Lake Mead watch: As levels fall, hydropower dips
Why Southwest utilities are starting to sweat.
When the Hoover Dam was built in 1936, it was the largest concrete structure – and the largest hydropower plant — in the world, a massive plug in the Colorado River, as high as a 60-story building. For nearly 80 years, the dam has been producing dependable, cheap electricity for millions of people in the Southwest, but as water levels in Lake Mead continue to drop, the future of “the greatest dam in the world” is more precarious than it ever has been, and utilities across the desert are taking notice.
This month, Lake Mead, the 112-mile reservoir created by the dam, is projected to hit 1,074.73 feet above sea level, the lowest it has been since it was filled in 1937. Thanks to a 16-year drought and serious over-allocation, Lake Mead is now just 37 percent full. Although a “miracle May” of rain means the water level will rise again, the longer term prognosis is more worrisome: If water levels continue their downward trend, the amount of energy generated by the Hoover Dam will fall, leading to higher electricity costs for 29 million people in the desert Southwest.
That's because a shallower reservoir means less water pressure against the turbines, generating less electricity. A recent report by graduate students at the University of California, Santa Barbara in conjunction with the Western Water Policy Program, examines the economic and physical impacts as Lake Mead’s elevation falls: With each 25-foot drop, total energy costs increase by roughly 100 percent, compared to a full reservoir. The costs paid by contractors for hydropower double at 1,075 feet, triple at 1,050 feet, quadruple at 1,025 feet. At 895 feet, the turbines won’t run, a level they call “dead-pool.”
Dead pool is still a ways off and in the short term, less generation at Hoover won’t translate into soaring electrical bills, says Frank Wolak, an economics professor at Stanford. That’s because utilities buy “futures” contracts for energy, which guarantee a certain price for a period of time. It’s like buying a plane ticket in advance: The price is significantly less than one bought on the same day as a flight. In the case of Hoover, many of those contracts span up to 10 years and were negotiated before low water levels became a significant concern.
Still, Hoover’s power capacity has dropped nearly 25 percent since 2000, and the 53 hydropower facilities run by the U.S. Bureau of Reclamation across the West are producing 10 percent less power than a few years ago, despite rising demand. So when those futures contracts run out and continued low water levels appear likely, bottom-barrel prices for hydropower will likely be a thing of the past.
That means that utilities currently relying on Hoover’s power, such as the Overton Power District No. 5, which serves 15,000 people in Nevada on the southern end of Lake Mead, are wary. Overton buys 20 percent of its power from the Hoover Dam, 5 percent from other hydro projects, and 75 percent on the spot market (where energy is traded on day-by-day basis). The utility anticipates having to replace 5 percent of its hydropower with another, more expensive, energy source, says Mendis Cooper, Overton’s general manager. That switch won’t translate into sky-high energy bills, likely just a 1 to 2 percent increase. But if Lake Mead continues to fall and shortages become routine, his customers could see more dramatic increases in their electricity bills.
“We’ve been having those discussions,” Cooper says, noting that the major topic is moving to more renewables, like solar, as well as improving efficiency.
Luckily, the West has ambitious renewable goals, says Wolak, which will likely make up more of the region’s energy mix and help mitigate the loss of hydropower in the future.
Still, renewables aren’t a panacea. Wind and solar are far more volatile and require back-up power sources, such as gas-fired power plants. And though the prices for renewables have come down in recent years, they’re still no match for cheap, federally subsidized hydropower. “They solve the resource issue,” Cooper says, “but not the price issue.”
Sarah Tory is an editorial fellow at HCN. Follow @tory_sarah
