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All Risk Warmer winters can reduce demand for electricity Decreased top line revenue None.
T&D Opportunity Warmer winters could reduce the frequency of ice storms Less ice-related equipment damage N/A Warmer Winter Temperatures Solar Risk Less ice coverage on lake could cause lake effect cloud cover.
Cloud cover reduces output from regional solar farms in the Great Lakes region.
None.
Temperature Increased Summer Heat Opportunity Increased summer heat increases demand for electricity Increased top line revenue N/A All.
Wind.
Physical Climate Risks, Opportunities, and Impacts At-A-Glance (continued)
Climate Potential Risk/ Potential Risk Parameter Change Assets Opportunity Physical Impact Operational Impact Mitigation Measures.
All Risk Severe weather (winter and summer) can damage equipment Outages, storm related costs, customer experience suffers Equipment hardening.
All Risk Equipment ratings and throughput can be temperature dependent (conductors, transformers, batteries, gear box, generators, etc.)
Components may not be able to operate to design basis and need to be replaced more often.
Change design basis, add cooling systems.
Employees Risk Increased risk for heat stress Requires workflow changes to build in additional breaks to prevent heat illnesses Reduced productivity for employees and contractors.
Severe Weather Increased Storms.
Wind Risk Wind turbines curtailed if wind speeds are too high Need for more costly replacement generation None.
Wind Risk Wind turbines curtailed if wind speeds are too high Need for more costly replacement generation None.
Wind Risk Increased winter storms cause icing of blades Ice on turbine blades can affect safety, performance, durability and reliability.
Ensure turbines are equipped with cold weather packages, regular O&M blade inspections.
All Risk Storms decrease or eliminate outside work productivity Major construction, routine maintenance etc. will experience increased delays.
Determine effective ways to continue work safely during precipitation events.
Risk Higher air temperatures increase surface evaporation Increased surface evaporation reduces water storage and power output, loss of revenue.
None Hydro.
Solar Risk Negative impact to efficiency of photovoltaic cells if temperatures rise above ratings.
Reduced power output None.
Wind Risk Increasing air temperatures result in declines in air density Declines in air density result in mismatch of expected power output Incorporate predictions of air temperature changes into resource predictions.
Fossil Risk Increased temperatures cause cooling ponds to heat up — fish kills possible.
None Risk to reputation, potential for fines for noncompliance.
Technology Chairman’s Message Introduction and TCFD Framework Transition Analysis Just Transition.
Physical Risks and Opportunities
Texas: Where Climate Variables Converge.
Texas is one state in AEP’s service territory that experiences multiple climaterelated variables. AEP Texas and Southwestern Electric Power Company (SWEPCO) both serve portions of the Lone Star State. AEP Texas is based in Corpus Christi and serves customers in south and west Texas to the Mexico border. SWEPCO’s service territory is in East Texas and the Panhandle area of North Texas. The climate variables affecting areas of the state include: • Rising sea level, flooding • Coastal storms, hurricanes • Precipitation (rain, snow, ice) • Tornados, windstorms • Wildfires, drought • Extreme temperatures (heat, cold)
Texas is home to some of the nation’s hottest cities, and, according to a study published in Earth’s Future, the state faces drier summers and decreasing water supplies for the rest of this century. Meanwhile, on the Gulf Coast, the state is at increasing risk of coastal flooding, hurricanes and sea level rise. In the western part of the state, freezing precipitation in the winter can be problematic for transmission, distribution and renewable facilities. In fact, Texas ranks as the most at-risk state in the U.S. for natural disasters.
We use our experience managing weather variations to plan differently for storm recovery and for hardening the system to mitigate future damage. Storm surge during Hurricane Harvey taught us that we need more locations for staging crews and equipment for restoration, since some of the locations we historically relied upon were flooded from storm surge and heavy rain.
55 AEP’s Climate Impact Analysis.
REGULATORY OVERSIGHT AND DESIGN BASIS.
As one of the most highly regulated industries, the electric utility sector is subject to an array of regulations and oversight. Understanding AEP’s regulated business model is important to appreciating the financial and strategic impact of climate-related risks.
