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Energy Generation Uses
Natural Resources | Water

Hydroelectric energy generation affects water supplies for cities, agriculture and environmental systems. Solutions start with long term planning for diverse water usage.

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The most important natural resource for generating electricity in the United States isn’t coal, natural gas, or uranium.

It's water.

According to a new study by Western Resource Advocates, electrical power plants in six Western states used a staggering 129 billion gallons of water in 2005. These plants impact the region's rivers and aquifers, and tie up water that could meet growing urban, agricultural and environmental needs for a sustainable environment. While the value of water is highly varied, it is not zero. This report attempts to develop a range of values of water for use in electric resource planning.

Stacy Tellinghulsen, author of the report "Every Drop Counts" points out how water has tremendous value for people, crops, industry and the environment. "In the arid and semi-arid West, the value of water is even more pronounced, rising precipitously in times of drought and scarcity. Climate change models project increased rates of evapotranspiration throughout the West, more severe droughts, and reduced runoff in the Colorado River. Accordingly, the value of water in the Southwest will continue to rise."

Electric utilities’ choices can have vastly different impacts on water resources. A wet-cooled coal plant, for example, typically uses three times as much water as a combined-cycle gas plant; wind turbines, solar photovoltaic panels, and energy efficiency use no water; and employing dry cooling in a thermoelectric power plant can reduce water use by 90%. Yet most electric utilities and regulators do not adequately consider water in their future resource plans.

Electric utilities typically appropriate or purchase water rights for new thermoelectric power plants, but the cost of these water rights does not reflect the opportunity cost of water use over the life of the power plant — 40 to 50 years or longer.

Population Growth and Water Supplies

City Water Supplies

Future trends of municipal water values are important. In Colorado, water prices rose precipitously in the early 2000s, as urban populations swelled along Colorado’s Front Range and severe drought impacted water. This history provides valuable insight into future values across the region, as population growth continues and climate change reduces available supplies.

Agricultural Water Supplies

Increasingly, cities and power plants are turning to the agricultural sector to meet their water needs.

The median price farmers paid for permanent water transfers ranges from $16 per acre-foot per year ($16/AF/yr) in Wyoming to $153/AF/yr in Colorado (annualized costs), much lower than prices paid by municipalities

Environmental Water Supplies

Leaving water instream provides a host of benefits: It supports recreation, sustains healthy ecosystems, improves water quality, and offers aesthetic benefits. Monetizing the value of instream or environmental flows proves challenging — valuing instream flows is a relatively new practice, and estimates of the value of these flows are scarce. Outdoor recreation activities, such as fishing and whitewater rafting, provide a tremendous (and growing) source of revenue throughout western states, but attributing that income to a volume of water proves difficult. And many of the benefits of instream flows, e.g., a healthy river ecosystem, are not yet adequately measured by economic analyses.

Measuring the Value of Water

To estimate the value of water for environmental uses, WRA examined market-based transactions (both permanent transfers and temporary leases), non-market valuation studies, the value of instream flows to recreation, and the cost of dedicating storage space in new reservoirs to serve environmental purposes (“environmental pools”). The median and average price paid for temporary leases was below $65/AF/yr

Most electric utilities and regulators do not recognize or incorporate the agricultural, municipal, or environmental values described above when considering future resource plans. Most state public utility commissions already have the authority to consider water impacts, but, to date, many have not exercised this authority.


Water use at thermoelectric power plants competes directly with the water demands of cities, people, agriculture, and environmental needs. Recently, utilities and developers have proposed building new thermoelectric power plants in rural locations, distant from municipalities. These plants would draw on water supplies that would otherwise sustain agriculture or the environment, and, in many cases, the municipal value of water is not directly relevant. However, as municipalities seek new urban water supplies, they are increasingly looking farther afield; for example, the Southern Nevada Water Authority proposes to tap water from rural White Pine County, 300 miles north of Las Vegas, where electric utilities have also proposed building two new power plants. Additionally, many of the West’s oldest, most inefficient coal plants are located in or near urban areas, and accelerating their retirement could create valuable new municipal water supplies.

  • At a minimum, utilities across the region should report water consumption for existing facilities, along with projected water consumption for different proposed portfolios, as part of their integrated resource plans.
  • In considering new water-intensive power plants, utilities and regulators should assess both the value of water today and the potential value of water in the future.
  • Regulators and electric utilities should consider the benefits of maintaining flexibility, and the role of water-efficient forms of generation and energy efficiency as a hedge against short- or long-term drought.
  • In considering new water-intensive power plants, utilities and regulators should assess both the value of water today and the potential value of water in the future.
  • Regulators and electric utilities should consider the benefits of maintaining flexibility, and the role of water-efficient forms of generation and energy efficiency as a hedge against short- or long-term drought.

In many parts of the West, climate change is projected to reduce available water supplies and increase the likelihood and intensity of drought. In order to adapt to changing water availability, water users throughout the region will need to preserve or increase flexibility in management — committing water to a new power plant would remove some of this flexibility.

SOURCE: The "Every Drop Counts" report was prepared by Stacy Tellinghuisen, with invaluable research assistance and review. It was funded by grants from the National Renewable Energy Laboratory, The William and Flora Hewlett Foundation, the Compton Foundation, Inc., and an anonymous funder.

Edited by Carolyn Allen
| water conservation | renewable energy | energy | energy generation | hydroelectric |


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