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Electricity Prices, River Temperatures and Cooling Water Scarcity

Author

Listed:
  • McDermott, Grant R.

    () (Norwegian School of Economics)

  • Nilsen, Øivind Anti

    () (Norwegian School of Economics)

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.

Suggested Citation

  • McDermott, Grant R. & Nilsen, Øivind Anti, 2012. "Electricity Prices, River Temperatures and Cooling Water Scarcity," IZA Discussion Papers 6842, Institute for the Study of Labor (IZA).
    • Handle: RePEc:iza:izadps:dp6842
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    References listed on IDEAS

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    Cited by:

    1. Grossi, Luigi & Heim, Sven & Waterson, Michael, 2014. "A vision of the European energy future? The impact of the German response to the Fukushima earthquake," The Warwick Economics Research Paper Series (TWERPS) 1047, University of Warwick, Department of Economics.
    2. Machiel Mulder, 2015. "Competition in the Dutch Electricity Market: An Empirical Analysis over 2006-2011," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    3. Mulder, Machiel & Scholtens, Bert, 2013. "The impact of renewable energy on electricity prices in the Netherlands," Renewable Energy, Elsevier, vol. 57(C), pages 94-100.
    4. Zheng, Xinzhu & Wang, Can & Cai, Wenjia & Kummu, Matti & Varis, Olli, 2016. "The vulnerability of thermoelectric power generation to water scarcity in China: Current status and future scenarios for power planning and climate change," Applied Energy, Elsevier, vol. 171(C), pages 444-455.
    5. repec:eee:eneeco:v:66:y:2017:i:c:p:450-465 is not listed on IDEAS
    6. Eyer, Jonathan & Wichman, Casey J., 2018. "Does water scarcity shift the electricity generation mix toward fossil fuels? Empirical evidence from the United States," Journal of Environmental Economics and Management, Elsevier, vol. 87(C), pages 224-241.
    7. Pechan, Anna & Eisenack, Klaus, 2014. "The impact of heat waves on electricity spot markets," Energy Economics, Elsevier, vol. 43(C), pages 63-71.
    8. Bogmans, Christian W.J. & Dijkema, Gerard P.J. & van Vliet, Michelle T.H., 2017. "Adaptation of thermal power plants: The (ir)relevance of climate (change) information," Energy Economics, Elsevier, vol. 62(C), pages 1-18.

    More about this item

    Keywords

    water scarcity; thermal-based power; water-energy nexus;

    JEL classification:

    • 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

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