The Conservation Nexus: Valuing Interdependent Water and Energy

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The Conservation Nexus: Valuing Interdependent Water and Energy Savings in Arizona Matthew D. Bartos* and Mikhail V. Chester Civil, Environmental, & Sustainable Engineering, Arizona State University 501 E Tyler Mall, Room 252, Mail Code 5306, Tempe, Arizona 85287-5306, United States S Supporting Information *

ABSTRACT: Water and energy resources are intrinsically linked, yet they are managed separatelyeven in the water-scarce American southwest. This study develops a spatially explicit model of water-energy interdependencies in Arizona and assesses the potential for cobeneficial conservation programs. The interdependent benefits of investments in eight conservation strategies are assessed within the context of legislated renewable energy portfolio and energy efficiency standards. The cobenefits of conservation are found to be significant. Water conservation policies have the potential to reduce statewide electricity demand by 0.82−3.1%, satisfying 4.1−16% of the state’s mandated energy-efficiency standard. Adoption of energy-efficiency measures and renewable generation portfolios can reduce nonagricultural water demand by 1.9−15%. These conservation cobenefits are typically not included in conservation plans or benefit-cost analyses. Many cobenefits offer negative costs of saved water and energy, indicating that these measures provide water and energy savings at no net cost. Because ranges of costs and savings for waterenergy conservation measures are somewhat uncertain, future studies should investigate the cobenefits of individual conservation strategies in detail. Although this study focuses on Arizona, the analysis can be extended elsewhere as renewable portfolio and energy efficiency standards become more common nationally and internationally.

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BACKGROUND The term “water-energy nexus” refers to the interdependency of water and energy resources.1 Put briefly, energy generation requires water,2−5 and water provision requires energy.6,7 Thermoelectric power plants require water for cooling,2−5 and primary fuel production requires water for extraction, refinement and transport.2,8,9 Energy is needed to extract, deliver, treat, and heat water for municipal, industrial, and agricultural uses.6,7,10−14 While often overlooked, energy and water interdependencies represent significant portions of total demand. In the year 2000, water withdrawals for thermoelectric power generation accounted for 39% of all water withdrawals in the United States, and 1.1% of consumptive water use.2 Likewise, the energy required to move and treat water is estimated to comprise 4% of total electricity consumption nationwide.6 Already a significant portion of total demand, water and energy interdependencies are expected to increase significantly in the coming decades.5 In the Rocky Mountain region, water demand for power generation is expected to increase 74% between 2005 and 2030,15 while energy use associated with water provision is projected to increase 20% nationwide by 2025, with greater increases in water-scarce regions like Arizona.6 As a net exporter of electricity situated in a water-scarce region, Arizona faces additional challenges. On the energy side, Arizona must invest in additional generating capacity to satisfy expanding domestic, interstate, and foreign electricity demand. However, as a net exporter of electricity, Arizona effectively exports scarce water supplies in the form of © 2014 American Chemical Society

interstate energy sales to less water-scarce regionsroughly 62 million cubic meters (m3) per year.5 Meanwhile, energy requirements for water are augmented by high urban population growth,16 chronic groundwater overdraft,16 the possibility of surface water shortages due to climate change,17,18 and increasing reliance on alternative water sources.19 As waterenergy interdependencies become more significant, steps must be taken to quantify, assess, and mitigate interdependent water and energy demands. This study focuses on Arizona primarily because the state’s uncertain water future demands urgent policy action. However, a water-energy analysis of Arizona also carries regional and national implications. Specifically, Arizona has recently approved two initiatives to regulate its utilities by adopting energy efficiency and renewable energy mandates. The Arizona Corporation Commission’s (ACC) energy efficiency mandate requires increases in energy efficiency to account for 20% of retail electricity sales in 2020,20 while the Renewable Portfolio Standard (RPS) requires 15% of electricity retail sales in 2025 to be met with renewable generation technologies.21 In this light, Arizona offers an excellent case study in the cross-valuation of cobeneficial water-energy conservation programs with respect to legislated energy efficiency and renewable energy mandates. With energy Received: Revised: Accepted: Published: 2139

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withdrawals.16,28 Water for public supply constitutes the second largest demand, at 17% of withdrawals. Public supply water includes water delivered to residential, commercial, and industrial users by municipal water providers. These deliveries must be treated for potable usethey also require energy for distribution pumping and wastewater treatment downstream. Minor water uses include thermoelectric generation (3% of withdrawals), self-supplied residential and industrial groundwater withdrawals (3−4%),28 and direct recharge to aquifers (6−8%).30 Direct recharge to aquifers is facilitated through underground storage permits, which allow water providers to store CAP water, surface water, and treated effluent underground in exchange for storage credits.30 With a basic understanding of Arizona’s water and energy infrastructure, the interdependencies between these two systems can be assessed. First, the water requirements of Arizona’s power plants are identified on a plant-by-plant basis. Next, the energy requirements for water provision and use are estimated by disaggregating the water infrastructure into its component parts and analyzing the energy inputs for individual wells, pumping stations, treatment facilities, and buildings. Water-energy interdependencies are then used to estimate the cobenefits of future water-energy conservation strategies.

