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Climate Change and the Vulnerability of Germany's Power Sector to Heat and Drought

The effects of extreme weather events and the resilience of the energy sector have become the subject of regulatory initiatives and ongoing research. We demonstrate the vulnerability of the German power sector to climate change and provide a qualitative and quantitative analysis of emerging risks from two types of extreme weather events: droughts and high temperatures. Our analysis is based on datasets covering temperature and drought data for the last 40 years. We present evidence of a higher frequency of power plant outages as a consequence of droughts and high temperatures. To characterize the vulnerability of the power sector we develop a capacity-adjusted drought index. The results are used to assess the monetary loss of power plant outages due to heatwaves and droughts and losses to consumers due to higher wholesale electricity prices and price volatility. An increasing frequency of such extreme weather events will aggravate the observed problem.

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Keywords: Electricity, Utilities, Thermal generation, Climate change, Droughts, Weather extremes, Panel data

DOI: 10.5547/01956574.43.3.agol

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Published in Volume 43, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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