Fighting climate change together: The regional heterogenous impacts of climate change and potentials of regional power market

This study measures the impact of the climate change on China's electricity sector and how the heterogenous impact across a large geographic area could be employed to better adapt to climate change. A unique dataset of daily load in China's five southern provinces in 2018 is employed to estimate the temperature response functions and predict the future changes driven by climate change. The results show that although the rising temperature will normalize the higher level of electricity demand on average, it exerts a heterogeneous impact on the electricity demand of different provinces, thereby creating opportunities for trade and cooperation among these five provinces. By using a cost-minimization model, we find that reforming the electricity sector through economic dispatch and expanding the dispatch area can serve as a cost-effective “soft” approach to adapting to climate change. •Temperature response functions vary with climate conditions.•Climate change will “stretch” the upper end of the distributions further outward.•Average load responds more to temperature rise than peak load.•Reforming the sector can save $4547.25 million by expanding economic dispatch.