efficiency and renewable portfolio mandates becoming more common throughout the United States, the results of this study illustrate how a linked water-energy framework can be used in conjunction with these policies to achieve maximum water and energy conservation potential. Arizona’s water-energy relationship has been documented, but additional research is needed to understand the components of each system that are driving water and energy use, and how these components should be targeted for conservation strategies. Water-energy studies have been performed at the community level,22 city level,7,10 and regional level,1,23 but as of yet, there is no comprehensive, spatially explicit assessment of Arizona as a whole that enables the targeting of conservation strategies at particular infrastructure components. Moreover, previous studies have analyzed the water-energy nexus at present,4,5,7,19 and some research has been done to estimate the future water burden of new power generation facilities in Arizona,24 however, no study has attempted to assess the nexus under both legislated renewable energy portfolios and energy efficiency mandates. Finally, although previous studies have argued for a linked policy approach in which water and energy resources are managed within a single framework,1,13,25 little research has been done to quantify the incremental costs and benefits of interdependent water-energy conservation measures in Arizona. This study (1) maps the Arizona water-energy nexus at the scale of individual infrastructure components under current conditions and (2) quantifies the long-term costs and cobenefits of alternative water and energy conservation policies. The results will enable Arizona’s policymakers to identify where water-energy interdependencies occur, quantify conservation potential within a linked policy framework, and allocate scarce resources toward the most cost-effective infrastructure investments. Moreover, the methods employed in this paper can be used to quantify costs and savings of linked conservation programs on a regional, national, or international scale.

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METHODOLOGY This study (1) uses a bottom-up approach to estimate current water and energy inputs at the level of individual infrastructure components and (2) uses a cost-optimization model to predict potential water-energy savings and costs under future conservation scenarios. By evaluating water and energy inputs at each step in the infrastructure, a model is developed to assess the water-energy nexus in Arizona for the year 2008. The year 2008 is chosen due to the wide availability of water-use data for this year.4,16,30−32 Forecasts are then created to assess waterenergy interdependencies for the year 2025 using projections for future energy and water demand. The costs and benefits of developing renewable generation capacity and water/energy efficiency measures are evaluated with respect to energy efficiency and renewable portfolio goals using an optimization model, which implements conservative strategies while minimizing costs. Water-Intensity of Electricity Generation. Water demands for thermoelectric power generation in 2008 have been quantified on a plant-level basis by Averyt et al. (2011).4,33 This study augments these estimates by incorporating water demands for fuel extraction, processing, and hydroelectric generation. Estimated ranges of water withdrawals and consumption for each power plant in 2008 are taken from Averyt et al. (2011).4,33 Water consumption estimates for each power plant are then refined by incorporating state-specific water-intensity values for various generation types.3,25 Water withdrawals and consumption for production of major fuel sources (coal and natural gas) are estimated using primary fuel production estimates,34 and estimated water intensities for fuel extraction and processing.2 A breakdown of water-intensities by fuel source and generation type can be found in the Supporting Information (SI) document (SI 1.1. SI 1.2). In addition to thermoelectric power, water consumption for hydroelectric generation is also considered, where the water-intensity of hydroelectric generation is estimated as the quantity of reservoir evaporation associated with hydroelectric generation (SI 1.3).35−38

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OVERVIEW OF ENERGY-WATER INFRASTRUCTURE Arizona’s power plants generate between 110 and 120 TWh of electricity each year.26 Despite initiatives to foster development of renewable capacity, roughly 93% of annual generation is from conventional technologies including coal (39%), nuclear (28%), and natural gas (27%).26 Hydroelectric power makes up most of the remainder, at 5% of annual generation. As of 2013, nonhydroelectric renewable energy comprised about 2% of electricity production. Net electricity exports account for 30− 35% of in-state generation, making Arizona a large exporter of energy.27 Embedded water in electricity exports is estimated to be about 62 million m 3 per year (or about 3% of nonagricultural water demand).5 Arizona currently uses between 8.6 and 9.9 billion m3 of water per year.16,28 About half (48%) of this demand is met by groundwater. The rest is met with surface water (29%), Central Arizona Project water (20%), and reclaimed water (3%).16,28 The Central Arizona Project (CAP) is a 541 km aqueduct that pumps 1.9 billion m3 of Colorado River water to Central Arizona each year.16 Because the CAP canal must overcome a cumulative elevation difference of about 920 m, CAP pumping requires approximately 2.8 TWh of electricity per year, and is estimated to be the largest single end user of electricity in Arizona.29 Water use can be broadly divided into agricultural, public supply, and minor uses. Agriculture is by far the largest user of water in Arizona, accounting for about 70% of 2140

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Figure 1. Water transfers between water cycle components in 2008. Column length indicates the quantity of water transferred to each component (SI 2.3). The annual volume of water passing through each component is provided in billions of cubic meters (BCM).”CAP” refers to the Central Arizona Projecta large interbasin transfer project. Flows between infrastructure components indicate withdrawals, while flows to the evaporation column indicate consumptive use.

