California Facing Record Hydro Season This Spring

What a difference a year makes

Going into this winter, California was facing another year of prolonged, severe drought. This spell of historically dry weather began in 2011 and reached emergency levels in 2015. The State of California imposed mandatory water restrictions following one of the driest winters on record. During that time, there was no measurable snowpack in some portions of the Sierra Nevada Mountains—a key indicator that more of the same extremely dry weather was to be expected.

But the snow thrower crews at Tahoe are making up for lost overtime this year!

Cooler temperatures and a series of strong storms this winter have improved conditions dramatically in only a few months.

Winter weather provides needed relief to California

The state received well-above normal precipitation this winter. This curtailed the effects of six consecutive years of drought. Conditions have improved to the point that the severe drought has been eliminated from most parts of the state. Only the southern part of the state is showing abnormally dry (D0) to moderate drought (D1).

Notably, the weather from this past winter has replenished vital reservoirs across the state of California. Looking at the Sierra now, we have seen one of the deepest snowpack levels in the last 50 years that should result in a robust hydro season, likely displacing gas-fired generation this spring.

As the map below shows, the Sierra Nevada Mountains received a snow water equivalent this winter that was 220% higher than normal. The chart below shows how much higher these conditions were in comparison to weather patterns dating back to 2001.

CA Drought Map

Source: USDA

Winter 2016/’17 Snow Water Equivalent

Source: USDA & EIA

Rebound from drought poised to boost hydro output

The drought conditions suppressing California’s water supply over the past six years had curtailed hydro output as a result. This lost generation was made up via natural gas-fired generation, as well as the steady growth of renewable capacity from added wind and solar installations.

The coming spring melt should boost hydro output through June and even into July, as rains this spring could add to runoff levels.

Data from the California ISO shows hydro levels on a daily basis from October through March will be up year-over-year by close to 1,000-2,000 MW/day. This will likely continue to accelerate in April and run through June. Conservative estimates for displaced natural gas demand could be about a 0.25 Bcf/d displacement.

 Source: CAISO

Renewables to gain ground on gas-fired generation

The impact of increased hydro flows, as well as added utility scale solar capacity (per EIA, California added 1.4 GW – 27 percent from June ‘15 to June ’16), will reduce gas-fired generation in the state.

Renewables account for 20,446 MW (29 percent) out of 71,740 MW of installed capacity in the state. Wind and solar make up close to 70 percent of renewables. Large-scale hydro accounts for 12 percent. Natural gas accounts for 54 percent of capacity.

Source: CAISO

Weather conditions can impact procurement strategies

California has been lucky this winter to receive such abundant precipitation as to relieve the long-standing drought.

Robust hydro output, along with growing solar capacity, will likely displace gas-fired generation demand this spring—possibly into this summer.

Forward natural gas prices on the NYMEX have been moving higher since the middle of February, as overall gas production has been declining year-over-year.

Customers could consider a layered procurement strategy to take advantage of surplus hydro this spring, as well as protection from rising underlying gas prices. Contact us today to learn more.