What happens to the power system during a heatwave?

José Ramón Arechederra, IGNIS Energy Management Director, explains how these events affect both electricity consumption and generation

Heatwaves are a regular feature of summer in Spain and, beyond driving temperatures higher, they also put the power system under greater pressure. Electricity demand rises, the availability and performance of some generation technologies change, and anticipating market developments becomes even more important.

José Ramón Arechederra, IGNIS Energy Management Director, explains how these events affect both electricity consumption and generation, why they can lead to higher electricity prices, and how forecasting and asset optimization enable an efficient response to an increasingly demanding environment.

What is the first thing that changes when a heatwave arrives?

The first noticeable change is the demand profile. Electricity consumption increases due to the intensive use of air conditioning and cooling systems, particularly during certain hours of the day. This is immediately reflected in the electricity market: demand peaks become more challenging, requiring dispatchable technologies such as combined cycle gas plants and hydropower to meet them.

During these periods, these types of assets play a more prominent role. In our case, for example, hydropower allows us to concentrate generation during peak demand hours and actively participate in system balancing services.

Why do electricity prices increase?

Prices do not rise simply because temperatures are higher. They increase because higher demand requires additional generation technologies to be brought online. When the available renewable generation is not sufficient to meet demand, power plants with higher production costs enter the market, ultimately setting the electricity price during those hours.

As a result, prices depend on the combination of demand, available renewable generation, hydropower availability, thermal generation and cross-border electricity exchanges.

Does heat also affect electricity generation?

Yes, although the impact varies depending on the technology. High temperatures reduce the efficiency of photovoltaic panels and can also affect the performance of thermal power plants. In addition, heatwaves may coincide with lower availability of certain natural resources, such as wind or water, although this depends on the specific conditions at the time.

That is why it is not enough to anticipate how much demand will increase. It is equally important to forecast which generation technologies will be available and how each of them is expected to perform.

What does «asset optimization» mean during a heatwave?

For dispatchable assets, such as hydropower, it means deciding the most valuable hours to generate electricity, determining how much energy should be reserved to cover demand peaks, and defining the best strategy for participating in balancing services.

For renewable assets, our role is not to decide when they generate electricity, but to continuously determine how that energy should be allocated across different electricity markets. The participation of dispatchable technologies to meet demand peaks changes price dynamics and can create opportunities between the day-ahead market, intraday markets and balancing services.

Understanding these market dynamics allows us to update forecasts, adjust market positions and determine the most efficient market in which to sell each megawatt. During periods of high prices, effective asset management is about both capturing market opportunities and avoiding forecasting or positioning errors that could reduce the value of the generated energy.

How far in advance can these events be anticipated?

The first indications can usually be identified several days in advance through weather and demand forecasts. From that point onwards, the strategy is continuously refined as more accurate information becomes available regarding temperatures, renewable generation and the availability of other generation technologies.

Rather than making a single decision several days ahead, the process consists of building an initial market position and progressively adjusting it until real time.

How should asset management evolve as these events become more frequent?

As extreme weather events become more common, it will be increasingly important to combine more accurate weather and demand forecasting with the ability to respond in real time.

Asset optimization will need to become more dynamic, automated and integrated, progressively incorporating battery storage, demand-side flexibility and other assets capable of responding when the power system is under greater stress.

Increasingly, value will come not simply from selling the electricity produced, but from understanding how the power system is evolving and continuously adapting operations and market strategy accordingly.