1.4.3).31,44 Similarly, energy requirements for wastewater treatment and collection are calculated by determining the energy-intensity of relevant unit processes,6 determining which unit processes are used by which wastewater treatment plants,32 and determining the total annual volume of wastewater treated at each facility (SI 1.4.4).32 Energy requirements are aggregated at the county level for all infrastructure components. Energy requirements associated with water use are estimated for residential, commercial, industrial, and agricultural water users in each county (SI 1.5). Energy associated with residential and commercial water use is assumed to be isolated to water heating,10,12,45 given that water-heating accounts for the majority of water-related energy expenditures in these buildings (about 80% of water-related energy-use in Arizona).12 Residential energy requirements for water heating are estimated using data from the Residential Energy Consumption Survey.46 To assess conservation potential, the segmentation of waterheating energy by end-use is determined by estimating the overall energy-intensity of residential water-heating,10 and then determining the percent of hot water associated with each end use in Arizona homes (SI 1.5).10,47 Energy associated with commercial water use is estimated by determining the percent of commercial energy use associated with water heating in the Mountain census region,48 then applying this factor to commercial primary energy usage in Arizona’s commercial buildings.27 Energy requirements for industrial water use are evaluated by identifying sectors with significant water-related energy use,13 estimating the percent of energy use related to water,13 determining the percent of primary energy use for each manufacturing sector in the West census region,49 then applying these factors to Arizona’s industrial energy consumption (SI 1.5).27 Energy requirements for agricultural water use are assumed to be isolated to booster pumping.14 Energyintensities for flood irrigation, sprinkler irrigation, and drip irrigation are adapted from a study by the California Energy Commission (SI 1.5).14 Residential, commercial, industrial, and agricultural water withdrawals are then estimated for each county to determine the distribution of use-phase energy (SI 1.5). With the methods developed above, both the supply phase and use-phase energy demands of water are isolated and quantified in a spatially explicit way. Having developed a geospatial assessment of energy and water interdependencies, the water-energy nexus is modeled under future scenarios to determine the potential for linked water and energy savings. An optimization model is created to

Energy-Intensity of Water Provision and Use. The water-cycle is mapped as a series of flows between infrastructure components to estimate the energy-intensity of water provision at each stage. Water infrastructure processes include (1) conveyance pumping, (2) groundwater pumping, (3) drinking-water treatment, (4) distribution pumping, and (5) wastewater treatment.6,39 The marginal energy needed to supply water is calculated by determining the energy-intensity (in kWh per m3) and water input (in m3) at each infrastructure component (S1 1.4.1−1.4.4). The energy-intensity of water at the use-phase is also considered, where “use-phase” comprises agricultural, residential, commercial, and industrial water withdrawals (SI 1.5). Energy requirements at the use-phase are not required for water provision, but are nevertheless associated with water use (e.g., water-heating and agricultural booster pumping). A map of water transfers between relevant water-cycle components is shown in Figure 1. Arizona’s water demand is met by groundwater, surface water, CAP water, and reclaimed water. Surface water is gravityfed and therefore does not require significant energy inputs.12 However groundwater, CAP water, and reclaimed water are relatively energy-intense. Groundwater pumping uses electricity to lift water from the water table to a surface elevationan elevation difference of about 44 m on average.40 The Central Arizona Project (CAP) requires electricity to pump water from the Colorado River to Central Arizonaan uphill climb of about 920 m across a 540 km aqueduct.41 Electricity is also required for collection, distribution, and treatment of reclaimed water. For each infrastructure component, the total energy required to supply and treat water is estimated for each county. Electricity requirements for conveyance pumping are calculated by estimating the annual flow rate and dynamic pumping head at each pump station along the CAP Canal (SI 1.4.1).30,41,42 Flow rates through each CAP pump station are estimated based on total deliveries to different water-use regions.30 Electricity requirements for groundwater pumping are estimated by determining the depth to groundwater for each Arizona well,40,43 estimating the average depth to water for each county, and then determining the total annual volume of water extracted in each county(SI 1.4.2).28 Electricity requirements for raw-water pumping, drinking-water treatment, and distribution pumping are calculated by determining the energyintensity of relevant unit processes,6 determining which unit processes are used by providers,31 then estimating the total annual volume of water delivered by each provider (SI 2141

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hybrid cooling systems for power plants. For a comprehensive list of efficiency measures considered along with characteristic costs and savings, refer to the SI (SI 1.7). For energy-efficiency strategies (1−3), maximum energy efficiency potentials for each building type in Arizona are adapted from the Southwest Energy Efficiency Project (SWEEP).56 To account for uncertainty in maximum efficiency potential, an uncertainty assessment is performed to characterize the range of savings possible (SI 1.12). Market saturations and implementation rates of energy efficiency measures are estimated using survey data.57 Where survey data are not available, saturation rates from previous efficiency studies are used, and an uncertainty assessment is conducted (SI 1.9, SI 1.12).56 To determine the cost of saved energy for energy efficiency strategies (1−3), the capital cost, annual energy savings, and lifetime of each measure are determined using estimates from SWEEP (SI 1.7.1, 1.7.2).56 Water savings are achieved primarily through water conservation strategies (4−7). Water savings and implementation costs for residential water-conservation measures (4) are determined using estimates from the California Urban Water Council (SI 1.7.3).65 Costs and savings for agricultural irrigation retrofits (SI 1.7.4)14,58 reclaimed water facilities (SI 1.7.5)6,59,60 and dry cooling systems (SI 1.7.6)61−63 are also estimated. Agricultural irrigation retrofits (5) include both subsurface drip systems and Low Energy Precision Applicators (LEPA). Dry/hybrid cooling systems (7) can reduce water demands at thermoelectric power plants,61 and are thus considered as a water conservation strategy. A social discount rate of 5% is used for the implementation of all efficiency measures, based on values used by SWEEP.56 To account for uncertainty, the social discount rate is varied from 2 to 10% in the uncertainty analysis (SI 1.12). Four optimization scenarios are generated to isolate the incremental water and energy savings of future conservation strategies. These scenarios are listed in Table 1. These scenarios

