The Cost Borne by Electricity Consumers Under Expanded Irrigation From the Columbia River

Abstract

An analysis is done of the costs imposed on participants in the electricity market arising from irrigation diversions from the Columbia River. The hypotheses analyzed are (1) that electricity consumers' welfare is not affected by irrigation diversions, (2) that hydropower loss estimates derived using time and location specific data do not differ from those derived using average data, (3) that water year does not affect welfare losses, (4) that demand elasticity does not affect welfare losses, (5) that farmer pumping payments do not affect welfare losses, and (6) that interruption of water in critical flow years does not affect welfare losses. Electricity consumers are found to lose welfare when diversions are increased. Considering a potential diversion in central Washington, the annual loss to electricity consumers is in excess of $100 per acre ($247/hectare) developed. When the government delivers water to farmers' fields, this loss exceeds $200 per acre ($584/hectare). A sensitivity analysis of the welfare loss estimates shows that they are sensitive to the share that diverters pay of pumping costs and the potential interruption of diversions but not to different hydropower loss estimates, demand elasticity and water year. The results under critical water year interruption show a potential for reducing the tradeoffs between irrigation development and hydroelectric power generation as the costs fall by almost 80%.