Relative Value of Water for Hydropower and Municipal Supply in Southeastern Reservoirs

Abstract

Population growth in the Southeast has driven withdrawals for municipal water beyond the limits of local supplies. With few options left for development of virgin sources, a number of urban areas are looking toward demand management and additional supplies by reallocating storage in reservoirs that were built primarily or in part for hydropower. Hydropower has become a lesser part of the mix of energy sources, and the question arises as to value of water for that purpose relative to its value for municipal use. Three cases are used to examine the issue. Effects of withdrawal for municipal water supply on output of electric energy are estimated. Benefits of foregone energy are evaluated using the least cost alternative for replacement, and benefits for municipal water are estimated using costs for development of new sources. Benefits for use as municipal water are found to be considerably higher than benefits for hydroelectric energy at existing prices, even higher than the least cost alternative for replacement. Given the spatial distribution of the cases, that finding would appear to hold in general across the region.