How does climate change affect electricity system planning and optimal allocation of variable renewable energy?

Highlights: • Climate change affects long-lived infrastructures like electricity systems. • Decarbonization will largely be based on variable renewable energies. • Impacts of climate change work differently in size and direction. • Two investment planning strategies are compared: Anticipate climate change yes or no. • Total effects but also isolated effects on potential welfare loss are estimated. -- Abstract: Ongoing climate change affects complex and long-lived infrastructures like electricity systems. Particularly for decarbonized electricity systems based on variable renewable energies, there is a variety of impact mechanisms working differently in size and direction. Main impacts for Europe include changes in wind and solar resources, hydro power, cooling water availability for thermoelectric generation and electricity demand. Hence, it is not only important to understand the total effects, i.e., how much welfare may be gained when accounting for climate change impacts in all dimensions, but also to disentangle various effects in terms of their marginal contribution to the potential welfare loss. This paper applies a two-stage modeling framework to assess very strong climate change impacts on a cost-optimally decarbonized, highly renewables-based European electricity system. Thereby, the performance of two electricity system design strategies – one based on no anticipation of climate change and one anticipating impacts of climate change – is studied under a variety of climate change impacts. Impacts on wind and solar resources are found to cause the largest system effects in 2100. Combined climate change impacts increase system costs of a system designed without climate change anticipation due to increased fuel and carbon permit costs. Applying a system design strategy with climate change anticipation increases the cost-optimal share of variable renewable energy based on additional wind offshore capacity in 2100, at a reduction in nuclear, wind onshore and solar photovoltaics capacity. Compared to a no anticipation strategy, total system costs are reduced.