Impacts of climate change on the European electricity market

This study considers the effects of climate change on the electricity market. For this purpose, an ARIMAX model and a neural network are used to adjust the demand and generation time series from the ten-year development plan 2022 of the European transmission system operators to various climate scenarios, using Copernicus climate indicators. Utilizing the agent-based electricity market model PowerACE, we identify a significant influence of climate change on renewable electricity production, whereas its impact on electricity demand is less pronounced. As such, accelerating climate change might reduce the need for conventional capacity compared to scenarios where climate change is less extreme. However, inaccuracies in climate change projections pose a risk of leading to inappropriate long-term investments, compromising the security of electricity supply.