State governments have an assortment of options available to address energy-water nexus issues, including commissioning in-depth studies to develop a greater understanding of state needs and appropriate management actions. These options are considered against the backdrop of federal energy and water policy, which can have a major influence on state options and actions.
Commission Research and Form Working Groups
Often, the state agencies that oversee energy issues do not work in coordination with state agencies that oversee water use, resulting in lack of information on energy-water nexus issues in general. However, some states are working to increase coordination and develop a better knowledge base as demonstrated by the case studies that follow.
Former Arizona Governor Jan Brewer established a Blue-Ribbon Panel on Water Sustainability in 2009. The panel was formed to improve the long-term sustainability of Arizona’s water supplies and was tasked with identifying obstacles to increasing water sustainability and potential strategies to overcome these obstacles. The panel is divided into five working groups, one of which is the Conservation/Recycling/Efficiency/Energy Nexus group. This group was directed to make recommendations on statutes, rules, policies and strategies for reducing the water cost of energy and the energy cost of water.
A primary goal identified by the panel was to reduce the amount of water required by Arizona power generators to provide energy. In November 2010, the panel released its final report, which included 18 sets of recommendations to improve water sustainability in Arizona, several of which were designed to address the energy-water nexus. These recommendations encompassed five broad categories—education and outreach, standards, information development and research agenda, regulatory improvements and incentives—and included improvements to the state’s existing “toolbox” of water management, education and research capabilities.
Of the 18 recommendations made by the panel, roughly half made some degree of progress toward completion by December 2016. These include several recommendations related to matching alternative water supplies to appropriate end uses, developing comprehensive reclaimed water infrastructure standards, facilitating indirect potable water reuse, and encouraging the use of alternative water supplies. The remaining half of the recommendations, including those to develop incentives for using alternative water supplies, had not been started or had an unknown status.
Governor Doug Ducey created a Water Augmentation Council in 2015. The Council includes energy and water state agencies, agricultural stakeholders and municipal utilities. It was originally tasked with investigating opportunities to increase water conservation and reduce the energy-intensive impact of water treatment. Upon request, the Water Augmentation Council provides direction to the director of the Arizona Department of Water Resources (ADWR) on any issues determined to affect water management. The council focuses on implementing water conservation measures in all water use sectors and makes recommendations to the ADWR on water conservation.
The Arizona Corporation Commission (ACC), known as a public utility commission in other states, has also conducted research and adopted policy related to the energy-water nexus. In May 2017, ACC Commissioner Andy Tobin requested an investigation into how to improve ACC’s water loss policy. The ACC held two workshops on the topic of water conservation and Tobin drafted a policy statement to address the need for an updated and more collaborative approach to water loss methodology by the commission. The statement includes a section related to addressing the energy-water nexus. The ACC adopted the policy on Sept. 12, 2017. A subsequent decision was issued on Sept. 19, 2017, that directed ACC staff to establish the Water Reform Working Group (WRWG). The group was charged with overseeing the ACC’s efforts to coordinate data collection and reporting processes. It also required ACC staff to file a progress report on the establishment, roster and meeting schedule of the WRWG within 60 days of the order’s effective date.
Former Governor Arnold Schwarzenegger addressed the energy-water nexus issue in 2005 through Executive Order S-3-05, creating a Climate Action Team (CAT) to coordinate statewide greenhouse gas emission reduction efforts and the state’s Climate Adaption Strategy. The original mandate for the team was to develop proposed measures to meet the emission reduction targets set forth in the executive order. Since then, CAT has expanded to encompass 11 working groups that coordinate policies among the state agencies and departments involved.
One of these working groups is the Water-Energy Team (WET-CAT), which works to identify opportunities for large energy and water efficiencies. The team, which includes members from 11 state agencies, has overarching goals to achieve large water and energy savings and efficiencies, reduce greenhouse gas emissions, and reduce or eliminate risks from changing hydrological and ocean conditions. WET-CAT integrates regulation with state and federal agency support for planning, research, data analysis, technical tools and funding to leverage regional projects and programs. The team also works to strengthen interagency coordination through information sharing to inform actions that can reduce the energy intensity of water use.
After the 2011 drought, the Electric Reliability Council of Texas (ERCOT) performed a study, using a legally required biennial study of transmission and generation capacity, to research how the electric system responded under extreme drought.135 The study concluded that “most generators were prepared for or had contingency plans for a single-year severe drought such as experienced in 2011. The more complex issue for generators in Texas appears to be a multi-year drought when water storage is further diminished.”
Include Water in Integrated Resource Plans
On a regular basis, electric utilities in most states must submit integrated resource plans (IRPs) to state regulators, which outline how they plan to meet forecasted annual peak demand with supply- or demand-side resources. The basic components of an IRP—including what data needs to be provided, how often they need to be prepared, and what timeframe they need to cover—are usually outlined in state law or regulation, as is the requirement that the state public utilities commission review and approve the plan.
