Hydropower generates roughly 30 percent of West Coast electricity. Drought conditions cut hydro output 15 to 25 percent in dry years. Replacement generation is typically gas-fired peaker plants, which cost 2 to 4x more per MWh than hydro. The cost passes to retail through wholesale markets. CAISO retail bills rose roughly 6 percent in 2024 due to drought-driven hydro shortfall. 2026 outlook depends on Sierra snowpack accumulation through April.
Drought conditions by state
California, Oregon, Washington run majority hydropower in normal years. Drought-prone since 2020 with brief recovery in wet 2023 winter.
Columbia Basin (OR, WA) provides hydropower to Pacific Northwest plus exports to California. Drought there affects multiple state retail markets.
Replacement generation cost
Hydropower marginal cost: roughly $15 to $25 per MWh. Gas peaker marginal cost: $50 to $90 per MWh during normal conditions, $120 to $300+ during stress events.
When drought cuts hydro by 18 percent, replacement gas generation lifts wholesale price by roughly 4 to 8 percent on average. Retail rates follow within 30 to 90 days.
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