Blowing Hot and Cold

IMF Blog, March 16, 2021

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Examines where current conditions are relative to the temperature "sweet spot" for electricity demand and the implications of warming.
Uses satellite data: changes in electricity usage are approximated by nighttime lights recorded by satellites, which are described as highly correlated with electricity usage.
Analysis is conducted at subnational levels, comparing changes in electricity usage with changes in temperature over time.
Focuses on places not extremely cold where the annual average temperature is above 0 degrees Celsius (32 degrees Fahrenheit).

The relationship between electricity demand and temperature is generally U-shaped: at both low and high temperatures, electricity demand is high.
The identified "sweet spot" (minimum electricity demand) is about 14.6 degrees Celsius (58.3 degrees Fahrenheit) for the annual average temperature.
For much of the world, the average temperature has already increased beyond that sweet spot; further temperature rises are set to increase electricity demand further.
Regional vulnerability example: Sub-Saharan Africa’s average temperature is already well beyond the sweet spot.
- A 1 degree Celsius (1.8 degree Fahrenheit) increase in temperature is estimated to raise Sub-Saharan Africa’s electricity consumption by about 7 percent.
Differential effects by climate:
- Hotter climates: electricity demand will likely surge to combat heat waves (increased cooling needs).
- Colder climates: less electricity may be needed to keep people warm (reduced heating needs).

Access to affordable, reliable, sustainable and modern energy is one of the United Nations’ Sustainable Development Goals.
Investing in basic energy infrastructure is described as especially urgent in the context of development needs.
To avoid compromising the fight against climate change, it is vital that increased electricity generation be "green and renewable."
Historical context: Three-quarters of the world’s households were electrified during the 20 th century, presented as a significant achievement and a foundation for future investment.

Continued global warming will generally raise electricity demand in many regions by moving average temperatures beyond the identified sweet spot of about 14.6 degrees Celsius (58.3 degrees Fahrenheit).
Policy priorities highlighted: scale up electricity generation to meet rising demand; prioritize investments that support sustainable development and renewable generation to align adaptation and mitigation objectives.

Blowing Hot and Cold — Jiaxiong Yao, March 16, 2021