quantify future interdependent savings, and to prioritize conservation strategies that achieve the greatest savings at the lowest cost. Water-Energy Nexus Futures. To assess the costs and cobenefits of future conservation scenarios, the water-energy infrastructure model is extended using estimates of future water and electricity demand. An optimization model is then developed to determine the most cost-effective combination of power generation and energy efficiency investments needed to meet legislated Renewable Portfolio and Energy Eff iciency standards. In Arizona, Renewable Portfolio Standard (RPS) goals require utilities to increase renewable generation capacity such that 15% of annual retail sales in 2025 are satisfied by new renewable generation.21 Similarly, the Energy Eff iciency Standard and Tarif f, adopted by the Arizona Corporation Commission in 2009, requires utilities to meet 22% of expected electricity demand in 2020 with increased energy efficiency (with up to 2% of savings satisfied by load management).20 To estimate the quantities of renewable generation and energy efficiency required to meet legislated standards, base case electricity demand is estimated for the years 2020 and 2025 (where base case demand refers to the expected demand minus increases to energy efficiency). Electricity demand is estimated by determining the expected base case 2020 load forecast for Arizona, then scaling this forecast to Arizona population projections for the year 2025 (SI 1.8).50,51 An uncertainty assessment is performed to assess possible ranges of electricity demand in 2025 (SI 1.12). Base case electricity demand is estimated to be 105 TWh in 2020, and between 113 and 124 TWh in 2025. To meet legislated standards, 21 TWh of energy efficiency gains and 10−19 TWh of additional renewable generation are required. Base case water demands for 2025 are forecasted by scaling public supply withdrawals to population projections, then adding withdrawals for power generation, assuming the generation mix remains constant (SI 1.8). An optimization program is created to model the combination of infrastructure investments that satisfy or exceed legislated standards while achieving the greatest net present value of water and energy savings. The optimization model allocates investments to both generation capacity and energy efficiency. Decision variables are expressed as equivalent quantities of new annual net generation (in MWhe) and are assigned to each fuel source and energy efficiency measure. For new generation capacity, an objective function is devised to minimize the levelized cost of developing additional energy resources plus the retail value of water consumed for generation (SI 1.10).52 Energy resources include conventional technologies, like natural gas and coal, as well as renewable technologies, like solar and geothermal. New generation is constrained by future demand requirements, requirements of legislated Renewable Portfolio Standard (RPS) goals, available state-wide capacity for certain generation types, current solar projects waiting “in the pipeline” and expected trends in the development of energy resources (SI 1.9).21,53,54 Levelized costs for each generation technology (in 2010 dollars per MWh) are adapted from EIA estimates.55 For efficiency measures, the objective function is set to minimize the cost of saved energy minus the retail value of water saved (SI 1.10). Efficiency strategies fall into seven categories: (1) residential appliances, (2) residential heating, ventilation and cooling (HVAC) improvements, (3) commercial HVAC improvements, (4) residential water conservation, (5) agricultural irrigation retrofits, (6) reclaimed water facilities, and (7) dry/

Table 1. Future Scenarios Examined by the Optimization Modela scenario

efficiency achieved

renewable generation achieved

(% of 2020 retail electricity sales)

(% of 2025 retail electricity sales)

base case

no additional efficiency

mandated efficiency

20%

mandated efficiency, mandated RPS maximum efficiency, exceeded RPS

20%

no additional renewables no additional renewables 15%

34−50%

25%66

a

The exceeded RPS scenario of 25% renewable generation achieved is based on statements from Arizona regulators that 25% renewable generation is feasible.66.

are chosen because they represent informative bounding cases for Arizona’s energy and water future. Under the two mandated efficiency scenarios, only cost-effective strategies are considered. Under the maximum efficiency scenario, both costeffective and cost-ineffective measures are assessed. For each scenario, the energy savings, water savings, and net present value are compared. An analysis of future scenarios allows potential water and energy savings to be quantified, isolates 2142

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Figure 2. Embedded energy in water cycle components in 2008. Top: Embedded energy (noncumulative) in each county for the four major water life-cycle stages. “WWTP” indicates wastewater treatment plant. Bottom: Cumulative embedded energy in each life-cycle component. The width of each flow indicates the relative quantity of embedded energy transferred (SI 2.4). The annual quantity of energy passing through each component is provided in TWh of end-use energy. ”CAP” refers to the Central Arizona Projecta large interbasin transfer project. Columns are disaggregated into two categories: energy added and embedded. The darker portion indicates the energy added at the stage, while the lighter portion indicates embedded energy from previous stages.

tion command a significant water burden, the water burden of hydroelectric generation is much greater (SI 2.5.4). Hydroelectric generation is estimated to consume 2.2−2.6 billion m3 per year through associated reservoir evaporation. Reservoir evaporation is typically not included in estimates of water demand, because incidental evaporation is considered a natural process rather than a “withdrawal”. If reservoir evaporation were incorporated into the estimates, Arizona’s total water demand would be 23−27% higher. Although water demand for hydroelectric generation is large, Arizona’s dams are used for a multitude of purposes, including the control of water supply to the state. Thus, policy measures targeting hydroelectric dams are considered outside the scope of this analysis. Energy Demand for Water Provision and Use. Energy demand for water provision and use is modeled in a geospatially explicit way, to establish a basis for comparison with future water demand scenarios (SI 2.5.1−2.5.3). Figure 2 shows the cumulative embedded energy at each stage of the water-cycle, along with maps of embedded energy in each county. Energy demand for water provision (extraction through wastewater treatment) is about 4.8 TWh, while the total embedded energy in water is 25 TWh. Energy demand for water provision represents about 1.1% of statewide primary energy consumption, while total embedded energy in water represents about 5.8% of primary energy consumption. Energy demand associated with the use-phase of water (water heating) constitutes the majority of water-related energy expenditures, at about 77% of water-related energy use. However, electricity use for water-supply is considerable, representing about 6.4% of Arizona’s annual electricity demand. The aggregate (extraction to wastewater treatment) energyintensity of Arizona’s water supply is 490 kWh of electricity

interdependent savings, and reveals which measures offer the greatest savings at the lowest cost. Uncertainty Assessment. An uncertainty assessment is conducted to characterize the range of results predicted by the optimization model. The uncertainty analysis focuses on four parameters: the (1) total water savings achievable, (2) total energy savings achievable, (3) quantity of renewable generation developed, and (4) costs of saved water and energy. The ranges of savings and costs predicted by the uncertainty analysis are incorporated into the ranges presented in the following Results section. For a full explanation of the methodologies involved in the uncertainty analysis, see (SI 1.12).

