Economic impact of adaptation to climate change in Iceland's energy supply sector

The economic value of adaptation to climate impact on renewable resources is examined using the UniSyD_IS model of Iceland's energy system. The model captures the entire energy system including interactions among supply sectors, energy markets, infrastructure and fuel demand. In this framework, climate adaptation options are evaluated in the context of a rational decision making process. Comparison of two scenarios with and without climate impact on hydro and biomass resources reflects the direct and indirect economic effects of adaptation strategies and provides insights for generation and energy supply investment planning. The simulation results show that the adaptation to climate change in Iceland leads to higher installed capacities for hydro, biodiesel, and bioethanol plants with lower supply costs. The findings indicate that the adaptation of energy supply to climate change could provide net benefits from an energy supply perspective.