Weather has always been one of the most important considerations in power system operations. In Australia’s National Electricity Market, temperature has historically been a particularly key driver of power system dynamics. Heating loads and cooling loads drive both bulk energy consumption, and peak loads which have a direct impact on system costs. In addition, extreme temperature events can reduce the output of thermal, solar, and wind generation, impact transmission lines, and result in loss of supply. This loss of supply posses challenges to maintain the reliability of the power system.

 While these impacts on the power system are well understood, the changing climate and increasing dependence on aging infrastructure changes the outlook. Electricity systems and infrastructure have been designed to withstand fluctuations in temperature weather, however, the outlook in a changed climate is not well understood. The market operator is currently enhancing temperature modelling, with particular focus on improving forecast performance during temperature extremes. In addition, the performance of the supply side in higher and extreme heat conditions is also not well understood.

 This paper extends this work by providing further insight into the effect of extreme temperatures on forward-looking demand in a changed climate. Drawing on analysis from the United States, a detailed bottom-up model of the generation fleet is also used to estimate the effects on power system supply. These two factors are combined to provide an assessment of the impact of increased temperatures and heat waves on the National Electricity Market. In particular, this paper focuses on the impact and cost of maintaining a reliable power system in the face of a changing climate.