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RESULTS Water Demand for Power Generation. In 2008, Arizona’s thermoelectric power plants withdrew between 200 and 760 million m3 of water to generate 120 TWh of electricityabout 2.2−8.4% of Arizona’s total annual water withdrawals.4 Of these withdrawals, roughly 160−320 million m3 are consumed,4 with an average consumption rate of 210 million m3 per year.5 The aggregate water-intensity of thermoelectric generation in Arizona is 1.8 m3 of water consumed per MWh of electricity generated (about 30% greater than the national average). Arizona’s higher-thanaverage water intensity of electricity generation can be attributed to a high proportion of recirculating cooling systems,33 which reduce water withdrawals while increasing the proportion of water consumed. The water burden of coal extraction and processing is significant, requiring withdrawals of 25−62 million m3 (0.28−0.70% of total withdrawals) and consumptive water uses of 6.8−28 million m3. Although thermoelectric power generation and primary energy produc2143

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Figure 3. Left: Cumulative reductions in water withdrawals (top-left) and electricity consumption (bottom-left) by efficiency measure. Base case consumption is shown in red. Colored bands indicate cumulative reductions achieved under the mandated efficiency (cost-effective) scenario. Cumulative reductions under the maximum efficiency scenario are indicated by the dotted black line. Irrigation LEPA savings are incremental to irrigation drip savings. Right: The cost of conserved water (top-right) and electricity (bottom-right) are shown for each category of efficiency measures. Embedded cobenefits are included. The cost of conserved electricity includes the retail value of water saved per MWh of energy saved. Likewise, the cost of conserved water includes the retail value of energy saved per m3 of water saved. The cost axis (ordinate) is a logarithmic scale. Average retail prices of electricity ($96 per MWh) and water ($1.2 per m3) are indicated by dotted red lines. Conservation measures below this line indicate that money is saved by conserving water or energy. The horizontal axis signifies the conservation potential for each measure (in TWh). The dotted green line shows the minimum water savings needed to reduce water use below 2008 levels. Costs of conserved energy and water for all uncertainty scenarios can be found in SI Tables S38 and S39.

drawals),16 and because a majority of irrigated land uses waterintense surface irrigation (about 75% of irrigated land).28 However, water savings from irrigation retrofits are highly uncertain. Residential water conservation offers the secondlargest potential for water savings, reducing nonagricultural water withdrawals by 8.7−14% under the maximum efficiency scenario. However, the majority of residential water conservation measures are not cost-effective, even when energy savings are included (see the conservation cost charts of Figure 3). Without financial incentives to invest in these measures, actual water savings from residential water conservation are likely to be smaller than estimated potential savings. Dry cooling retrofits for all existing natural gas and coal facilities in Arizona can reduce nonagricultural water withdrawals by 2.8− 11% (assuming thermoelectric withdrawals of 200−760 million m3 in 2008). However, the cost of saved water is highly sitespecific, and varies between $2.4−24 per m3 (2−20 times greater than the current price of water). Estimates of water reductions and costs of saved water for each facility can be found in SI 2.9. Policy scenarios involving dry and hybrid cooling should take into account the reduced capacity of drycooled plants. These capacity reductions can approach 20% in hot climates,61 which limits their suitability to Arizona. Although direct water conservation measures dominate potential water savings, indirect water savings are found to be significant (46−350 million m3). Indirect water savings include (i) thermoelectric cooling water reductions through energy efficiency, (ii) commercial HVAC cooling water reductions through energy efficiency and (iii) thermoelectric cooling water reductions through renewable generation. Indirect water savings are primarily achieved through energy efficiency. By reducing the amount of cooling water needed for thermo-

consumed per 1,000 m3 of water delivered through the water infrastructure. Using this aggregate energy intensity, the energy required to deliver and treat a year’s worth of water for a single family (260 kWh) is roughly equivalent to powering a 40W light-bulb eighteen hours a day for an entire year. A detailed summary of energy requirements for each water infrastructure component can be found in the SI (SI 2.2, 2.4, 2.5.1−2.5.3). Valuation of Future Demand Scenarios. Co-beneficial conservation programs can mitigate future increases in electricity demand and help ensure long-term water sustainability. Indirect water and energy savings (energy savings from water efficiency and water savings from energy efficiency) are significant. Figure 3 shows cumulative reductions in water and electricity demand for the mandated and maximum efficiency scenarios, along with the costs of conserved water and electricity for each efficiency measure. Only average reductions and costs are shown in Figure 3 (ranges can be found in SI 2.10). A detailed breakdown of costs and savings by generation type and efficiency measure can be found in SI Tables S29, S30. Investments in conservation programs and renewable portfolios can prevent Arizona’s water demand from increasing, in spite of rapid population growth. Reductions in water withdrawals range from 4 to 43% under all uncertainty scenarios (relative to 2008 withdrawals). To ensure that water withdrawals do not surpass current levels, reductions of 5.6−6.0% (500−530 million m3) are needed by 2025. Potential water savings are dominated by drip and LEPA irrigation retrofits, which can reduce total water withdrawals by 17% and 21%, respectively (assuming average application efficiencies shown in SI Table S19). Overall, irrigation retrofits dominate water savings because agricultural irrigation accounts for a majority of Arizona’s water demand (about 70% of with2144

