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Electricity Prices, River Temperatures and Cooling Water Scarcity

Grant R. McDermott () and Øivind Nilsen ()
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Grant R. McDermott: Norwegian School of Economics

No 6842, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Thermal-based power stations rely on water for cooling purposes. These water sources may be subject to incidents of scarcity, environmental regulations and competing economic concerns. This paper analyses the effect of water scarcity and increased river temperatures on German electricity prices from 2002 to 2009. Having controlled for demand effects, the results indicate that the electricity price is significantly impacted by both a change in river temperatures and the relative abundance of river water. An implication is that future climate change will affect electricity prices not only through changes in demand, but also via increased water temperatures and scarcity.

Keywords: water scarcity; thermal-based power; water-energy nexus (search for similar items in EconPapers)
JEL-codes: Q25 Q41 Q5 C3 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2012-09
New Economics Papers: this item is included in nep-ene and nep-env
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Working Paper: Electricity Prices, River Temperatures and Cooling Water Scarcity (2011) Downloads
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