[QUOTE=interested_learner;1275318]Actually it is normally the other way around.QUOTE]
It may well be, but it surprises me. In the plant which I operate, we simply adjust the amount of fuel according to steam demand. But ours isn't primarily a generating station; we produce 35 MW for in-plant use and use the exhaust steam for process. Things may be done differently in power plants.
If I understand, you're saying that
1) the swings are outside the operating range of the thermal plants, so if the hydro turbines didn't slow down they would push the thermal plant off line, and
2) when demand is low, excess water is spilled instead of being allowed to back up into the reservoir.
Is that correct? Is it normally the case? Seems like a waste of fuel and money.
Rate adjustment to encourage off-peak use?
Better distribution to share the load swings between a number of plants?
More generating capacity at the dams? (which is what you are suggesting).
H2 production certainly sounds like a possible solution, if fuel reduction isn't practical.