The rules and requirements of IRPs often reflect the concerns of policymakers, and they have developed and changed substantially over time to touch on issues like fuel prices and price volatility, greenhouse gas emissions and market conditions. “Water, in particular, is a resource that has not been given much consideration in utility integrated resource planning in past decades,” notes a report from the Regulatory Assistance Project. However, that has started to change.
Every two years, the ACC requires utilities to submit IRPs that cover the next 15 years and can require utilities to provide information on past practices and future plans. The ACC has constitutional and statutory authority to engage in rulemaking, including rules that pertain to IRP requirements. In 2010, the ACC revised its IRP requirements touching on water use in a way it previously had not, requiring that IRPs include data on air emissions and water consumption. As a result, Arizona Public Service (APS), the state’s largest utility, now tracks water costs and usage as a metric for consideration in its IRPs. While the ACC does not prohibit water-intensive generation, it does require utilities to consider alternatives.
In its most recent IRP, APS’s plan for reducing water consumption includes: considering alternative cooling technologies and alternative water resources for new power plants; improving the efficiency of water use; retiring existing power plants that consume large amounts of water; reducing the amount of non-renewable groundwater consumed; and increasing the utility’s reliance on energy efficiency and renewable energy resources. APS states that the goal is to reduce groundwater’s share of total water usage from 13 percent to 6.5 percent between 2016 and 2026. The utility expects the portion of total water usage supplied by reclaimed water to increase by 3 percentage points in the next 10 years. In addition, while the utility anticipates significant growth in electricity demand due to population increases, the combination of renewable generation and energy efficiency will help reduce the utility’s “water intensity,” which it measures based on gallons per MWh. By 2032, the utility expects to reduce its water intensity from 444 gallons per MWh to 314 gallons per MWh. The greatest reductions in water consumption will come from transitioning from wet-cooling to dry-cooling systems.
Another of Arizona’s largest utilities, the Salt River Project (SRP), also considers water in its electric planning. SRP provides water and electricity to Phoenix and its surrounding areas. When evaluating its resource portfolios, SRP includes water use as a key planning metric. In its IRP, the utility prioritizes resource portfolios that reduce water intensity and states that changes to SRP’s current generation resource mix are required to lower the utility’s water intensity. During 2016, SRP reported avoiding using more than 1.9 billion gallons of water as a result of sustainable resources—including energy efficiency, renewables and hydropower—in its portfolio. This year, 3 percent of the utility’s energy generation came from renewable energy sources and 2 percent from hydropower.
Other water-constrained states have also started to implement water-inclusive IRPs. In Colorado, the Public Utilities Commission made changes to IRP requirements in 2010 after the state legislature passed HB 1365, known as the Clean Air-Clean Jobs Act. The legislation required utilities to file an emissions-reduction plan that would reduce emissions from coal-fired power plants, either through emissions control technologies, conversion to natural gas or retirement. Due to the changes in statute, the PUC modified its IRP process to include annual water withdrawal and consumption data for new generators, along with the overall water intensity of each generating system.
In addition, many municipal water utilities engage in a similar process for water resource planning. Integrated water resource plans (IWRPs) evaluate the issue from another perspective—largely ensuring municipal access to quality water supplies. Requirements for statewide or regional plans that integrate the water and energy components into the same process could be considered.
Reduce Water Use Through Renewable Energy and Efficiency Mandates
Twenty-nine states, the District of Columbia and three territories have adopted renewable portfolio standards, which require utilities to sell a specified percentage or amount of renewable electricity. An additional eight states and one territory have set renewable energy goals. Since most solar and wind installations use very small amounts of water to generate electricity, state actions that provide incentives for, or mandate, the adoption of renewable resources, in effect mandate the adoption of low-water energy generation. The Lawrence Berkeley National Lab (LBNL) and the National Renewable Energy Laboratory (NREL) reported that renewable generation used to meet 2013 renewable portfolio standard compliance obligations reduced national water withdrawals by approximately 830 billion gallons and consumption by an estimated 27 billion gallons. These reductions are equivalent to approximately 2 percent of total 2013 power-sector water withdrawals and consumption. Wind power capacity has increased by more than a third while solar has tripled since that time, making current water savings much higher.
California offers an example of how RPS policies can decrease water use for energy generation. California’s RPS policy requires that 60 percent of energy must come from renewable sources, such as wind and solar, by 2030. This mandate has led to decreases in water consumption, and wind energy alone reduced the state’s water withdrawals for energy production by 2.5 billion gallons in 2014.
Energy efficiency policies can also conserve water by reducing power plant fuel consumption and cooling needs while helping states avoid the construction of costly new generation resources that could draw from a state’s water supply. Twenty-seven states have implemented energy efficiency resource standards (EERS), which require a percentage of energy demand to be met with efficiency.
