Presentation is loading. Please wait.

Presentation is loading. Please wait.

The Economic Feasibility and Sustainability Implications of Water Reuse (and Desal) Bob Raucher, PhD Stratus Consulting Inc. Boulder, Colorado, USA Presented.

Similar presentations


Presentation on theme: "The Economic Feasibility and Sustainability Implications of Water Reuse (and Desal) Bob Raucher, PhD Stratus Consulting Inc. Boulder, Colorado, USA Presented."— Presentation transcript:

1 The Economic Feasibility and Sustainability Implications of Water Reuse (and Desal) Bob Raucher, PhD Stratus Consulting Inc. Boulder, Colorado, USA Presented at Texas Innovative Water 2010 Texas Water Development Board 12 October 2010

2 Background Economic Feasibility => Net Economic Value Going beyond financial viability (cash flow) Focus on full range of benefits, compared to costs Sustainability Implications Triple Bottom Line perspective Includes financial implications, but also social and environmental impacts Case study illustration (Chino Basin, Southern CA)

3 Motivation Reuse (& desal) are considered relatively expensive water supply options, raising the question: Revenues rarely cover full cost of service (financial) Is reuse worth the investment for a community? A full perspective of the benefits and costs of reuse and desal is needed to answer that question … Cost effectiveness relative to other water supply alternatives (good) Factoring in the benefits of reuse or desal (better) In the broader context of regional water resource management needs and objectives (best!)

4 Reuse or Desal from a Relative Cost of Water Supply Perspective

5 Reuse (and desal) from Benefit-Cost Perspective, as a Water Supply Option The relative cost of reuse or desal is not the only relevant consideration There are benefits that reuse and desal provide that most other alternatives may not Need to identify and consider the full range of benefits (and costs), relative to other water supply alternatives

6 Counting All the Benefits (not necessarily to scale) Enhanced wetlands quality and habitat Improved in-stream flows and water quality Storage and distribution costs Increased local control Increased water supply reliability On-site retrofit costsAvoided and deferred water supply costs Treatment costsAvoided and deferred wastewater costs CostsBenefits $

7 Counting All the Benefits (cont.) CostsBenefits $ Enhanced wetlands quality and habitat Improved in-stream flows and water quality Storage and distribution costs Increased local control Increased water supply reliability On-site retrofit costsAvoided and deferred water supply costs Treatment costsAvoided and deferred wastewater costs

8 Counting All the Benefits (cont.) CostsBenefits $ Enhanced wetlands quality and habitat Improved in-stream flows and water quality Storage and distribution costs Increased local control Increased water supply reliability On-site retrofit costsAvoided and deferred water supply costs Treatment costsAvoided and deferred wastewater costs

9 Two Basic Approaches to Assess the Economics of Reliability 1. Portfolio Theory (drawn from financial sector) Diversifying a portfolio Used to scale the size of water supply options needed to meet a given reliability target 2. Stated Preference (scientifically designed surveys) value Aimed directly at the value people hold for reliability Based on Willingness To Pay (WTP) Already a body of US empirical research (but outdated) We currently are are conducting new empirical work in US

10 Smarter Use of Water Desalination Groundwater Surface Water Water Trading Catchment Management Water Reuse Security through Diversity (copied from Ross Young, WSAA)

11 Value of Reliability Study: Example Water Supply Restriction Scenarios Trend over the past 20 yearsExpected water use restrictions over next 20 years if nothing more is done

12 Example Choice Experiment for Reliability Values Study

13 Empirical Results to Date Over 800 households surveyed so far: Denver and Austin (400+ in each) 400 households to add in each: Southern CA (Long Beach), San Francisco, AZ (Phoenix?) Willingness to Pay per household $0 to $7 per year to avoid 1 year of low-level use restrictions $20 to $34 per year to avoid 1 year of more severe water use restrictions $130 - $136 per year to avoid all future water use restrictions over next 20 years

14 Opinions on Top Three Options for Supply Augmentation Options (Austin) Expand reservoirs Use local groundwater Mandate xeriscape for new homes

15 Opinions on Least Preferred Supply Augmentation Option (Austin) Raise price Add imported water Transfer water from agriculture

16 The Triple Bottom Line (TBL): Economics of Sustainability TBL began as an enterprise-level reporting Also useful for portraying the broad array of all benefits (and costs) of a project or program Three bottom lines, to reflect: Financial results (cash flow, revenues & costs) Social outcomes (e.g., reliability, equity/fairness) Environmental (e.g., instream flows, energy use) In essence, TBL = a comprehensive benefit-cost analysis Identifying and portraying all benefits & costs Internal and external, market and nonmarket goods

17 TBL Graphic: Choosing the Least Cost Option May Not Deliver Social and Environmental Values to the Community

18 Options that Meet Broader Goals May Increase Financial Costs to a Utility, but Yield Larger Net Benefits to the Community

19 ENVIRONMENTAL (> $400M) SOCIAL (>$2.3B) FINANCIAL TBL Demonstrated the Benefit of Philadelphias Green Stormwater Control Recreation ($525M) Property values/aesthetics ($575 M) Green Jobs ($125 M) Public health: Heat stress ($1.1 B) Energy cost savings ($36M) Cost of Green = cost of Grey CSO control Air Quality ($222 M) Water quality ($147 M) Carbon footprint ($27 M) Ecosystems (+) =