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can still be achieved through a combination of residential water conservation and indirect water savings. This result highlights the importance of including indirect savings in conservation policy. Total water savings are highly sensitive to the estimated field application efficiency of irrigation technologies. For drip irrigation retrofits, potential water savings range from 0 to 2.8 billion m3 per year, with average savings of 1.5 billion m3 per year. A no savings scenario is encountered because the maximum application efficiency of surface irrigation is roughly equal to the minimum application efficiency of subsurface drip irrigation. Savings of LEPA irrigation retrofits are somewhat less sensitive to variations in application efficiency, with savings ranging from 320 million to 3.1 billion m3 per year. Application efficiencies are controlled by uncertainty in runoff, infiltration, and evapotranspiration rates,68 which are in turn controlled by variability in soil characteristics and climate. The wide variation in potential water savings highlights the need for better regionspecific estimates of irrigation application efficiency. Although water savings from irrigation retrofits are uncertain, water-use reductions can still be realized through a combination of residential water conservation and indirect water savings from energy efficiency. Potential water savings from residential conservation measures are less variable than water savings achieved through irrigation retrofits, and depend mostly on the current saturation rate of water-saving equipment. Varying the initial saturation rate of equipment from 15% to 55%, potential water savings from residential water conservation measures are estimated to range between 190 and 300 million m3 per year (for the maximum efficiency scenario). Indirect water-energy savings are also less susceptible to uncertainty than irrigation water savings, allowing better conclusions to be drawn about their role in conservation policy. Indirect savings from energy efficiency depend primarily on (i) the degree of energy efficiency achieved (mandated or maximum), and (ii) the mix of generation technologies that energy efficiency is used to replace. Under the mandated efficiency scenario, indirect water savings from energy efficiency range from a low of 47 million m3 (where energy efficiency is assumed to replace only natural gas generation) to a high of 170 million m3 (where energy efficiency is assumed to replace only coal generation). Average indirect water savings of 100 million m3 are achieved under the mandated efficiency scenario (assuming energy efficiency is used to replace the current mix of generation technologies). Using the same method, indirect water savings under the maximum efficiency scenario range from 120 to 310 million m3, with an average of 210 million m3. To ensure that water withdrawals do not surpass current levels, annual water savings of 500−530 million m3 must be achieved by 2025. Under the maximum efficiency scenario, residential water conservation can only reduce withdrawals by 190−300 million m3. However, when indirect water savings from energy efficiency are included (47−310 million m3 under all uncertainty scenarios), reductions in water withdrawals from 2008 levels are potentially achievable. With potential water savings from irrigation retrofits uncertain, indirect savings play a valuable role in Arizona’s water conservation portfolio. Factors affecting the cost-effectiveness of conservation vary by strategy. Irrigation retrofits produce a cost of saved water below the retail price of water for all ranges of application efficiencies and capital costs considered. For dry cooling and hybrid cooling, the largest component of cost is the value of lost electricity sales, rather than the cost of the retrofit itself.

electric generation, energy efficiency can reduce nonagricultural water withdrawals by 0.87−11% (depending on the generation technology replaced, and the efficiency scenario). Increasing commercial HVAC efficiency also reduces water demand for commercial cooling towers, which reject heat by evaporating water (SI 2.6).67 Commercial cooling water savings can reduce nonagricultural water withdrawals by an additional 1.2−3.6%. Investments in renewable energy save water by reducing thermoelectric cooling water withdrawals associated with conventional generation. Renewable energy can reduce nonagricultural water withdrawals by 0.3−2.8%. Altogether, indirect water savings can reduce nonagricultural water withdrawals by 1.9−15%. These savings are comparable to direct savings from residential water conservation (8.7−14%) and dry cooling retrofits (2.8−11%) under the maximum efficiency scenario. When embedded energy savings are excluded, cost-effective water-conserving measures include irrigation retrofits ($0.03− 0.23 per m3 over all uncertainty scenarios) and reclaimed water facilities ($0.21−0.4 per m3 over all uncertainty scenarios). Even when embedded energy savings are excluded, these measures offer a cost of saved water below the average retail price of water ($1.2 per m3), making them viable substitutes for additional water purchases. When embedded energy savings are included, residential HVAC retrofits, commercial HVAC retrofits, and residential appliances offer a negative cost of saved water (Figure 3). This means that these measures achieve water savings and deliver a financial return on investment, because the retail value of saved electricity greatly outweighs the cost of saved water. Residential water conservation is not cost-effective under the maximum efficiency scenario. Even when embedded energy savings are included, the average cost of residential water conservation is $4.6 per m3 under the maximum efficiency scenarioabout four times the retail price of water. At the current price of water, policy interventions are needed to provide rebates or subsidies to promote these interventions. For electricity, conservation measures can reduce statewide consumption by 17−40%, relative to 2010 levels. Under the mandated efficiency scenario, 95% of potential electricity-use reductions are achieved through residential HVAC retrofits and commercial HVAC retrofits. However, indirect electricity savings that arise from water use reductions can reduce electricity demand by 0.82−3.1%, satisfying 4.1−16% of mandated energy efficiency goals. Indirect electricity savings arise primarily from residential water conservation measures (1.68 TWh under maximum efficiency), agricultural irrigation retrofits (0.31 TWh on average) and water-efficient appliances (0.32 TWh under all efficiency scenarios). When embedded water savings are excluded, cost-effective energy-saving measures include residential HVAC retrofits ($5−10 per MWh), commercial HVAC retrofits ($3.8−7.3 per MWh), and efficient residential appliances ($18−35 per MWh). Under the mandated efficiency scenario, commercial HVAC improvements offer negative costs of saved energy when embedded water savings are included, meaning that savings are achieved through water reductions alone (for social discount rates of 2− 5%). Decision Making with Uncertainty. An uncertainty assessment is developed to characterize the range of potential water and energy savings under future scenarios, and to evaluate the cost of saved water and energy for each of these scenarios (SI 2.10). Water savings from irrigation retrofits are uncertain; however, water use reductions from current levels 2145

