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Abstract Water consumed by power plants is transferred virtually from producers to consumers on the electric grid. This network of virtual transfers varies spatially and temporally on a sub-annual scale. In this study, we focused on cooling water consumed by thermoelectric power plants and water evaporated from hydropower reservoirs. We analyzed blue and grey virtual water flows between balancing authorities in the United States electric grid from 2016 to 2021. Transfers were calculated using thermoelectric water consumption volumes reported in Form EIA-923, power plant data from Form EIA-860, water consumption factors from literature, and electricity transfer data from Form EIA-930. The results indicate that virtual water transfers follow seasonal trends. Virtual blue water transfers are dominated by evaporation from hydropower reservoirs in high evaporation regions and peak around November. Virtual grey watertransfers reach a maximum peak during the summer months and a smaller peak during the winter. Notable virtual blue water transfers occur between Arizona and California as well as surrounding regions in the Southwest. Virtual grey water transfers are greatest in the Eastern United States where older, once-through cooling systems are still in operation. Understanding the spatial and temporal transfer of water resources has important policy, water management, and equity implications for understanding burden shifts between regions.
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Managing Financial Risk Trade‐Offs for Hydropower Generation Using Snowpack‐Based Index Contracts
Abstract Hydrologic variability poses an important source of financial risk for hydropower‐reliant electric utilities, particularly in snow‐dominated regions. Drought‐related reductions in hydropower production can lead to decreased electricity sales or increased procurement costs to meet firm contractual obligations. This research contributes a methodology for characterizing the trade‐offs between cash flows and debt burden for alternative financial risk management portfolios, and applies it to a hydropower producer in the Sierra Nevada mountains (San Francisco Public Utilities Commission). A newly designed financial contract, based on a snow water equivalent depth (SWE) index, provides payouts to hydropower producers in dry years in return for the producers making payments in wet years. This contract, called a capped contract for differences (CFD), is found to significantly reduce cash flow volatility and is considered within a broader risk management portfolio that also includes reserve funds and debt issuance. Our results show that solutions relying primarily on a reserve fund can manage risk at low cost but may require a utility to take on significant debt during severe droughts. More risk‐averse utilities with less access to debt should combine a reserve fund with the proposed CFD instrument in order to better manage the financial losses associated with extreme droughts. Our results show that the optimal risk management strategies and resulting outcomes are strongly influenced by the utility's fixed cost burden and by CFD pricing, while interest rates are found to be less important. These results are broadly transferable to hydropower systems in snow‐dominated regions facing significant revenue volatility.
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- Award ID(s):
- 1639268
- PAR ID:
- 10448002
- Publisher / Repository:
- DOI PREFIX: 10.1029
- Date Published:
- Journal Name:
- Water Resources Research
- Volume:
- 56
- Issue:
- 10
- ISSN:
- 0043-1397
- Format(s):
- Medium: X
- Sponsoring Org:
- National Science Foundation
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