Hydropower producers face a future beset by unprecedented changes in the electric power industry,
including the rapid growth of installed wind power capacity and a vastly increased supply of natural gas
due to horizontal hydraulic fracturing (or “fracking”). There is also increased concern surrounding the
potential for climate change to impact the magnitude and frequency of droughts. These developments
may significantly alter the financial landscape for hydropower producers and have important
ramifications for the environmental impacts of dams.
Incorporating wind energy into electric power systems has the potential to affect price dynamics in
electricity markets and, in so doing, alter the short-term financial signals on which dam operators rely to
schedule reservoir releases. Chapter 1 of this doctoral dissertation develops an integrated reservoir-power
system model for assessing the impact of large scale wind power integration of hydropower resources.
Chapter 2 explores how efforts to reduce the carbon footprint of electric power systems by using wind
energy to displace fossil fuel-based generation may inadvertently yield further impacts to river
ecosystems by disrupting downstream flow patterns.
Increased concern about the potential for climate change to alter the frequency and magnitude of
droughts has led to growing interest in “index insurance” that compensates hydropower producers when
values of an environmental variable (or index), such as reservoir inflows, crosses an agreed upon
threshold (e.g., low flow conditions). Chapter 3 demonstrates the need for such index insurance contracts
to also account for changes in natural gas prices in order to be cost-effective.
Chapter 4 of this dissertation analyzes how recent low natural gas prices (partly attributable to
fracking) have reduced the cost of implementing ramp rate restrictions at dams, which help restore subdaily variability in river flows by limiting the flexibility of dam operators in scheduling reservoir releases
concurrent with peak electricity demand.
