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The Power Water Correlation

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Water has the ability to shape the power markets on a global scale, 15% of the water the world is currently using goes into making energy, according to the International Energy Agency. Traditionally the main risks are from countries with a strong exposure to Hydroelectricity that are heavily dependent upon rainfall.

Today we are seeing the effects. In the last few months, Brazil has been forced to import more liquefied natural gas (LNG), paying a premium for the commodity on the spot markets. Brazil’s hydroelectric dams, which generates 67% of the country’s power, have seen water levels dip to near critical levels. Although they have reduced their exposure, where hydroelectricity previously accounted for over 90% of their power supply mix, it is still a high source to be heavily reliant upon.

This nexus does not just effect hydroelectricity. “During the 2003 heat wave in France, which was responsible for more than 10,000 deaths, nuclear plants had to reduce their output, worsening the crisis. The rising temperature of river water meant they could not achieve sufficient cooling and still observe discharge limits”, Michael Webber of the University of Texas Energy Institute told senators.

Coal and natural gas power plants require water to both generate and cool the steam that turn their turbines. In addition to power plants, water is used in growing crops for biofuels as well as drilling for oil and gas. The shale gas revolution is also heavily water intensive, which will rapidly increase the amount of global water consumption as more countries try to develop their reserves. One of the factors that Spain accounted for before deciding not to pursue fracking.

As energy demand goes up, so will the demand for fresh water. The International Energy Agency expects the demand for water just for energy production(not including water for washing, drinking or irrigating crops)to grow twice as quickly as the demand for energy itself.


Alfa Energy Group

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