24 July 2012

Energy and water: More than meets the eye

Editor's note: James Workman taught "Unlocking the Real Worth of Water" as a visiting professor at Wesleyan University last semester. He told his students that they -- like all people -- needed to be "water resource managers" because water allocations are increasingly driven by subjective individual values, not top-down planing. The students addressed these ideas from different perspectives (local utility, energy/water nexus, and water and food trade); each choose one essay to post here. Please tell them what they got right or wrong.

Hichem Hadjeres writes...

I was really excited about getting an internship for Joule Assets, a start-up company that specializes in energy efficiency consulting for businesses, and although I had the rather basic and mundane task of researching and entering information into a massive database to be used by future clients, I developed a firm grasp on the inner workings of the energy industry, especially as they pertain to vulnerabilities. For example, I learned that one of the main issues that electricity utilities face is keeping up with demand during the summer months, and while utilities certainly have the resources and capacity to supply electricity, it is far too costly for them to do so, resulting in profit losses. As a result, utilities implement demand response programs, which pay customers to use less during peak hours of demand, and they do this in order to save on production costs such as fuel.

Initially, it seemed to me that utilities were on top of their game by cutting costs and reducing externalities through programs like demand response. However, I soon realized that many utilities do not factor the single most important resource of electricity production when calculating costs, water. With the exception of solar panels and wind turbines, all conventional methods to produce electricity are extremely water intensive. If there is a shortage of water, there will be a shortage of electricity; this was the case in the 2007 drought in the western U.S., whose unprecedented water shortages saw significant reductions in electricity production.

While working for Joule Assets, I realized that the issue of water scarcity and its relationship to energy production almost never showed up in my research; in fact, the word “water” was absent in nearly all the documents and tariff sheets I was tasked with analyzing. Now, it is important to note that utilities are doing the right thing: Saving electricity means saving water, and vice versa. The issue, as far as I am concerned however, is not utilities’ contributions to curbing water consumption; rather it is their failure to make a connection between the water-energy nexus.

Until very recently, water and energy have been treated as two, completely isolated things, and this was largely as a result of the perceived abundance of water. It was not only until the aforementioned drought in 2007 that the U.S. Department of Energy began connecting the dots and looked at water and energy as one, inextricably linked entity.

As a result, I see the energy efficiency industry’s lack of attention on water scarcity as a weakness that can be converted into an opportunity. As I said previously, there is no explicit link between demand response and water efficiency as of yet; but there is a lot of potential to merge the two industries and make a lot of money in the process.

For example, NSTAR, the largest energy and gas supplier in my home state of Massachusetts, could cut costs considerably and make the most out of its demand response programs by investing more of its resources in water efficiency. It could take a vertically integrated market approach and incorporate water efficiency programs into its business, thereby maximizing profits and minimizing environmental costs, such our watersheds.

To conclude, the link between water and energy consumption/production has not received the attention it deserves, and the energy efficiency industry is perhaps most guilty of this. However, by default, energy efficiency programs like demand response will inevitably curb water consumption. The only issue is that the full potential of the water-energy nexus has not yet been exploited; for starters, utilities should start incorporating the word “water” in their dictionary.

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