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Dive Brief:

  • California’s extended drought could nearly halve its summer hydropower generation from 15% of the state’s electricity under normal conditions to only 8%, according to a new analysis by the U.S. Energy Information Administration.
  • The dip in hydropower generation would also bump up California’s natural-gas fired generation, lead to a 6% increase in carbon dioxide emissions from the state’s energy sector, and an average 5% increase in wholesale electricity prices across the West, according to the study.
  • California is facing “the perfect storm” of events that regulators have little control over, including climate change-related conditions, as well as supply chain and tariff issues that are affecting the deployment of projects, according to Jan Smutny-Jones, CEO of the Independent Energy Producers Association.

Dive Insight:

Around 41% of California was classified under exceptional drought by August 2021, leading to lower hydroelectric generation. According to the report, hydroelectric generation in 2021 was 48% lower than the state’s 10-year average. Natural gas generation in California, meanwhile, was higher in July 2021 than any month since September 2015, according to EIA data.

California is currently in the third year of its latest drought, and these conditions are impacting the state’s hydropower resources, typically the third largest source of its electricity, according to the EIA. Most of the state’s reservoirs have low levels of storage at the moment, and its two largest ones — Lake Shasta and Lake Oroville — were, as of April 1, at 48% and 67% of historical storage averages respectively. What’s more, experts warn, the drought could have broader impacts across power markets in the West. 

The drought conditions also come as the state is going through a broader transition in its electricity mix toward cleaner sources of energy. Roughly 6.5 GW of natural gas units have been retired since 2015, the EIA study notes, while solar capacity has increased by 8.8 GW in that same period. Even taking into account the large amounts of battery storage that California is adding to its system, its total share of dispatchable resources is lower now than it was seven years ago, the study stated. 

“The thing about hydropower is it is a very flexible resource and it can ramp up and ramp down pretty quickly. So in that sense, it’s a very good match for helping to meet the variation in renewable generation,” said Debra Warady, electricity industry economist with the EIA.

The analysis mostly hones in on the summer months – June 1 to September 30 – when electricity demand in California increases, and takes a closer look at the modeled output of six hydropower projects in the state. It modeled two scenarios – a “median case,” based on the median water supply between 1980 and 2020, and a “drought case,” which represents the current year as of April 1.

In the latter case, the study found that California’s summer hydroelectric generation is nearly halved to 8% of the state’s electricity generation. The state could offset this by importing more power from its neighbors as well as increasing natural gas generation from 45% to half of the summer generation mix. The increase in more expensive natural gas generation, in turn, contributes to higher wholesale electricity prices and carbon emissions.

One countervailing factor, however, is the Western Energy Imbalance Market, or WEIM. While the market was launched in 2014, more than half of its entities joined in the last two years, creating a footprint that offers broader load and resource diversity, according to the study.

“We expect that WEIM, given its expansion since 2015, will moderate the impact of drought conditions on the California electricity market and possible changes in emission levels this summer,” the study notes.

While the WEIM has been working well to move power around the West, “I think where the danger is, is if you have a West-wide heat event – which happens from time to time,” said Smutny-Jones, adding that this could mean power imports are not sufficiently available. 

California has added a lot of solar and wind in the last few years and will continue to do so, and the gas fleet will operate less, Smutny-Jones added. “But we’re going to need to keep it for periods of time [like] we’re experiencing right now, where we could have [a] long drought,” he added.