Sensitivity of Western U.S. Power System Dynamics to Droughts Compounded with Fuel Price Variability

The energy sector is heavily dependent on surface water availability for reliable electricity generation. Power system operations are usually evaluated through system reliability and economic perspectives, with assumptions based on market prices and normal water availability. As natural gas technologies continue to dominate new thermal capacity, replacing retiring coal and nuclear generators, natural gas price stability becomes increasingly important and the impact of price volatility on grid operations must be understood. Here, we explore the range of Western Electricity Coordinating Council (WECC) regional power operations, which represents the electric interconnection over the western half of the continental United States, using a production cost model driven by different fuel prices and an integrated hydrology model to simulate historical water availability. Our results show system-wide operation costs increasing in drought years or when gas prices increase, as expected. In addition, we found those system-wide increases can be of the same magnitude. Regional analysis of the responses to compounded droughts and price volatility highlight differences in magnitude and direction depending on regional generation technology portfolios. The Pacific Northwest is most sensitive to drought conditions, Southern California is most sensitive to gas prices, and the Desert Southwest is sensitive to both with the same magnitude. This analysis motivates further research in combined hydrology and power system modeling to characterize regional dynamics and associated uncertainties across scales, which is an important underpinning for the development of more resilient energy and water systems.