Drought puts California transmission in dire straits

After four consecutive years of below-normal rainfall, California is currently facing its most severe drought emergency in decades. The drought in California has led to a drop in hydroelectric generation that could create ongoing price spikes in hydro-heavy transmission-limited load pockets. Stakeholders should now consider the increased option value that thermal generation in those areas will now carry, because the revenue effects for affected thermal generators are significant.

In this quick take, ICF experts examine the California drought and its impacts on local capacity areas and sub-zones, and discuss the added value of thermal generation.