Electricity Prices, River Temperatures and Cooling Water Scarcity
AbstractThermal-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 InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6842.
Length: 41 pages
Date of creation: Sep 2012
Date of revision:
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Other versions of this item:
- McDermott, Grant R. & Nilsen, Øivind A., 2011. "Electricity Prices, River Temperatures and Cooling Water Scarcity," Discussion Paper Series in Economics 18/2011, Department of Economics, Norwegian School of Economics.
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
- Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
- C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-30 (All new papers)
- NEP-ENE-2012-09-30 (Energy Economics)
- NEP-ENV-2012-09-30 (Environmental Economics)
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