By Kara Lamb
Editor’s Note: The following report summarizes Fiscal Year 2015 data from our Hydropower conditions webpage for straight power purchase costs, which are based solely upon hydrology, actual hydropower generation and related generation shortages.
One of today’s biggest challenges for the energy industry, and especially those of us who deal in hydroelectric power, is water variability due to intermittent drought and flooding. Western has a natural interface with water. By definition, hydropower needs water to generate electricity. Without it, we are forced to buy power on the open market from other sources to meet our contractual obligation to our customers. This is referred to as purchase power.
In an ideal year, snowpack around the West is average, or above average, yielding snowmelt runoff to recharge reservoirs behind the dams and powerplants that provide the energy Western markets. Federal dam owners like Bureau of Reclamation, U.S. Army Corps of Engineers and the International Boundary and Water Commission, move water to federal hydropower plants. Western markets the power generated there to almost 700 preference customers. Our customers, in turn, sell that power to about 40 million Americans.
Water around Western in 2015
Drought in the desert and coastal West was a driving factor in Fiscal Year 2015. As a result, Western’s total generation was slightly below average at 88.9 percent for a total generation of 23,437 gigawatt-hours. For the same period, total purchase power was 3,904 GWh with actual purchase power expenses around $133,670,000, which equates to $34.24 per MWh.
The Colorado River Storage Project Management Center projected most probable purchase power expenses for FY 2015 to be around $23,327,954. Actual purchase power expenses were slightly lower, due to drought conditions, at $22,059,837. Lake Powell and Glen Canyon Dam, the largest hydropower facility in CRSP MC, finished FY 2015 at a water level elevation of 3,606 feet, about 94 feet below the maximum generation level and 116 feet above the minimum generation level.
In the Desert Southwest, the total most probable projected purchase power expenses were $2,998,530. Actual purchase power expenses were $5,537,178. A contributing factor to the difference is DSW’s practice of developing its most probable projection of monthly purchase power expenses at the beginning of the fiscal year and retaining that projection throughout the year to serve as a hard baseline. However, the disparity mainly can be attributed to reduced head and power generation caused by Lake Mead beginning the fiscal year at a lower-than-average elevation and dry hydrology conditions in later months.
Lake Mead and Hoover Dam make up the largest hydropower facility in DSW. At the close of the fiscal year, Lake Mead’s water level elevation was 1,078 feet, about 141 feet below full storage level and roughly 28 feet from the minimum generation level.
High levels of precipitation in FY 2014 created good reservoir storage conditions for Rocky Mountain that carried over into FY 2015. As a result of that carryover storage and low demands for water until late in the irrigation season, actual power purchases were more than originally projected. However, due to lower-than-anticipated power prices, the actual purchase power expense of $13,766,444 was lower than the projection of $17,164,237.
The overall reservoir content at the end of September and FY 2015 exceeded the annual average at 118 percent. Rocky Mountain Civil Engineer John Gierard explained, “Water conditions in Rocky Mountain for 2015 had all appearances of being just as dry as other parts of the western U.S. until a ‘miracle May’ of heavy precipitation and low temperatures resulted in an above-average water year.”
Drought was a factor for Sierra Nevada in FY 2015 where California snowpack reached a historic low during the spring, typically a time of plenty. The region began the fiscal year with a most probable projection of purchase power around $14,300,000 for the Full Load Service Customers, but ended FY 2015 closer to $22,128,080. The difference is the result of SN’s power purchase strategies based upon term purchases between 70-75 percent of anticipated power needs, with the remainder being purchased on the day-ahead and real-time market purchases after project pumping and generation have been scheduled. Customers other than full-load service customers needed to purchase the difference in their portfolios on their own, increasing their purchase power budgets as well.
Sierra Nevada Vice President of Power Marketing Sonja Anderson explained, “Throughout the past three years, California drought conditions severely affected power production. In fact, this year was extremely low at 2,588 gigawatts of generation. However, due to SN’s proactive risk management power purchase strategies, Power Marketing was able to take advantage of the lower market prices and hedge power purchases to help ease the burden placed on our customers due to the drought.”
Upper Great Plains’ most probable projection for purchase power in FY 2015 was $52,068,767. Actual purchase power expenses were $70,487,479. UGP Power Marketing Manager Jody Sundsted explained, “Generation was slightly less than projected and the timing of water releases increased purchase power costs. In addition, Joint Marketing activities are not included in the projections due to their variability, but are included in the actual amounts.”
Anticipating upcoming water year
The Seasonal Drought Outlook provided by the National Weather Service’s Climate Prediction Center in early January 2016 showed some slight drought improvement or removal in parts of the western U.S. However, much of the existing drought in the nation is designated as long term.
It is anticipated that El Niño conditions favor improvement of drought across California by the end of March 2016. The Climate Prediction Center models show the most likely area for drought removal exists across northwestern California due to abnormal wetness during early to mid-December 2015 and what looks to be a continued wet pattern forecast.