The Impact of Water Use Fees on Dispatching and Water Requirements for Water-Cooled Power Plants in Texas

We utilize a unit commitment and dispatch model to estimate how water use fees on power generators would affect dispatching and water requirements by the power sector in the Electric Reliability Council of Texas' (ERCOT) electric grid. Fees ranging from 10 to 1000 USD per acre-foot were separately applied to water withdrawals and consumption. Fees were chosen to be comparable in cost to a range of water supply projects proposed in the Texas Water Development Board's State Water Plan to meet demand through 2050. We found that these fees can reduce water withdrawals and consumption for cooling thermoelectric power plants in ERCOT by as much as 75% and 23%, respectively. To achieve these water savings, wholesale electricity generation costs might increase as much as 120% based on 2011 fuel costs and generation characteristics. We estimate that water saved through these fees is not as cost-effective as conventional long-term water supply projects. However, the electric grid offers short-term flexibility that conventional water supply projects do not. Furthermore, this manuscript discusses conditions under which the grid could be effective at "supplying" water, particularly during emergency drought conditions, by changing its operational conditions.