Hydropower Concerns Continue in the West

Low snowfall during the 2025/2026 winter continues to impact the western United States. In mid-May, the region's snowpack, also known as snow-water equivalent, was measured at half of its historic median. This has affected hydro generation in two essential ways: reduced inflow volumes to reservoirs and hastened snowmelt during the summer. This Insight will examine how overall generation has been affected as a result and how power markets may react across the Western Interconnection in turn.

Lake Powell Reaches Record Lows

One striking example of this water shortage can be seen in the water levels at Lake Powell, home to the 1.3 GW Glen Canyon Dam. This August, water levels fell to under 3,520 feet above sea level, bringing the lake to its lowest point since the late 1960s. As a result, the lake is now closer than ever to its minimum power-pool level, at which point the facility would be unable to generate electricity. While it is still relatively far from this threshold, lower water levels still constrain the plant's output, and this continuing trend has contributed to capacity factors dropping 10% so far this decade compared to 2010–2019.

Hydro Generation Starting to Slump

Glen Canyon is not the only facility affected. Across the Western Interconnection, August hydro generation was down 8.4% year-over-year and 12.2% compared to the five-year average. Faster runoff has contributed to this falloff, as earlier snowmelt led to June hydro generation coming in 10.4% higher year-over-year, making the subsequent summer slump even more pronounced. There is little short-term upside in sight considering the dry winter mentioned previously and the fact that hydro generation typically declines between August and November. As a result, already low generation numbers this year could fall even further below historical norms.

New Capacity Helps Offset Hydro Generation Losses

While hydro generation is expected to remain below normal through the fall season, the buildout of new capacity has made certain areas of the Western Interconnection better equipped to handle this shortfall. Since prior lows seen at Lake Powell in early 2023, states like Arizona and Nevada have added between four and five times their hydro capacity in other fuel types, providing the Southwest with more options when hydro generation falls short. The Pacific Northwest, on the other hand, continues to be heavily reliant on its vast hydropower fleet, meaning that any reductions in hydro generation there are most likely to be met by natural gas generation or a rise in imports from other regions.

Going forward

While new capacity additions across the Western Interconnection have helped address hydropower generation reductions, it remains to be seen whether this will be enough to offset retirements and growing load. Since 2023, there have been 3.7 GW of thermal retirements in the West, and utilities continue to field interest in areas such as Seattle, Phoenix, and San Francisco to add data centers to support the ongoing AI push. Though a forecasted super El Niño is projected to bring heavy precipitation across the southwestern U.S., this will likely only alleviate hydropower concerns for next year, with longer-term water level challenges likely to persist. Taken together, the combination of reduced hydro generation, thermal retirements, and rising load growth driven by data-center expansion presents a complex challenge for grid operators across the Western Interconnection. While new capacity additions and potential El Niño-related weather could offer some near-term relief, the longer-term trajectory of water levels and power supply adequacy will remain a critical issue that FactSet will continue to monitor heading into the latter half of the decade. Be sure to check back in for more Energy Market Insights as we continue to explore emerging power market trends.

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