Working paper

Financial implications of parched power: insights from an analysis of Indian thermal power companies

Energy industries Power resources groundwater Risk

This paper introduces a new, independently developed methodology to assess the financial impacts of water shortages. In our methodology, we leverage asset-level data from the Parched Power paper and combine it with geospatial physical risk and corporate financial data to analyze the financial impacts of water shortages on five publicly listed Indian thermal power generation companies. Although our analysis focused on the Indian market, others could use the methodology to replicate similar analysis in other markets where necessary data are available. As such, our findings have implications for investors in the broader global thermal power sector.


  • Water shortages can cause significant impacts to earnings at thermal power companies. Analyzing five Indian companies, water shortages caused electricity generation outages that resulted in quarterly impacts to earnings as high as 17.4 percent from FY 2014-2017.
  • Water-shortage-induced generation outages affected a much higher percentage of power plants using more water withdrawal-intensive once-through cooling technologies than units using less water withdrawal-intensive recirculating cooling technologies.
  • While baseline water stress is well suited to measure chronic water risks, drought indexes can provide more meaningful information when evaluating acute water-shortage risks.
  • Forward-looking climate scenarios project significant uncertainties in India’s future water availability. Stress-testing thermal power companies’ exposures to water-related risks is essential to ensure prudent investment decisions.
  • Investors need better data and disclosures to effectively measure and manage the impacts from water shortages on thermal power companies.
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