How big is the spillover effect?, Extreme high temperatures "grill" global economic weather | power grid | effects

The hot weather is testing the electricity bills of factories, power grids, and the public worldwide.

In North America, Canada is suffering from a new round of wildfires, which is the most severe wildfire season in its history. Timber factories in Quebec have been forced to close, and Alberta has also reduced its oil production. More than 100 million people in the United States are shrouded in high temperatures, and the huge demand for electricity has increased the burden on the grid. North American Power Reliability Group said that most parts of the United States may face power outages this summer. The temperature in Mexico soared in June, and the country's National Energy Control Center issued an alert, stating that the power grid briefly entered a state of emergency with less than 6% of operating reserves remaining.

During the European heatwave, regulatory rates in the Spanish electricity market jumped by 20%, and Greece's tourism industry and France's agriculture were threatened by the hot climate.

In India, Asia, the scorching heat has caused multiple deaths.

According to Brimicom, a climate researcher at the University of Graz in Austria, high temperatures will bring pressure to the entire society and carry associated risks, such as pressure on energy networks and healthcare services, slower train speeds, melting roads in some areas, potential decline in crop yields, health and retail issues for livestock, and so on.

Bloomberg economist Sarkozy also told First Financial reporters that droughts and floods under extreme weather conditions will directly affect crops and fisheries, cut off channels for mining and other industries, and thereby drive up inflation. And due to the connection between trade and finance, there may be significant spillover effects.

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Power grid under pressure, bills skyrocketing

High temperature weather will not only increase electricity demand, but extreme weather can also cause physical damage to power grid components such as transformers, resulting in power outages, rolling power outages, or comprehensive power outages.

The National Weather Service of the United States announced that as of July 16th, new high temperature records will appear in the western, southwestern, southern depths of the United States, and South Florida. During extreme hot weather, about half of the electricity consumption in the United States is used for cooling equipment, greatly increasing the load on the power grid.

The non-profit organization North American Power Reliability Group has warned in an assessment report that if extreme heat events occur, two-thirds of the North American continent will face a high risk of energy shortages this summer. The US Government Accountability Office estimates that if the power grid is not upgraded, weather related power outages could result in annual losses of billions of dollars for utility companies and customers in the coming decades.

The power grid problem in Texas, USA is the most severe. Since the winter storm of 2021 forced the shutdown of the Texas power grid, the resilience issue of the state's power grid has not been resolved. Over the past month, the Texas Power Reliability Commission, the state's power grid operator, has issued multiple weather warnings, stating that electricity demand has reached a new high.

On the 13th, ERCOT reported a historical high demand record of 81406 megawatts, and issued another alert on the 14th, stating that there will be a new peak demand from the 16th to the 18th.

The National Energy Assistance Guidance Association predicts that household energy bills in the United States will increase by 11.7% this summer from $517 last summer to an average of $578.

"If the heatwave continues, more people will say they don't have the money to pay for cooling costs," said Wolf, the executive director of the association. With the bad economic situation, people will be more cautious about spending.

In Asia, Vietnam experienced a wave of power outages this summer, with some areas experiencing power outages lasting up to 7 hours. Singapore's electricity demand has also reached a new peak, with the average monthly electricity consumption of residents skyrocketing from 300 kilowatt hours to 500 kilowatt hours. The Ministry of Electricity, Energy, and Mineral Resources of Bangladesh stated in June that due to fuel shortages, Bangladesh's largest coal-fired power plant and several other power generation equipment were shut down, leading to a power outage crisis.

The same goes for Spain in Europe. Due to energy constraints, Spanish energy market operators have announced that the average wholesale market electricity price for July will increase from 94.89 euros/megawatt hour in June to 109.92 euros/megawatt hour.

Affects almost all industries

The abnormal high temperature weather is also damaging the operation of the economy.

In Germany, high summer temperatures cause a decrease in the water level of the Rhine River, putting pressure on Europe's energy and transportation systems. In Greece, one of the popular tourist attractions, the Acropolis of Athens, will be closed for the third consecutive day during the hottest period.

The warming of the Rh ô ne River, another key waterway, may also force the French power company to limit the nuclear power output of some nuclear reactors. According to French regulations, when the temperature of the river reaches a certain threshold, the French power company must reduce or stop production to ensure that the water used to cool nuclear power plants does not cause harm to the environment when it flows back into the river.

Moody's Analytics stated in a report that high temperatures are one of the tangible risks affecting almost all industries. High temperatures can cause crop death and damage retailers in the supply chain who rely on crops; Extreme high temperatures can change consumer demand for tourism; There are still many industries that have to shut down under high temperatures.

Anpax Asset Management Group also states that two-thirds of the world's large enterprises have at least one asset highly exposed to tangible risks of climate change.

Many large companies have identified high temperatures as a significant financial risk for their operations. For example, Wal Mart said that its large facilities were vulnerable to rising cooling costs. Disney also stated that excessive heat may affect the sales of its tourism products.

In addition, high temperatures and the accompanying drought are bound to pose a threat to agriculture. Deutsche Bank recently stated that the approaching El Ni ñ o phenomenon has led to a significant increase in coffee, sugar, and cocoa prices. As the harvest is affected by adverse weather events, it is expected that other food commodities will also rise accordingly.

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World Meteorological Organization: High temperature weather may continue until August

According to a report by the Eiffe News Agency on July 14th local time, the United Nations World Meteorological Organization stated on the same day that the scorching weather that broke the monthly average temperature record in June and the two daily average temperature records in the first half of July will continue for another two weeks and may continue until August.

The World Meteorological Organization predicts that temperatures in the Mediterranean region will continue to be above normal levels, with a weekly average temperature of 5 degrees Celsius higher than normal. "This extreme weather is becoming an increasingly frequent phenomenon in climate change and has significant impacts on human health, ecosystems, economy, agriculture, energy, and water supply," said Petri Taras, Secretary General of the World Meteorological Organization

The meteorological departments of the United States and Morocco have issued high temperature warnings for the coming weeks. Taras believes that the situation is "urgent" and reiterates the importance of reducing greenhouse gas emissions as quickly and deeply as possible.

According to reports, if this situation cannot be reversed, the Intergovernmental Panel on Climate Change predicts that by 2050, approximately half of the European population may face high or extremely high heat stress risks during the summer.