Aug. 2023 Science Corner | Exploring Interacting Effects of Forest Restoration on Wildfire Risk, Hydropower, and Environmental Flows

Authors: Benjamin P. Bryant, Tessa Maurer, Philip C. Saksa, Jonathan D. Herman, Kristen N. Wilson, and Edward Smith

Science Corner by: Tessa Maurer

Blue Forest’s primary financing model, the Forest Resilience Bond, aims to support upfront financing for large-scale land restoration projects by leveraging the many co-benefits of healthy forests. However, the value of even the most common co-benefits, such as protection and enhancement of water resources, are not always fully quantified or understood. These water benefits are central to many of Blue Forest’s projects in the Western U.S. By removing vegetation from the landscape, fuels reduction work not only creates more resilient ecosystems with lower fire risk and less competition, but can also reduce the amount of water used by plants and vegetation in certain geographies. This water can be valuable for hydropower utilities and motivate their participation in forest restoration projects by increasing generation potential and overall resilience, particularly in dry years.

Despite this potential value, there remains a lack of detailed research that links the combined landscape impacts, such as forest management treatments and wildfire, to reservoir operations. Estimates of water value in the literature have been largely based on average generation values, without accounting for real constraints that operators face when deciding how much water to release for energy production. These constraints can be biophysical (e.g., how much runoff occurs into the reservoir); structural (e.g., the size of the reservoir and turbines); or institutional (e.g., the environmental flow requirements that must be met at certain times of year).

To address this gap, Benjamin Bryant, then a researcher at Water in the West at Stanford’s Woods Institute for the Environment, worked with a group of collaborators that included Blue Forest team members Tessa Maurer and Phil Saksa and researchers from The Nature Conservancy and U.C. Davis. The authors designed a linked modeling study, coupling the impacts of planned treatment with hypothetical, unplanned fires on vegetation, then modeling subsequent impacts on streamflow and reservoir operations. The results were published last month in the journal Sustainability. This place-based study modeled forest management activities from the active French Meadows Restoration Project, a collaborative effort between the American River Conservancy, The Nature Conservancy, and the U.S. Forest Service in the headwaters of the American River in the California Sierra Nevada. The study then followed the impacts of the treatments on the downstream reservoir system owned and operated by Placer County Water Agency (PCWA), a water provider and hydroelectric utility.

The study found that the forest management treatments, which included fuels reduction, increased annual runoff by between 1.67 to 1.95 thousand acre-feet (1.5 to 1.8%) depending on the occurrence and severity of a wildfire. Though the increases may seem modest, that’s enough water to sustain between 22,600 and 26,300 Californians for a year, assuming a daily usage of 66 gallons. From an energy standpoint, this increase in water supply has the potential to generate up to 2,880 megawatt-hours (MWh) annually or enough to power 337 homes. The value of additional hydropower generation is up to $115,000 per year and could therefore cover between 8.2 and 15.8% of treatment costs, depending on the discount rate and how fast vegetation regrows after treatment. This makes hydropower generation potential an important co-benefit for forest restoration alongside other benefits like wildfire risk reduction, water quality protection, and carbon stability, the combined value of which can be leveraged to help meet total project costs.

The authors also found that most of the water benefits accrued from treatment alone, even in the absence of wildfire. Furthermore, treatment enhanced water supply when coupled with moderate fire, but mitigated vegetation loss and water runoff when coupled with extreme fire. This demonstrates the benefits of treatment even in cases of severe fire, which can have devastating impacts on water utilities. In that case, forest management value is not just derived from direct revenue enhancement through hydropower generation, but also through reducing the risks to water supply–such as water quality, sedimentation, and changes to runoff timing–that come with severe fire.

The study modeled two different scenarios for reservoir operations: one based on current federal regulatory environmental flow requirements and another based on “enhanced” requirements that are more aligned with the latest available science on what is needed to support vulnerable aquatic species in the Sierra Nevada. The authors found that additional water supply from treatment was sufficient to more than offset generation losses if more stringent environmental flow requirements were implemented. This finding is significant, because it means that forest management could reduce perceived trade-offs between hydropower production, a relatively low-carbon energy source, and habitat protection, two environmental benefits that are often at odds.

Finally, the authors found that including explicit reservoir modeling when estimating hydropower generation has significant implications for the energy generation value of enhanced water supply. The authors compared their results to a simpler valuation approach employed in previous studies that does not include explicit operational modeling or localized information. They found that the first principles approach could overestimate the value of additional water supply by between 11% and 74% depending on the scenario.

“Often studies are considered important when they find some general pattern or statement that applies everywhere–but the take-home of our study is the opposite: That the impacts of restoration will be different depending on so many localized factors, which means project developers and participants need to consider their own context. Fortunately the tools exist to provide these place-specific insights,” said Dr. Bryant.

Blue Forest has long had a process of cooperative and iterative valuation with potential beneficiaries. The findings of this study reinforce how critical this process is: by co-creating value estimates with beneficiaries, Blue Forest can reduce the likelihood that these estimates diverge significantly from reality, even when detailed modeling is not available. However, by demonstrating this discrepancy, this study gives Blue Forest and our beneficiaries a better reference point for valuation and also reiterates to the broader modeling community the importance of looking beyond averages and simplified estimates.

By better understanding these nuances, this research will allow Blue Forest to present more accurate and useful information to potential beneficiaries, especially in areas of California near French Meadows. This new approach will allow these beneficiaries to more accurately assess the impact of treatment on their operations and participate in forest restoration projects with greater confidence. We will incorporate these findings into our conversations with potential hydropower beneficiaries and will continue to look to our project development work to identify critical, unanswered science and research questions in land restoration and conservation finance.

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Benjamin P. Bryant is currently an economist at the Millennium Challenge Corporation. This work was performed primarily as a researcher at Water in the West within Stanford’s Woods Institute for the Environment.

Tessa Maurer is a Senior Project Scientist at Blue Forest Conservation.

Philip C. Saksa is the Chief Scientist at Blue Forest Conservation

Jonathan D. Herman is an Associate Professor at U.C. Davis, Department of Civil and Environmental Engineering.

Kristen N. Wilson is the Lead Forest Scientist of The Nature Conservancy in California

Edward Smith is a Regional Ecologist with The Nature Conservancy in California