Water Reliability, Conservation and Recycling

Quantifying The Value of Diversification

Gary Wolff, P.E., Ph.D.7 April 2006

Yield Reliability: Acknowledgments and Disclaimers

• This Work Was Funded by the Bureau of Reclamation; Thanks to Steve Kasower and Kevin Price

• Thanks Also to Mark Buehler, Tom Chesnutt, Michael Hanemann, Michael Kiparsky, Bob Raucher, and Bob Wilkinson, for Sharing Their Thinking on This Topic

• Disclaimer: The Following Results Are A Mix of Fact and Fiction

A Fictional Water Supply Problem

Water and Financial Managers Face A Similar Problem:

How To Deliver Water or Pension Checks Year After Year, Reliably, Despite Weather or Stock Market Uncertainty

Satisfying Growth In Demand:The Old Math

DTDE

2 S.D.

Annual Reservoir Releases Available For Use (units per year)

% of Years

SN

Satisfying Growth in Demand: Portfolio Math

• On Previous Slide, SN = ( DT – DE ) Leaves Out Uncertainty in Supply Sources

• Should Write: SN = ( DT – DE ) + SR

• Where SR Is Insurance Against Uncertainty

• And SR Depends On:

– Variability of Existing (E) and New (N)– Correlation Between E and N Sources

Comparing Some Fictional Options

Source of SN S.D. of N

Correlation Of E & N

SN / Unit of Growth

Desalinated or Recycled Water

0% 0.0 1.00

Import X 10% 1.0 1.25

Import Y 20% 0.8 1.55

Landscape Use Efficiency

10% -1.0 0.85

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

Desalinated orRecycled Water

Import X Import Y Landscape UseEfficiency

Do

llars

Per

Un

it

Average Unit Costs Constant-Reliability Unit Costs

Adjusting To Achieve Constant-Reliability Can Change Decisions

How Can We Compare “Equally Reliable” Options?

• The Energy Intensity of Options Varies• For Example, Recycled Water Is Far Less Energy

Intensive Than Desalinated Seawater• Consequently, Energy Price Increases And

Volatility Affect The Cost of Recycled Water Less Than The Cost of Desalinated Water

• This Reduced Exposure to Energy Price Increases And Volatility Is A Quantifiable Advantage

Recycled Water Is NOT Very Energy Intensive (SDCWA Data)

0500

100015002000

25003000350040004500

ColoradoRiver

Aqueduct

State WaterProject

Groundwater ReclaimedWaste Water

SeawaterDesalination

BrackishWater

Desalination

Ocean-Towed Water

Bags

Ener

gy In

tens

ity (k

Wh/

AF)

Impact of Energy Price Changes on Water Cost Over Time (LA Area)

0

0.5

1

1.5

2

2.5

31971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

Year

Rela

tive C

ost

in L

A (

No

min

al

$)

Recycled Water Desalinated Seawater Gravity Surface Water

Impact of Energy Price Changes on Water Cost Over Time (SF Area)

0

0.5

1

1.5

2

2.5

3

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

Year

Rela

tive C

ost

in S

F (

No

min

al

$)

Recycled Water Desalinated Seawater Gravity Surface Water

ConclusionsWe Can Quantify the Value

of DiversificationHowever, We Need Case

Studies to Fully Do So

Gary Wolff, P.E., Ph.D.gwolff@pacinst.org