their energy needs in a year and low-income homes are significantly less energy efficient than their wealthier counterparts, utilities are left with a larger than optimal demand and their customers are energy burdened, with bills higher than they can comfortably afford to pay.

HomeServe policies can address all these issues for your customers and help them keep their home energy systems in the best shape possible, helping your utility address the issue of climate change more easily.

For larger utilities, the new HomeServe Advantage Program makes homes more energy efficient by making high-efficiency HVAC systems accessible. The Program incorporates everything for the customer, from financing to install to maintenance and repair, for one easily budgeted monthly price.

For more information about how we can help you and your customers improve their energy efficiency, contact us.