Coal retirements, the shale gas bonanza, post-Fukushima Daiichi nuclear curtailments, the rising adoption of distributed generation, and emerging price parity for solar PV and wind – the dynamic changes affecting electricity grids worldwide are many. Now, with prolonged droughts affecting leading global economies, like Brazil and California (the world’s seventh and eighth largest economies by gross domestic product [GDP], respectively), a slow decline in the prominence of hydropower is in the mix.
Historically, hydropower has been the primary source of clean and renewable energy in both economies. Its decline has had a more severe impact on Brazil’s grid, but in both places, this development is expected to continue to coincide with a further rise in gas-fired generation and renewables. Due to the current cost of renewables, the consequences of this shift may be a rise in greenhouse gas emissions in each country’s electric power sector.
With a fleet of 300 dams, California is among the nation’s leaders in hydropower generation. However, hydro in the state has declined from peaks in the 1950s, when it was responsible for more than half of the state’s generation mix, to just 9% in 2013. Having prepared for hydro’s decline by broadening its generation mix over the last several decades, the California grid remains mostly insulated from the worst effects of nearly a half decade of severe drought.
California generates around 55% to 60% of its power from natural gas and has seen a 30% increase in gas-fired generation since 2002. Meanwhile, California’s leading investor-owned utilities across the state – Pacific Gas and Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E) – are on track to meet or exceed their 33% renewable procurement obligations by 2020 under the state’s Renewable Portfolio Standard (RPS) policy.
Facing its worst drought in 40 years, meanwhile, Brazil has been more severely affected by reduced hydropower generation than California. Currently, the second leading producer of hydroelectric power in the world, trailing only China, Brazil relies on hydro for more than three-fourths of its generation. According to data published by BP earlier this year, hydropower consumption fell 7% in 2013.
This rapid decline has prompted severe rationing in 19 cities, undermined hydropower generation, and resulted in blackouts across the country. In the run up to the 2014 World Cup, the Brazilian government provided more than $5 billion to subsidize electric utilities, replacing lost hydroelectric generation with fossil fuel-fired generation, including large amounts of liquefied natural gas. While this helped stabilize the grid during the event, it has nearly doubled greenhouse gas emissions from the power sector.
Brazil’s experience provides a harsh lesson for drought-stricken areas with a high dependence on hydropower. Although natural gas is a low-carbon alternative relative to coal-based generation, it may stall or reverse carbon mitigation efforts when used in place of hydropower. Renewables can help make up the difference, but even with sharp declines in the price of solar PV and wind, they remain far more expensive than hydropower or natural gas. While both California and Brazil are in a hole with respect to water supply and hydroelectric generation, persistent drought is unlikely to result in a significant increase in new renewables spending without the introduction of new subsidies.
Tags: Climate Change, Hydropower, Power Generation, Renewable Energy, Smart Energy Program
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