Regulations can vary from requirements from the Institute of Electrical and Electronics Engineers (IEEE) that govern specific pieces of electric equipment due to regulations from the North American Electric Reliability Corporation (NERC) that govern the reliability and resiliency of the bulk electric power system. Compliance is a priority for AEP, and we invest significant resources to ensure we are designing, building and operating to the required standards at all times.
AEP currently designs, builds and maintains its transmission and distribution facilities to meet and/or exceed the current National Electric Safety Code (NESC) and American National Standards Institute (ANSI) standards established for particular geographic regions. These standards take into account known physical risk parameters, such as wind speed and ice loading, based on solid engineering judgment. In fact, AEP has design.
AEP’s Utilities.
Vertically Integrated Utilities Wires-Only Utilities.
Appalachian Power Company AEP Ohio.
Indiana Michigan Power Company AEP Texas.
Kentucky Power Company.
Public Service Company of Oklahoma.
Southwestern Electric Power Company.
Wheeling Power Company.
Technology Chairman’s Message Introduction and TCFD Framework Transition Analysis Just Transition.
Physical Risks and Opportunities
56 AEP’s Climate Impact Analysis standards that allow for lines and poles to withstand greater wind speeds and ice loading, especially where they are most susceptible to that kind of damage. For example, transmission lines and structures in hurricaneprone areas are designed beyond NESC requirements and include longitudinal strength loading criteria to improve resistance to cascading failures. We have also relocated and strengthened circuits to make them less vulnerable to weather-related damage and limit damage to equipment that requires long repair times.
Resilience is focused on risks and consequences that can come from anywhere. AEP’s capital investment strategy includes investing in local reliability projects that enhance grid resilience by replacing vulnerable assets, upgrading our telecommunications network and maintaining spare parts.
Recognizing the disruptions that can be caused by extreme weather events, some states are exercising increased oversight to ensure the grid is “hardened” to preserve service during these events. For example, Texas electric utilities have to file system hardening plans with the state to demonstrate they are implementing cost-effective strategies to increase the ability of transmission and distribution facilities to withstand weather extremes.
PRECIPITATION AND WATER-RELATED CLIMATE IMPACTS.
The water-energy nexus is critical to the production of electricity and energy security. Although AEP’s water dependency has decreased and will continue to as we transition to less-water-dependent sources of electricity, access to water in the interim remains vital to electricity production. Water serves many functions, including the power production from our hydroelectric facilities; the transfer of energy in steam-based generating units; a medium for cooling equipment; and the transportation of materials, such as barge deliveries of fuel and other consumables to plants located on rivers. As dependent as the energy industry is on water, the availability, quantity and quality of water is highly dependent on weather and the environment. When these are out of balance, there can be operational risks for AEP.
For example, an analysis of rainfall trends in northeast Texas shows that heavy rainfall events have increased the average annual rainfall amount over the past 20 years.
Annual Precipitation in Inches.
Longview, Texas 70 60 50 40 30 20 10 0
1995 2000 2005 2010 2015 2020.
Annual precipitation trends over the past 20 years in Northeast Texas show an increase in average annual precipitation by about 7 inches since 1999.
Technology Chairman’s Message Introduction and TCFD Framework Transition Analysis Just Transition.
Physical Risks and Opportunities
This can affect the operation of power plants because intense rainstorms leave wet coal piles that are temporarily unsuitable for energy production. This has occurred in Texas as well as at plants in Indiana and West Virginia where flooding has affected fuel supplies. Extreme rainfall can affect dams, spillways, coal ash ponds and other reservoirs by exceeding design standards, which could require mitigation and expensive retrofits or upgrades.
Heavy precipitation can also affect operation of renewable facilities. It can cause soil erosion at the foundation of a wind turbine or wash out access roads for both wind and solar facilities. Heavy precipitation also can accelerate erosion on the leading edge of turbine blades, which might not be covered under warranty, creating additional operational costs.
Climate-related water impacts are an issue of growing importance to stakeholders who are increasingly asking for water-related disclosures. This includes measures related to water risk in their value chains, the environmental and regulatory conditions where they operate, and internal governance around water 57 AEP’s Climate Impact Analysis management and risk mitigation. AEP has been very transparent about these issues for more than a decade through our Corporate Accountability Report and GRI Report, as well as our CDP Water Survey disclosure.
