Claiming Water’s Rightful Place in Energy Policy

There was a time when you could have energy policy conversations without addressing climate change. However, over the course of the last few years, this has changed, and now it is rare to discuss energy policy without acknowledging the impact that greenhouse gas emissions (GHGs) are having on the climate. Just last week, the Obama administration released the third U.S. National Climate Assessment, a report mandated by Congress, published every four years, that assesses the science of climate change and how it impacts the United States. The report is intended to inform both public- and private-sector decisions.

While the attention and the political will afforded to climate change has ebbed and flowed, it is generally accepted that a pathway toward a more sustainable energy future must, in some fashion, account for GHGs. Water should garner the same treatment in energy policy discussions.

Since 2004, analysis and policy attention centered on the energy-water nexus has intensified. The California Energy Commission as early as 2005 was analyzing how to integrate water and energy policy; Congress, by way of the 2005 Energy Security Act, tasked the Department of Energy (DOE) to produce a National Energy-Water Roadmap; and references to the energy-water nexus have been included in several pieces of energy- and climate-related legislation, including the American Clean Energy Leadership Act of 2009 (S. 1462) and the Energy and Water Integration Act of 2011 (S.1343), though none of these bills was made into law. In January, Senator Lisa Murkowski (R-AK) and Senator Ron Wyden (D-OR) introduced the Nexus of Energy and Water for Sustainability (NEWS) Act of 2014 (S.1971). The theme of this year’s World Water Day, focused on water and energy, and Senator Murkowski just released a white paper on the water-energy nexus.

More and more critical players in both the energy and water sectors, as well as the policymakers, are paying attention. And for good reason—fossil fuels (which use water throughout their lifecycle) accounted for 82 percent of global primary energy demand in 2011 and will remain the major source of primary energy demand out to 2035 (at 76 percent). Even alternative energy sources (namely bioenergy, nuclear, geothermal, hydro, wind, and solar) require some amount of water throughout their lifecycle. As the World Bank put it, energy is thirsty. According to the International Energy Agency (IEA), in 2010 the estimated global water withdrawals (water withdrawn and returned to its source) for energy production were around 15 percent of total water withdrawals and are projected to increase by 20 percent between 2010 and 2035. The statistics for water consumption (water withdrawn and not returned to its source) are even more dramatic. Out to 2035, IEA projects that energy’s water consumption will rise by 85 percent, from a baseline of 66 billion cubic meters (bcm) in 2010.

Water is also dependent on energy—the provision of water services (extraction, treatment, and distribution, as well as the collection and treatment of water after it has been used) requires energy. The previously mentioned 2005 study by the California Energy Commission found that the provision of water services requires 19 percent of the state’s electricity, 30 percent of its natural gas, and 88 billion gallons of diesel fuel per year. A 2009 study conducted by the River Network estimated that in 2007 water’s energy use (for supply, treatment, and end-uses) was 52.1 billion kilowatt hours (kWh) or roughly 13 percent of U.S. electricity consumption. Researchers at the University of Texas evaluated one component of water-related energy use, the public water supply (systems serving at least 25 people through a minimum of 15 connections), and found it accounted for 4.1 percent of the United States’ annual primary energy consumption and 6.1 percent of its electricity consumption (note: analysis did not assess water’s energy needs for agriculture, industrial, or self-supplied sectors). The variation in the estimates highlights that the amount of energy needed is highly dependent on a range of factors, including elevation change, distance, friction, water loss and inefficiencies, quality of the water and type of treatment technology used, in addition to the variations by region and state. Moreover, as we shift toward greater use of nonpotable water sources to meet future water demands, and as more stringent drinking water and wastewater discharge standards are implemented, the energy intensity of wastewater reuse and desalination will grow. Despite this growing understanding that water and energy truly are interconnected, the bulk of the attention has centered on energy’s water needs and how energy impacts water resources.

