A retrospective study of the 2012–2016 California drought and its impacts on the power sector

Abstract

Over the period 2012–2016, the state of California in the United States (U.S.) experienced a drought considered to be one of the worst in state history. Drought’s direct impacts on California’s electric power sector are understood. Extremely low streamflow manifests as reduced hydropower availability, and if drought is also marked by elevated temperatures, these can increase building electricity demands for cooling. Collectively, these impacts force system operators to increase reliance on natural gas power plants, increasing market prices and emissions. However, previous investigations have relied mostly on ex post analysis of observational data to develop estimates of increases in costs and carbon dioxide (CO2) emissions due to the 2012–2016 drought. This has made it difficult to control for confounding variables (e.g. growing renewable energy capacity, volatile natural gas prices) in assessing the drought’s impacts. In this study, we use a power system simulation model to isolate the direct impacts of several hydrometeorological phenomena observed during the 2012–2016 drought on system wide CO2 emissions and wholesale electricity prices in the California market. We find that the impacts of drought conditions on wholesale electricity prices were modest (annual prices increased by $0–3 MWh−1, although much larger within-year increases are also observed). Instead, it was an increase in natural gas prices, punctuated by the 2014 polar vortex event that affected much of the Eastern U.S., which caused wholesale electricity prices to increase during the drought. Costs from the drought were very different for the state’s three investor owned utilities. Overall, we find that increased cooling demands (electricity demand) during the drought may have represented a larger economic cost ($3.8 billion) than lost hydropower generation ($1.9 billion). We also find the potential for renewable energy to mitigate drought-cased increases in CO2 emissions to be negligible, standing in contrast to some previous studies.