Electricity consumption and adaptation to climate change: heterogeneity across regions and economic sectors in China

Abstract There is growing empirical evidence that a warming climate will induce adaptation of the electricity system. Less understood is the extent to which climate change could exert on electricity demand given heterogeneity in consumption patterns and the latent mechanisms driving these patterns. We statistically estimate an asymmetric U-shaped temperature response function of city-level daily electricity consumptions using data in years 2018–2019 and examine heterogeneous responses across regions and economic sectors. Benefiting from the high-frequency electricity consumption data that covers 92 Chinese cities and multiple economic sectors, our findings speak to both the intensive margin as well as the extensive margin adaptation to climate change. We find that access to district heating can explain the asymmetry slopes in temperature-load responses. We also find that although the marginal load responses are statistically significant for all sectors in both high (> 25.6°C) and low (< 6.6°C) temperature ranges, the tertiary (service) sector load is more sensitive to temperature changes. Taking account of the tertiarization trend, we predict about 66% of the cities will experience more than 3% increase in their summer daily electricity consumption before year 2040. This will likely require substantial investments to expand power grid capacity and to build up energy storage.