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supply phase nexus loss decreases to 0.059%, only 70% greater than the national average. Indirect Water and Energy Savings. Indirect water and energy savings are small, but important. Through efficiency measures that reduce water use, Arizona can reduce its electricity demand by 0.82−3.1%. Likewise, investments in renewable generation and energy efficiency can reduce nonagricultural water demand by 1.9−15%. Although indirect water and energy savings are relatively small, most of these savings are achieved at virtually no cost, and thus should be prioritized. For example, increasing commercial HVAC efficiency reduces the amount of cooling water needed to generate electricity, and also reduces the amount of cooling water needed to operate commercial cooling towers. A levelized investment of $2.8 is required for every m3 of water saved through commercial HVAC efficiency. However, for every m3 of water saved, $25 worth of retail electricity sales are avoided. Because the retail value of saved electricity is much greater than the cost of saved water, indirect water savings through commercial HVAC efficiency are essentially “free”. An additional advantage of indirect water savings is that they allow water savings to be realized at power plants by reducing cooling water demand directly. An assured water supply is particularly important to thermoelectric power plants where continuous water demands can exhaust local groundwater resources if left unchecked. In 2002, groundwater depletion concerns led the Arizona Corporation Commission to initially deny a request for additional generating capacity at the Arlington Generating station.69 Regulators subsequently proposed implementation of a dry cooling system and an aquifer recharge program. The results of this study show that improved energy efficiency can achieve thermoelectric cooling water savings comparable to dry cooling at a fraction of the cost. Indirect thermoelectric cooling water savings from energy efficiency (between 21 and 230 million m3, not including commercial HVAC water savings) are similar to water savings achievable by converting all existing Arizona coal and natural gas power plants to dry cooling (between 58 and 250 million m3). Assuming average savings for both measures, achieving mandated energy efficiency can realize 60% of the water savings available through wholesale adoption of dry cooling retrofits. Indirect water savings can also help realize thermoelectric cooling water savings at facilities where dry cooling technology is not feasible, like Arizona’s largest power plantthe Palo Verde Nuclear Generating Station. Currently, indirect water savings from increased energy efficiency are not included in infrastructure planning and should be considered by regulators when approving new generating capacity. Implications of Spatial Variation on Water-Energy Policy. Co-beneficial energy and water conservation strategies must take into account spatial variation in water infrastructure and end-uses. The majority of water-related energy use occurs in Arizona’s megapolitan “Sun Corridor,” consisting of Maricopa, Pinal and Pima counties (see Figure 2).16 Although these counties only account for 57% of water withdrawals, they use roughly 91% of the energy involved in water provision and 81% of total water-related energy. Supply phase energy use is driven by CAP and groundwater pumping, while total embedded energy is driven by water heating associated with “urban” water uses. “Sun Corridor” counties offer the greatest potential for indirect energy savings and should thus be targeted for linked conservation programs. Although waterrelated energy use is dominated by Arizona’s urban centers,

Thus, the cost of saved water depends primarily on the performance penalty incurred, which varies primarily with climate.62 With a few exceptions, the social discount rate does not significantly affect the affordability of efficiency measures relative to retail prices (see SI Tables S38 and S39). However, for many conservation measures, costs of saved water and energy change drastically when embedded cobenefits are included. Under the maximum efficiency scenario, appliances, residential HVAC retrofits, and commercial HVAC retrofits exhibit a cost of saved water above the retail price of water (assuming a social discount rate of 5%). However, when embedded energy savings are included, the cost of saved water is negative for these strategies, meaning that they are costeffective water conservation strategies. This highlights the importance of including embedded cobenefits when valuing conservation policies.

