Texas Power Sector at the Crossroads: Challenges and Opportunities in a Changing Climate

Energy

Building Optimization

Clean Energy

Energy Resilience

Climate Research

Assessing Climate Impacts

Mitigating Climate Change

Planning & Adapting for Climate

Client / Funder

Various

Researchers

Location

Texas Gulf Coast

Recent infrastructure failures in Texas have spotlighted climate risks as millions of Texans were left in the cold and dark or without water. Extreme weather increasingly impacts electricity generation and delivery, which could have far-reaching implications. For instance, power generators may discover that their output is increasingly constrained by rising temperatures and falling water tables. Surges in energy demand could push the electrical grid to fail as Texans scramble to stay cool or warm. Compounding extreme weather events could incur financial liabilities that eventually push companies and utilities towards bankruptcy.

HARC’s new series of research publications analyzes the growing need for climate resilience in Texas’ power sector. Extreme weather is among the megatrends affecting the Texas power sector, alongside a growing energy demand and a push for clean energy. This series aims to develop thought leadership and inform stakeholder dialogue to chart the path towards climate resilience in the Texas power sector. It focuses on three questions:

How is climate change impacting the power sector now and in the future?
Do power sector stakeholders view climate change as a risk or an opportunity (or both), and what types of actions do they take in response?
How could the financial implications of climate change affect the “bottom line” in asset operations?

Climate Impacts in the Power Sector

The first position paper of the series analyzes how climate change is impacting the power sector in various ways. For instance, acute shocks may have highly visible impacts in terms of power reliability, whereas slow burn disaster slowly chips away at operational efficiency over time. This position paper dives into the question of what it takes to climate-proof power sector assets is based on variables linked to life cycle, fuel source, geographic location, and capacity to implement best-available technologies. Leveraging critical investment decisions towards resilience opportunities is paramount.

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Stakeholder Views and Management Approaches

Under the umbrella of Pythias Analytics, HARC aims to support and strengthen stakeholder capabilities to monitor infrastructure exposure to extreme weather. In partnership with ClimeCo and Lehigh University, the team rolled out a survey in 2021 to understand climate risk perceptions in the power sector. The results of this survey will underpin investment tool development for the Texas power sector. HARC and its partners welcome stakeholder feedback and participation in the further development of this research.

Extreme weather increasingly affects business operations and financial sustainability in the power sector. In collaboration with partners, HARC is finalizing a case study that aims to support the integration of climate risk considerations in corporate tools for asset valuation and financial decision-making. The team deploys an integrated modeling approach that includes a downscaled climate model, a power plant performance model, and a discounted cash flow model to estimate the financial implications of efficiency losses due to climate change for a specific power plant in Texas.

Stay tuned for more information about this research and other upcoming publications.

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