Publication Date: 
May 2016
Rheinheimer, D. E., R. C. Bales, C. A. Oroza, J. R. Lund, and J. H. Viers (2016), Valuing year-to-go hydrologic forecast improvements for a peaking hydropower system in the Sierra Nevada, Water Resour. Res., 52, 3815–3828, doi:10.1002/2015WR018295.

We assessed the potential value of hydrologic forecasting improvements for a snow-dominated high-elevation hydropower system in the Sierra Nevada of California, using a hydropower optimization model. To mimic different forecasting skill levels for inflow time series, rest-of-year inflows from regression-based forecasts were blended in different proportions with representative inflows from a spatially distributed hydrologic model. The statistical approach mimics the simpler, historical forecasting approach that is still widely used. Revenue was calculated using historical electricity prices, with perfect price foresight assumed. With current infrastructure and operations, perfect hydrologic forecasts increased annual hydropower revenue by $0.14 to $1.6 million, with lower values in dry years and higher values in wet years, or about $0.8 million (1.2%) on average, representing overall willingness-to-pay for perfect information. A second sensitivity analysis found a wider range of annual revenue gain or loss using different skill levels in snow measurement in the regression-based forecast, mimicking expected declines in skill as the climate warms and historical snow measurements no longer represent current conditions. The value of perfect forecasts was insensitive to storage capacity for small and large reservoirs, relative to average inflow, and modestly sensitive to storage capacity with medium (current) reservoir storage. The value of forecasts was highly sensitive to powerhouse capacity, particularly for the range of capacities in the northern Sierra Nevada. The approach can be extended to multireservoir, multipurpose systems to help guide investments in forecasting.