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POLICY IMPLICATIONS Water and Energy Interdependencies in Arizona. Arizona’s water and energy resources are highly interdependent, and these interdependencies can be expected to increase with business-as-usual policies. However, investments in efficiency have the potential to reverse this trend. Arizona’s aggregate consumptive water-intensity of thermoelectric generation (1.8 m3 per MWh) is 30% larger than the national average (1.4 m3 per MWh).2 This large consumptive waterintensity of energy can be explained by the prevalence of recirculating cooling systems, and by the fact that thermoelectric generation consumes more water in hot, dry climates.3 On the water side, Arizona’s aggregate energy-intensity of water (490 kWh per 1000 m3) is twice as high as the national average (250 kWh per 1000 m3).6 The large energy-intensity of water in Arizona is a direct consequence of water scarcity. With relatively little surface water to exploit, Arizona relies on energy-intensive conveyance pumping, groundwater pumping, and water reclamation to meet water demands. The overall efficiency of the water-energy nexus can be gauged by the supply phase nexus lossthe percent of water lost to supply water, or the percent of energy lost to supply energy (SI 1.11, 2.7). The supply phase nexus loss for Arizona is 0.088%, about 2.5 times higher than the national average. This means that Arizona loses between two and three times as much water and energy to nexus interdependencies, compared to the United States as a whole. It is likely that interdependencies will increase in the future as a consequence of increasing water scarcity. First, as urban areas expand (the Phoenix and Tucson metro areas are forecasted to increase to 8 million people by 2030 from 5 million people in 2005)16 it is possible that more energy will be allocated to extracting, treating, and heating municipal and industrial water supplies. Second, as overdraft of groundwater continues, groundwater levels will continue to decline, increasing the energy requirements of groundwater pumping. Third, climate change is expected to decrease available surface water supplies,17 and the development of replacement water supplies (such as reclaimed water and large interbasin transfer projects) will increase the energy-intensity of water. In spite of these complications, development of energy and water efficiency programs and renewable energy portfolios offer a chance to mitigate current water and energy supply interdependencies. The mandated efficiency and renewable portfolio programs shown in the results have the potential to decrease the water-intensity of energy by 10%, and to decrease the energy-intensity of water by 25%. Under this scenario, the 2146

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efficiency become a viable substitute for additional water purchases. An uncertainty analysis of water price shows that increasing the average price of water to $3.20 per m3 can incentivize residential water savings of 190 million m 3 (compared to 16 million m3 under the current water price of $1.20 per m3). Although this study allows policymakers to gauge the relative value of energy and water conservation measures, better estimates are needed to quantify the true cost of water in Arizona. In this study, the cost of water is approximated by the retail value of water. However, it has been demonstrated that groundwater is underpriced in Arizona, and that the true cost of water should incorporate the cost of securing additional water resources once exhaustible supplies become scarce.71 A thorough evaluation of the true cost of water in Arizona would allow future water and energy savings to be compared objectively, and would help policymakers allocate scarce resources to the highest-value conservation measures.

conservation strategies must also take into account local variability in water end uses. Due to a high proportion of sprinkler-irrigated land, Yuma county uses about 0.11 TWh for agricultural booster pumping, (compared to only 0.23 TWh for domestic water heating). For Yuma, water-related energy use can be reduced by converting existing sprinkler systems to drip or LEPA systems. Costs and benefits of conservation policies also vary with spatial location. Conservation measures that are cost-effective in some regions may not be cost-effective in others. This is illustrated in the variation in cost-effectiveness of hybrid cooling with respect to avoided supply cost. On an aggregate basis, Arizona’s water infrastructure is capable of supplying enough water to satisfy projected demand in 2025.16 However, some counties (including Cochise, Coconino, Gila and Yavapai counties) require large capital improvement projects to meet projected demand.70 In Cochise County, water demand is expected to significantly outpace supply by 2025, creating a supply deficit of 19 million m3 and a supply augmentation cost of roughly $220 million.70 By comparison, water withdrawals for thermoelectric power generation in Cochise county are estimated at 9.9 million m3roughly half of the supply deficit. When the levelized cost of supply augmentation is included (at $0.32−0.65 per m3), hybrid cooling retrofits to the county’s existing coal plants (at $1.20−3.90 per m3) may be costeffective. Although an in-depth analysis of avoided supply costs is outside the scope of this work, the avoided cost can significantly affect the benefit-cost ratio of linked conservation policies, and should be analyzed in future work with respect to spatial variations in supply and demand. Water-Energy Nexus in Conservation Policy. In environmental literature, the water-energy nexus is often framed as a threat. However, water-energy interdependencies can also be harnessed to facilitate increased conservation. With significant cobenefits to conservation, regulators should adopt a linked policy framework that incentivizes utilities to meet mandated energy efficiency goals through water-conserving measures, and accounts for indirect water savings achieved through energy efficiency. Although indirect water savings are significant, water resources sustainability is best achieved through a broad array of conservation strategies, including irrigation retrofits and residential water conservation. Although residential water conservation achieves significant savings, the current retail price of water is too low to make these strategies cost-effective. Residential water conservation measures have the potential to reduce nonagricultural water demand by 14% and statewide electricity demand by 2.3%, yet for water users the cost of conservation is greater than the price of water or energy. This raises questions of the appropriateness of policies that provide financial incentives for conservation efforts or affect the price of water or energy to account for externalities. Most residential water conservation measures do not achieve cost savings over their lifetimes, even when energy savings are included. The main driver of cost-ineffectiveness is not the high price of the measure, but rather the low retail price of water. Residential water conservation measures are not expensive on a per-unit basis: the median cost of these measures is $155 per unit, with a lifetime of 4 years. Rather, the retail price of water is low enough that additional water purchases cost less than implementing these measures. To facilitate residential water conservation, regulators should identify a target level of residential water conservation and either change water prices or offer conservation subsidies such that investments in water

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ASSOCIATED CONTENT

S Supporting Information *

The SI contains additional details and methods, output from the optimization program, and geospatial maps of water-energy infrastructure components. This material is available free via the Internet at http://pubs.acs.org.

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AUTHOR INFORMATION

Corresponding Author

*Phone: (480) 707-8313; e-mail: matthew.d.bartos@gmail. com. Notes

The authors declare no competing financial interest.

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ACKNOWLEDGMENTS This research was supported with an award from the National Science Foundation (Grant No. CAP3: BCS-1026865). The authors would also like to thank Dr. Susan Spierre Clark and Janet Reyna (Arizona State University) for their contributions in the problem formulation phase of this work.

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REFERENCES

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