BUSINESS & OPERATIONAL EFFECTS OF CLIMATE-RELATED WATER RISK.
AEP recently participated in a study led by EPRI, finding that projected changes to the climate will affect precipitation and temperatures, including in areas where AEP operates. The findings indicate that these changes could affect surface waterbodies, such as lakes, rivers and streams, through increased water temperatures, poorer water quality, more erosion, and disruptions to water flow.
The assessment identifies potential risks to: (1) thermal generation, (2) hydroelectric generation, (3) landbased renewable generation and (4) transmission and distribution facilities. These risks may result from projected reductions in water availability (e.g., for hydroelectric or once-through cooling), increased water temperatures (e.g., decrease in cooling efficiency,
Huntington, West Virginia 70 60 50 40 30 20 10 0
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020.
An analysis of annual precipitation trends at a point near the Ohio River (Huntington, WV) shows that annual precipitation has increased about 10 inches since 1999. This data supports climate research suggesting heavy precipitation events will become more frequent/severe in the Ohio Valley — including areas served by.
Kentucky Power, Appalachian Power and southern AEP Ohio.
Annual Precipitation in Inches.
Another analysis of rainfall trends over the past 20 years in Huntington, West Virginia, shows an increase in annual precipitation amounts and supports research claims that heavy rainfall events are increasing in the Ohio Valley.
Technology Chairman’s Message Introduction and TCFD Framework Transition Analysis Just Transition.
Physical Risks and Opportunities
inability to meet discharge permit conditions) and decreased water quality (e.g., from increased transport of sediment and dissolved solids). On a region-specific basis, the report notes key water-related impacts to the AEP system that would primarily occur in the Midwest, Southeast and Southern Plains areas.
The potential changes in water quality, availability, temperature and quantity identified by EPRI extend beyond generation facilities. For example, we might 58 AEP’s Climate Impact Analysis.
Midwest Water Risk Impacts • Impacts to agriculture could lead to increased stress on water availability for electric power generation.
• Projected increases in frequency and intensity of extreme precipitation events could affect transportation of fuel and related products due to damage to roads, rail, bridges and dams.
Southern Plains Water Risk Impacts • Increases in the frequency of warm nights, increasing energy demand.
• Projected increases in extreme rainfall and extreme weather events (hurricanes, tornados, thunderstorms) could impact infrastructure used to transport fuel and goods.
• Extreme single-day and multi-day rainfall amounts due to systems that stall over geographic regions, causing record rainfalls.
• Large swings between dry and wet periods may occur in the region, causing stress on agriculture, power generation and transportation.
• Increased frequency and intensity of extreme events could threaten infrastructure within the region, as well as the entire cycle of mining, refining, exporting and consumption.
Other Water Risk Impacts • Potential dam failures, impacts to coal ash ponds, and expensive upgrades and retrofits due to extreme rainfall events.
• More frequent and damaging wildfires due to drought, leading to widespread damage to assets and service disruptions.
• Decreases in efficiency of thermal generation facilities due to increased source water temperatures.
• Growth of nuisance biota (e.g., algal blooms) due to increases in water temperatures, potentially damaging condensers and strainers.
• Impacts to coal and biomass deliveries to generation facilities due to decreased stream flow (e.g., Ohio River) and less water depth/ draft in navigable rivers.
• Facilitation of invasive aquatic species leading to reduced populations of vulnerable species due to changes in water temperatures and flow patterns. Impacts to rare, threatened, and endangered species may also occur.
Hurricane Harvey dumped more than 27 trillion gallons of rain over Texas, making Harvey the wettest Atlantic hurricane ever measured.
need to take mitigating actions to stabilize a stream bank if we were relocating or siting new transmission or distribution infrastructure in an area at risk for this type of erosion. Strategies to mitigate these impacts would add to project costs.
Next steps for continuing this work may include the evaluation of individual or groups of assets for key risks in selected regions. Those facilities with vulnerabilities may be further evaluated using a quantitative risk.