OREANDA-NEWS. February 07, 2017. Recent rain has lessened severe drought conditions across much of California, but the resulting increase in hydroelectric output may curb natural gas-fired generation in the spring and early summer months.

One year ago, the entire state of California was characterized as abnormally dry or in various stages of drought, according to the US Drought Monitor. After four years of limited rain and snow, more than half the state was listed as in extreme drought or exceptional drought, the agency's most severe category, defined by widespread loss of pasture and crop land and emergency water conditions.

Relief began in 2016 and has recently accelerated dramatically. In the final two months of 2016 and early 2017, heavy widespread rain and snow has shrunk the area of the state considered abnormally dry or in drought to 61pc from 91pc in October. Just 2pc of the state remained in extreme drought.

January rain brought more relief, moving the last area of exceptional drought in Ventura, Santa Barbara and Los Angeles counties to a less-severe drought category.

Preliminary data from the California Independent System Operator (ISO) shows that hydroelectric output returned to normal last year after four years of decline. Annual hydro generation was 21,514GWh, double 2015's output of 10,500GWh which accounted for about 5pc of the state's power supply, the lowest level since the ISO began operating in 1998. The 2016 level was the highest since 2011 which topped 30,000GWh.

Many of the state's water and snowpack indicators have risen to above-normal levels, setting the stage for strong hydro output this year.

Snowpack across California's Sierra Nevada has increased in the last month, the California Department of Water Resources (DWR) said last week. Snowpack as of 2 February held 173pc of its water equivalent, triple the figure from New Year's Day.

In the first four months of the current water year which began 1 October, three regions of California have recorded more rainfall than the areas normally see in a full water year, DWR said last week.

Hydro generation typically peaks in late spring and early summer, ahead of California's peak summer electric demand, which usually occurs in August and September. Variation in year-to-year hydro output has a major impact on power prices and California's wholesale market, the ISO's market monitor said.

With rising seasonal wind and solar output, additional spring rain will likely boost short-term hydro output as reservoirs may not have the flexibility to hold more water. Water levels may need to fall to make room for snow melt later in the spring.

"The bottom line here is that we should expect significant downside in California moving forward as increased wind and rain add length to the grid," said analysts at Energy GPS.

Peak hydro generation last year occurred on 29 June at 6,372MW, according to preliminary ISO data. The agency will issue a hydro forecast ahead of the summer, based on reservoir levels and snowmelt conditions later this spring.

Supply from run-of-river hydro projects can reduce gas-fired baseload generation. Hydro generation can also compete with gas-fired generation to supply ancillary power services needed during peak hours and to integrate abundant solar and wind generation on the grid.

Even with recent record rain and snow, the California drought continues. The northern third of the state has returned to normal water conditions, but much of the state from San Joaquin County south remains under at least abnormally dry conditions, according to the federal agency.

Although 2017 started wet, storms can end, DWR warned. In the last 10 water years, eight have been dry, one wet and one average, said state climatologist Mike Anderson. "We cannot say whether (2017) will be one wet year in another string of dry ones," Anderson said.