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Electricity Prices, River Temperatures and Cooling Water Scarcity

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Author Info

  • McDermott, Grant R.

    ()
    (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Nilsen, Øivind A.

    ()
    (Dept. of Economics, Norwegian School of Economics and Business Administration)

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.

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Bibliographic Info

Paper provided by Department of Economics, Norwegian School of Economics in its series Discussion Paper Series in Economics with number 18/2011.

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Length: 29 pages
Date of creation: 22 Sep 2011
Date of revision:
Handle: RePEc:hhs:nhheco:2011_018

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Keywords: Thermal-based power; water scarcity.;

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  1. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2007. "Enhanced routines for instrumental variables/generalized method of moments estimation and testing," Stata Journal, StataCorp LP, vol. 7(4), pages 465-506, December.
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  3. Koch, Hagen & Vögele, Stefan, 2009. "Dynamic modelling of water demand, water availability and adaptation strategies for power plants to global change," Ecological Economics, Elsevier, vol. 68(7), pages 2031-2039, May.
  4. Bessec, Marie & Fouquau, Julien, 2008. "The non-linear link between electricity consumption and temperature in Europe: A threshold panel approach," Energy Economics, Elsevier, vol. 30(5), pages 2705-2721, September.
  5. Kopytko, Natalie & Perkins, John, 2011. "Climate change, nuclear power, and the adaptation-mitigation dilemma," Energy Policy, Elsevier, vol. 39(1), pages 318-333, January.
  6. Viehmann, Johannes, 2011. "Risk premiums in the German day-ahead Electricity Market," Energy Policy, Elsevier, vol. 39(1), pages 386-394, January.
  7. Boogert, Alexander & Dupont, Dominique, 2005. "The nature of supply side effects on electricity prices: The impact of water temperature," Economics Letters, Elsevier, vol. 88(1), pages 121-125, July.
  8. Kristin Linnerud & Torben K. Mideksa & Gunnar S. Eskeland, 2011. "The Impact of Climate Change on Nuclear Power Supply," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 149-168.
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