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Drought Impacts

Impacts of drought on the economy

Economic impacts of drought can be large and far-ranging. However, estimates of the economic impact of droughts are generally developed in the absence of an explicit conceptual framework. Therefore, in MaRIUS a new analytical framework was developed, to capture all the factors that contribute to, or mitigate against, the economic costs or impacts of a drought. These factors include climate and drought dynamics, infrastructure in place and policy, planning and management actions.

The economic model will be used to estimate direct and indirect losses of drought and highlight the impacts associated with different drought management options.

A particular focus was also placed on electricity generation. Approximately one third of the UK’s electricity supply depends on freshwater, for the cooling of coal, gas and biomass thermal power plants. These power plants need a reliable water supply and operate under strict environmental controls to minimise ecological impacts. Low flows and warm water temperatures mean some power plants may need to reduce or shut down operations, resulting in the need to use more expensive electricity supply options, thus pushing up electricity supply prices.

The maps right illustrate the proportion of capacity unavailable at 40 power plants across the UK, for different time-periods, with estimated economic costs shown in the bar graphs below.

  • In severe drought years, such as the 1975-‘76 drought, the value of unavailable generations ranges potentially up to £400-800m.