Colorado River Hydropower System Strained by Shrinking Water Levels and Data Center Electricity Demand
Colorado's Aspinall Unit, a key hydropower system on the Gunnison River, is generating significantly less electricity due to shrinking river levels and climate change. This decline coincides with a surge in electricity demand from data centers, with federal regulators ordering faster grid connections for AI data centers. A Colorado bill to hold data centers accountable for energy use was killed, raising concerns about increasing strain on the state's power supply and rising consumer costs.
Colorado's Wayne N. Aspinall Unit, a critical federal hydropower system on the Gunnison River, is facing severe stress, with generation projected to be nearly 30% below its historical average. The U.S. Bureau of Reclamation reports that Blue Mesa Reservoir, the largest body of water entirely within Colorado, is at just 17% of its live storage capacity, primarily due to climate change and shrinking river flows. This decline is leading to higher electricity prices, with Xcel Energy, Colorado's largest utility, seeking significant rate increases and projecting that data centers will drive two-thirds of its new demand.
Simultaneously, the West is preparing for a surge in electricity demand from data centers powering artificial intelligence. The Federal Energy Regulatory Commission (FERC) recently ordered the nation's six grid operators to expedite transmission connections for these large energy users, creating a "lopsided moment" where new demand accelerates onto a decaying supply grid, according to critics. Colorado lawmakers considered Senate Bill 26-102, which aimed to impose accountability requirements on data centers, but the bill was defeated before the General Assembly adjourned in May.
The strain is evident in the Western Area Power Administration's (WAPA) finances, which has paid more for replacement power than it charges customers, tripling its rate in 2023. While some utilities like La Plata Electric Association are buffered by diversified portfolios, others such as Platte River Power Authority are seeing reduced federal deliveries and rising WAPA rates impact their budgets. Environmental organizations, like the Flagstaff, Arizona-based Grand Canyon Trust, argue that the standoff between electricity costs and environmental protection is a false choice, advocating for diversified supply or dedicated funds.