Given energy’s dependence on water, how has the water-energy nexus factored into the ongoing energy discussions in the United States today? By and large, it has not played a big role in energy policy discussions in any coordinated or sustained way. To be fair, water has been a part of the dialogue. Notably there has been sustained discussion and action regarding water quantity and quality issues associated with hydraulic fracturing (driven largely by public concern); attention has been paid to the impact that lower than normal snowpack and precipitation has had on power generated from hydroelectric facilities; and drought has reduced power generation or temporarily shut down several power plants in the United States, prompting a discussion regarding the siting of power plants and the trade-offs of alternative cooling technologies. Moreover, increasingly visible climatic impacts and attention in the wake of Hurricane Sandy spurred a discussion regarding the vulnerability of our energy and water infrastructure to the changing climate (which will cause drought, floods, and storms). However, the discussion has largely centered on individual industries, fuel types, or circumstances. This should be fixed.

The role of water in energy policy should be more fully integrated, and not just under the umbrella of climate change. Despite the potential for water to impact energy in the future, it has not been included in a prominent way in several energy policy documents that seek to set the course for this country’s energy trajectory. The energy policy that has emerged has been an “all of the above” strategy, put forth in the President Obama’s Blueprint for a Secure Energy Future that pursues a three-part strategy: developing domestic energy, providing ways to reduce costs and save energy; and pursuing a clean energy future. Water, within this Blueprint, only specifically came up in regard to an ongoing initiative by the Environmental Protection Agency (EPA) to study the impact of fracturing on drinking water and surface water. Similarly, each year, in the State of the Union, the president reflects on the country’s energy security and its progress toward combating climate change and greenhouse gas emissions. Yet, water gets scant attention (in 2013 and 2014, water was referenced in regard to ensuring the protection of water during the production of natural gas).

The government has several notable initiatives and studies underway to work toward better integration. The Government Accountability Office (GAO) has produced a host of studies evaluating various components of the water-energy nexus; EPA is conducting work and implementing programs that assess water and energy efficiency; DOE established the Energy-Water Tech Team, which looks at the role DOE can play in energy-water; and, encouragingly, the first Quadrennial Energy Review (QER), which will focus on the infrastructure for transporting, transmitting, and delivering energy, will evaluate the impact that water-energy interdependencies have on energy systems, among other programs. Similarly, the newly released U.S. National Climate Assessment, in addition to an individual assessment about the implications of climate change for water resources (impact on water cycle, resource use and management, and adaptation and institutional responses) also evaluates the interaction of energy, water, land, and climate. These are all necessary and valuable things and should be lauded.

And this says nothing about the myriad programs, policies, and campaigns that are being pursued and implemented at the regional, state, and local level. Austin, Texas, is one such example, where supply-side and demand-side measures are being implemented. Efficiency measures put in place by both Austin Energy and Austin Water have enabled the utilities to postpone supply expansion plans, and these utilities constantly measure embedded energy and water inputs. Both utilities also participate in the Pecan Street Project, which is testing the impact of smart metering on electricity and water consumption. Similarly, many in the private sector and specifically in the energy industry are forward thinking when it comes to understanding the role and impact of water on their businesses and are working to implement solutions. A 2013 survey found that 82 percent of energy companies and 73 percent of power utilities thought that water was a substantive risk to business operations; moreover, 59 percent of energy companies and 67 percent of power utilities stated that they had experienced water-related business impacts over the past five years.

Achieving a coordinated overarching approach to deal with the water-energy nexus is difficult for several reasons. First, the United States manages both water and energy issues in a highly fragmented manner. Water is largely managed from the bottom up, while energy is largely managed from the top down. In addition to the myriad local and state-level management and agencies, management at the federal level is spread across several different agencies. Over 20 federal agencies and bureaus have water within their mandate, and about 18 federal agencies manage well over 150 energy-oriented programs. While several agencies have been tasked to look at components of the energy-water nexus (EPA, DOE, the Department of Agriculture, and the Department of the Interior), there is a lack of overarching collaboration among the agencies on this issue. Senator Murkowski’s recent white paper, as well as the Nexus of Energy and Water for Sustainability (NEWS) Act of 2014, call for better federal coordination on the water-energy nexus, directing the Departments of Energy and Interior to manage and implement interagency coordination and suggesting the White House’s National Science and Technology Council to coordinate such an energy-water nexus federal initiative.

