The energy sector faces significant financial implications due to climate action's impact on electricity demand and grid stability. Electricity demand for cooling during extreme heat events has nearly tripled since the 1990s, reaching 800 TWh in 2023, underscoring the urgent need for climate action in alignment with SDG13. Energy firms are struggling to manage escalating cooling demand while maintaining grid stability and meeting sustainability targets. To address these challenges, entities should implement sustainable cooling solutions, invest in grid resilience and deploy demand response programmes to manage peak demand during extreme heat events.
Global focus
The heat is on: Energy sector's cooling challenge
SDG13: Balancing affordable energy access with climate action - Energy firms must innovate for sustainable cooling solutions
UN Sustainable Development Goals
Energy (all industries)
AT A GLANCE
The energy sector faces stark challenges due to tripling electricity demand for cooling, reaching 800 TWh in 2023.
This surge poses grid stability risks and opens markets for sustainable cooling solutions, with a potential 50% demand increase in hotter regions.
Key measures could cut 60% off 2050 sectoral emissions, provide universal access to cooling and save trillions.
Rising cooling demand
The intensification of extreme weather events due to climate change is leading to a substantial surge in cooling demand, posing significant energy security risks for the Energy sector. A study published in Frontiers in Energy Policy projects that under the Representative Concentration Pathway (RCP) 4.5 scenario, the residential sector is expected to experience a substantial 63% increase in electricity demand from 2001-19 to 2050, with the commercial and industrial sectors also facing significant increases.
Cooling sector risk action
The rising cooling demand challenges the energy sector by impacting grid stability. The IEA's Electricity Market Report 2024 reveals that cooling accounts for about 10% of global electricity demand, potentially surging to over 50% in hotter countries during summer. The UNEP Cool Coalition report suggests that reducing cooling equipment power consumption could cut 60% off predicted 2050 sectoral emissions and save trillions of dollars by 2050.
Sustainable cooling advances
Energy companies are implementing innovative sustainable cooling solutions to address growing demand while minimising environmental impact. ARENA has awarded Shell Energy Australia AUD9.1 million for a demand-flexibility project optimising systems, including HVAC and refrigeration, to manage cooling demand during peak events. Dominion Energy's Smart Thermostat Rewards Program enables customers to manage higher energy demand by adjusting HVAC systems during peak hours, reducing overall grid load.
New GRI climate disclosures
New standards require companies to disclose comprehensive information about climate-related risks, opportunities and actions, focusing on cooling and energy efficiency. The Global Reporting Initiative (GRI)'s proposed climate change standard introduces new disclosure requirements on transition plans, emission reduction targets and GHG removal within value chains. The GRI's Energy Standard requires companies to disclose information on energy target setting and elaborate on energy policy roles in transitioning to a decarbonised economy.
FURTHER READING
- Cooling as a Service Initiative (BASE)
- CaaS: Pay-per-service model for clean cooling (Climate Policy Initiative)
- Financial Innovation for Climate Adaptation in Africa (GCA)