Analysis: California drought bites deeper

OREANDA-NEWS. Dry weather in January spells trouble for California hydropower plants and farmers as water reservoirs in the state remain depleted after a multi-year drought.

January normally is California's wettest month but the state Department of Water Resources recorded little precipitation in the past four weeks. A manual snow survey on 28 January showed that the statewide snowpack was only 25pc of the historical average. The snowpack normally supplies about 30pc of California's water needs, the state agency says.

Meager precipitation this month means California likely will encounter drought conditions for the fourth straight year, the agency said. Water levels at Lake Oroville, Shasta Lake and San Luis Reservoir — major reservoirs in northern California — are at 62pc, 65pc and 68pc of historical averages. California's precipitation has to exceed normal levels by 150pc for the rest of the current water year that ends in September to make up for the water deficit, which is unlikely, state climatologist Michael Anderson says.

The growth of solar and wind generation is partly making up for lower hydro generation. But gas-fired plants have to run more often in peak load hours both to replace hydropower output and to support renewables. Hydro generation on the California Independent System Operator system last year fell by 29pc from 2013.

The resulting change in the supply mix is adding to wholesale price volatility in real time markets. It also is lifting natural gas prices in California, located far from the fastest-growing US production regions.

Northern California depends more on hydropower so power prices there are affected more. NP-15 summer 2015 round-the-clock assessments are \\$34/MWh, gaining 11pc by summer 2016. The summer 2015 values at SP-15 are \\$35/MWh and are up by 9pc for the following summer.