Second, there are large economic disparities between energy and water, in terms of market size and influence on sector development, pricing and cost, and investment. Third, there are often discrepancies in the time horizons for policy planning: water plans typically look 50 to 60 years ahead, while energy plans often look ahead only 20 to 30 years. Moreover, many water infrastructure programs have been oriented more toward sociopolitical issues than market-based goals. Finally, the discrepancy in the availability of data for water and energy makes it difficult to undertake informed decisionmaking. Energy data is much more abundant and detailed than water data and is updated frequently.

Understanding the basic contours of the issue, while not a drastically new conversation, is key to ensuring a more energy-secure future and to begin to put in place the architecture for a more coordinated approach to the water-energy nexus. Stakeholders must recognize the fundamental interdependency of the two resources in order to pinpoint potential unintended consequences, trade-offs, or synergies when creating policy or making business decisions. It is important to keep in mind that demographic trends and other sectors (including agriculture, industry, domestic users) will impact water and energy trends, increasing the demand for both and, in some places, heightening the competition for those resources. Similarly, the uncertainty in climatic models regarding how weather patterns will shift underscores the need for flexibility and the importance of evaluating projects over a longer time horizon. Climate change will not only impact the availability of water and energy resources but will also impact the associated infrastructure.

Water issues are primarily local, and there is great variability in the availability of water resources among regions. That said, localized impacts could accelerate up a supply chain given global interconnectivity. The strategic trajectory of the energy sector and policy will also have implications for water use and the energy path chosen, and capital investments made in near term will shape the longer-term trajectories of water use.

Below is a list of a few core things stakeholders should think about when addressing the water-energy nexus:
 

1. Efficiency is low-hanging fruit in both the water and energy sectors.
2. Technology and innovation is key to solving water and energy issues, but technology cannot be static and must constantly continue to innovate and coordinate with regulators.
3. There is a need to develop a common language and a common baseline so that regulators, practitioners, and corporations can communicate effectively and accurately diagnose the issues in order to create solutions.
4. The availability of accurate and consistent year-on-year data, especially for water, is critical to aid decisionmaking.
5.  Collaboration between the water and energy sectors and the agencies that manage them, as well as between public and private stakeholders, will allow for innovation in addition to appropriate planning and policies and help limit stovepipe analysis or solutions.

In addition to the points above, there are two more worth contemplating. First, as with most pressing issues, there is a role for greater public awareness. Few understand the sources and true costs of their water and energy, much less how water and energy are integrated. Finally, an honest, though admittedly politically difficult, conversation should be started on the role of economic instruments in addressing the water-energy nexus, as a means by which to avoid waste and distortions that are a result of underpricing.

Policymakers, companies, and nongovernmental organizations recognize that our shared energy future must be more sustainable than our energy past. Achieving that will require a more deliberate approach to how we consider all the impacts of energy production and use, as well as a careful consideration of the trade-offs between water and energy policy. In this way, there are many parallels to the role of emissions in the energy policy debate. Just as most energy policy discussions regarding the outlook for the energy economy now include dialogue on GHG emissions, their impact on the climate and energy production, and strategies for emission reduction, any discussion about pursuing a pathway toward a more sustainable energy economy must also include water. The task at hand is to put in place policies and private-sector practices that do this in a more consistent and forward-looking way. There is no silver bullet to the energy-water nexus. However, a failure to account for the interconnections of water and energy will limit our choices in the future and prove detrimental to our nation’s progress.

Molly A. Walton is a research associate with the Energy and National Security Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Sarah O. Ladislaw is senior fellow and director of the CSIS Energy and National Security Program.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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