Assessing the Short-Run Economic Cost of Environmental Constraints on Hydropower Operations at Glen Canyon Dam.(Statistical Data Included)

I. INTRODUCTION

Hydropower plants produce electricity without burning fossil fuels and producing air pollution and are sometimes thought of as environmentally benign. In fact, large hydropower facilities have blocked the spawning of anadromous and migratory aquatic species, eliminated the downstream transport of sediment, fundamentally altered the seasonal hydrograph, affected water chemistry, and, changed the downstream temperature regime (Collier, Webb, and Schmidt 1996). Furthermore, the daily operations of these units, particularly units used to produce peaking power, may have a number of adverse effects on aquatic and riparian communities (Nilsson, Jansson, and Zinko 1997).

The environmental externalities resulting from the construction and operation of a number of hydropower plants are now being re-examined. Nationwide, Federal Energy Regulatory Commission (FERC) licenses to operate 520 hydropower plants have, or will, expire between 1997 and 2010 (Hunt and Hunt 1997). In addition to relicensings, endangered species concerns have lead to the reassessment of a number of other facilities. Although dam removal is an option in some cases (Loomis 1996), the focus of many recent analyses is on identifying new operational regimes which will result in improved downstream environmental conditions. These new regimes may well create significant market and nonmarket benefits but the resultant constraints on hydropower operations inevitably lead to economic costs of varying magnitudes.

This paper introduces an hourly constrained optimization framework for analyzing the effects of environmental constraints on hydropower operations. The short-run economic cost of these impacts is determined using market-based prices. Glen Canyon Dam, located on the Colorado River in Arizona, is used as a case study.

II. BACKGROUND

Electricity cannot be efficiently stored on a large scale using currently available technology. It must be produced as needed. Consequently, when a change in demand occurs, such as when an irrigation pump is turned on, somewhere in the interconnected power system the production of electricity must be increased to satisfy this demand. In the language of the utility industry, the demand for electricity is known as "load." Load varies on a monthly, weekly, daily, and hourly basis. During the year, the aggregate demand for electricity is highest in the winter and summer when heating and cooling needs, respectively, are greatest. Load is less in the spring and fall which are known as "shoulder months." During a given week, the demand for electricity is typically higher on weekdays, with less demand on weekends, particularly holiday weekends. During a given day, the aggregate demand for electricity is relatively low from midnight through the early morning hours, rises sharply during working hours, and falls off during the late evening.

Electric energy is most valuable when it's most in demand - during the day when people are awake and when industry and businesses are operating. This period, when the demand is highest, is called the "on-peak period." In the West, the on-peak period is defined as the hours from 7:00 A.M. to 11:00 P.M., Monday through Saturday. All other hours are considered to be off-peak.