Using case studies, this report highlights the close ties among energy, drought, and water use in the Intermountain West; clean energy policies that reduced the energy sector's water use and exposure to drought; and, finally, recommendations for mitigating the impact of future droughts on the West’s energy sector.

Drought has many impacts — it can reduce water supplies for urban areas, decrease crop yields in irrigated agriculture, and deplete stream flows. Recent droughts have had unexpected — and unprecedented — impacts on the energy sector, impacting both electricity demands and power plants’ ability to meet them. Preparing for drought is essential. Electric utilities and regulators can take critical steps to better prepare for and mitigate the impacts of future droughts. These steps include:

  • Providing more comprehensive information about water use in utilities’ long-term planning
  • Valuing the water used for electricity generation, both today and in the future
  • Analyzing the value of water-efficient renewable energy resources, energy efficiency, and dry-cooled power plants as a hedge against the risk of drought
  • Acting upon the preceding steps

The drought of 2012 was unprecedented in many ways. As of September 25, 2012, drought affected over 65% of the continental U.S., the largest area affected since the 1950s. The entire Interior West was affected by some level of drought. While the drought has not (yet) affected power plants in the region, it has underscored the importance of preparing for — and managing— the risk of drought. This paper outlines how drought can affect the energy sector and describes the effects of drought on electricity generation in two recent case studies —Texas in 2011 and Australia from 2000 to 2010. We highlight how clean energy policies implemented in recent years in the Interior West have reduced water use by the energy sector and, in turn, reduced its exposure to drought. Finally, we provide recommendations for mitigating the impact of future droughts on the West’s energy sector.