Abstract

The Colorado River is an important natural resource for the Southwestern United States. Predicted climate change impacts include increased temperature, decreased rainfall and increased probability of drought in this region. Given the large amount of hydropower on the Colorado River and its importance to the bulk electricity system, this purpose of this study was to quantify the value hydropower in operating the electrical system, and examined changes in hydropower value and electricity costs under different possible future drought conditions and regional generation scenarios. The goal was to better understand how these scenarios affect operating costs of the bulk electrical system, as well as the value of the hydropower produced, and proposed a method for doing so. The calculated value of the hydroelectric power was nearly double the mean locational marginal price in the study area, about $73 to $75 for most scenarios, demonstrating a high value of the hydropower. In general, it was found that reduced water availability increased operating costs, and increased the value of the hydropower. A calculated value factor showed that when less hydroelectric power is available, the hydropower is more valuable. Furthermore, the value factor showed that the value of hydro increases with the addition of solar or the retirement of thermal generating resources.

Highlights

  • Resource changes in the electricity sector are common and happen for many reasons

  • The subsequent sections focus on total generation cost, locational marginal prices (LMPs) in the WECC and in Arizona, hydro value, and value factor

  • This study used production cost modeling to examine the effects of specific future possibilities in the desert Southwest of the United States, taking into account generation scenarios and drought scenarios with the goal of better understanding how those possible future changes influence WECC

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Summary

Introduction

Resource changes in the electricity sector are common and happen for many reasons. Prominent among these are changes in the cost of generation, such as the decrease in the cost of natural gas fired generation in the United States due to an increase in supply and increased plant efficiency [1], and the continuing decline in cost of wind and solar power [2,3,4]. In the Southwestern (SW) United States, (Arizona, New Mexico, and parts of surrounding states) coal-fired power generation is being retired while more solar photovoltaic generation is being added, due to Renewable Energy Standards (RES) [6] and low costs [3]. Two examples of coal retirements are the Navajo Generating Station (NGS) in Page, Arizona, a 2250 MW coal generating plant, and the San Juan

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