20 ENVIRONMENTAL (++) SOCIAL (++) FINANCIAL TBL off a Non-Revenue Swap of Reclaimed Water to Retire Surface Rights Increase ag production Preserve lands in ag uses Support minority/ethnic farmers (currently lacking access to water) Improve aesthetics (flows) in Sammamish River Cost to provide Reclaim Water not recovered through revenues Enhance summer instream flows for critical spawning and nursery habitat for endangered salmon population =

21 Chino Basin, and IEUA Service Area

22 Evaluating Reuse in Context of Integrated Water Resource Management Adjudication of the Chino Basin Local groundwater extractions not sustainable Contamination (nitrates, salts, VOCs, etc.) Impacted local groundwater users Precluded reuse for irrigation or recharge (regulatory permits not approvable) Impacted Santa Ana River, Orange County Optimum Basin Management Program (OBMP) implemented as a broad water resource management strategy for the Chino Basin

23 The Comprehensive Nature of the OBMP OBMP Includes a range of water supply elements Desal, direct nonpotable reuse, indirect potable reuse (IPR), stormwater harvest, conservation Aquifer storage and dry year yields (DYY) Regional scope: large groundwater basin Multiple jurisdictions included Benefits (and some costs) extend beyond the Basins boundaries Addresses a broad range of water quality and quantity concerns in (and beyond) the Chino Basin

24 ENVIRONMENTAL (> $100M) SOCIAL ($??M) FINANCIAL ($1.9B) TBL for Chino Basin Identified $2 Billion Savings and other Benefits Supply reliability (+) and local control (+) Energy savings (5.8 billion kWh) Import water availability for other MWD users (+) Reduced volume but higher quality Santa Ana River flows to Orange County (+/-) Cost saving to supply water in Chino Basin Carbon footprint ($22M) Air quality ($84M) Groundwater quality (+) Surface water quality (+)

25 Percent of OBMP Yields and Costs by Component

26 Chino Basin Water Supply Portfolio with OBMP Preliminary estimates (October 2008) Thousands of AF ( ) 5,000 10,000 12,500 With OBMP Chino Basin GW (4,570) ) Imported MWD (5,100) Stormwater recharge Conservation OBMP components Desal Water reuse Dry year yield Enhanced GW Conservation (4,750) Chino Basin GW (4,570) Imported MWD (1,550) Other local SW and GW (1,550)

27 Chino Basin Water Supply Portfolio with and without OBMP Preliminary estimates (October 2008)

28 OBMP Reducing Basin-wide Water Supply Costs by over 40% Preliminary estimates (October 2008) Thousands of AF ( ) 5,000 10,000 12,500 $1.0B $3.0B $4.0B $5.0B PV Full Cost (billions 2007$) With OBMPWithout OBMP $2.0B $2.7B $4.6B (all borne locally) Chino Basin GW (4,570) Other local SW and GW (1,550) Imported MWD (5,100) Stormwater recharge Non-potable reuse Conservation $2.1B (locally borne) $0.6B (outside grants and subsidies) OBMP components Desal Water reuse Dry year yield Enhanced GW Conservation (4,750) Chino Basin GW (4,570) Imported MWD (1,550) Other local SW and GW (1,550)

29 OBMP Reducing Basin-wide Water Supply Costs by over 40% Preliminary estimates (October 2008) Thousands of AF ( ) 5,000 10,000 12,500 $1.0B $3.0B $4.0B $5.0B PV Full Cost (billions 2007$) With OBMPWithout OBMP $2.0B $2.7B $4.6B (all borne locally) Chino Basin GW (4,570) Other local SW and GW (1,550) Imported MWD (5,100) Stormwater recharge Non-potable reuse Conservation $2.1B (locally borne) $0.6B (outside grants and subsidies) OBMP components Desal Water reuse Dry year yield Enhanced GW Conservation (4,750) Chino Basin GW (4,570) Imported MWD (1,550) Other local SW and GW (1,550)

30 Benefit-Cost Results: OBMP as a Whole OBMP Costs ~ $1.25 Billion in total (PV, ) OBMP Benefits (financial only): ~ $1.9 Billion (PV water supply cost savings, 00 – 30) Additional benefits both within and beyond the Basin Net Benefits of OBMP: Benefits > costs ~ $0.65 Billion (~53% rate of return) Local net benefit ~ $1.2 Billion (~160% rate of return)

31 The Energy Intensity of IEUAs Water Supplies

32 Reuse-Related Benefits and Costs (OBMP Context) Cost of reuse PV of ~$540 Million ~43% of total OBMP costs Benefit of reuse Allocating 43% of OBMP benefits to reuse ~$820 Million benefit (PV) Net benefit: >$280 Million ($820 - $540) 53% rate of return ($280 / $540)

33 Conclusions Based solely on cost ($/AF), reuse or desal may not appear to be cost-effective water supply choice However, benefits associated with reuse or desal may well show the added expense is well warranted When viewed within the TBL context of broader, integrated regional water resource management: Obtain a much more meaningful sense of benefits In Chino Basin, reuse and desal enable the realization of significant benefits >$1.9 B over 30 yrs (53% Rate of Return)

34 Acknowledgements WateReuse Research Foundation California DWR Water Research Foundation Rich Atwater & Martha Davis (IEUA) Howard Neukrug, Philadelphia Water Department

35 Thank you! Bob Raucher (ext 216) Stratus Consulting Inc. PO Box 4059 (1881 Ninth Street, Suite 201) Boulder, CO USA


Download ppt "The Economic Feasibility and Sustainability Implications of Water Reuse (and Desal) Bob Raucher, PhD Stratus Consulting Inc. Boulder, Colorado, USA Presented."

Similar presentations


Ads by Google