While reducing water intensity of energy generation is a byproduct, and not the specific goal of these policies, some states do consider their water-saving benefits. A Colorado statute to promote utility-scale solar mentions “minimizing water use for electric generation” as a benefit of the law. The statute instructs the PUC to consider whether the acquisition of utility-scale solar resources is in the public interest and to consider whether solar projects “could reduce the consumption of water for electric generation.”
Colorado’s Water Plan highlights the smaller quantity of water required by renewable energy when compared to thermal generation as well as the policy goal outlined in the state’s Renewable Electricity Standard to minimize water use for electricity generation.
In several western states, including Arizona, Colorado and Texas, river authorities are given powers to restrict and manage access to water in certain cases. In Texas, the Legislature granted river authorities the power to initiate or participate in programs intended to encourage more efficient use of water and electricity or reduce overall use of water and electricity.
In addition to these policies, states can encourage deployment of less water-intensive renewable energy sources through financial incentives, including tax credits and direct cash incentives. Tax incentives are the most common type of financial incentive and include personal and corporate investment tax incentives, property tax incentives and sales tax incentives. Personal and corporate investment tax incentives provide a direct reduction in a taxpayer’s liability for a portion of the cost of purchasing and installing a renewable energy system. More than a dozen states offer personal and/or corporate investment tax credits. States have created other incentives, including grants, performance-based standards and feed-in tariffs.
Establish Cooling System Requirements
Other policy options include power plant cooling system requirements. In California, the state has embarked on a “Once-Through Cooling Phase-Out” in response to EPA’s cooling water intake ruling under the Clean Water Act. The policy authorized the state’s water boards—including the State Water Resources Control Board and Regional Water Quality Control Boards—to regulate power plants with once-through cooling systems. The approach offered two compliance options: One, a power plant could reduce its water withdrawals to a level consistent with closed-loop systems—which would require the power plant to retrofit its cooling system to be closed-loop or dry cooled. Or two, it could reduce fish impingement mortality and entrapment by 90 percent using operational or structural controls. While the regulation’s intended focus was primarily temperature and entrapment of aquatic life, it also addressed water quantity issues by mandating cooling systems that significantly reduce water withdrawals.
When it was approved in 2010, this policy applied to 49 generation units at 19 power plants, which were required to submit their compliance plans in 2011. Based on the submitted plans, around two-thirds of those units will be retired by 2020 and 16 will continue long-term operations. Half of those units will be replaced with new units using dry cooling technologies, while another six will be repowered. Two units will achieve flow-reduction and impingement compliance through operational controls and the installation of technological controls. In all, water withdrawals from the fleet will have been cut in half by around 2020. While cooling system requirements may have played a role in some plant decisions to shut down, operators faced other pressures—including low-cost natural gas and renewable energy as well as other environmental regulations.
In addition, a 2003 California Energy Commission policy established significant restrictions on the use of freshwater for thermoelectric power plant cooling. The policy directs new power plant developers to propose plants that either use dry cooling technologies or rely on recycled wastewater for cooling. The California Energy Commission is working with power plant developers to make these alternatives work.
Since 2004, the state has seen close to 9,000 MW of combined-cycle projects built, with nearly 85 percent of that operating capacity relying on dry cooling systems or recycled water, significantly reducing freshwater demand. Combined with the once-through cooling system phase-out, these policies have significantly reduced the amount of freshwater used in California’s electricity sector.
Include Energy in State Water Planning
State water planning efforts involve a collaborative planning process to develop short- and long-range plans for managing water resources and ensuring adequate supplies. Plans vary depending on the state’s endowment of water, experiences with shortages, and the ways in which water is used in a state. Some may emphasize conservation and management, while others focus on water rights and specific uses, such as agriculture or hydropower. Some, such as New Mexico’s, concentrate on drought management, while others, such as Utah’s, focus on water resource development. Many water plans consider federal requirements of the Endangered Species Act and Wild and Scenic Rivers Act, including stream flow and habitat preservation.
Kentucky’s water plan recommends assessing drought risks and developing a process to assess vulnerabilities related to water needs for electricity production. The plan also recommends establishing the Kentucky Drought Mitigation Team, which includes a representative from the Kentucky Department of Energy, to create a coordinated approach for drought response.
In addition to considering water use in integrated resource planning, Colorado also incorporates energy into state water planning. Former Governor John Hickenlooper directed the Colorado Water Conservation Board (CWCB) to develop Colorado’s Water Plan in 2013. The plan was created to be a road map to guide the state to a more collaborative and cooperative path to manage its water. In creating the plan, the CWCB was directed to work with other agencies and stakeholders, including the Colorado Energy Office. The resulting 2016 Colorado Water Plan was completed in November 2015 and included sections discussing the energy-water nexus and water use in energy production. Additionally, the Colorado Climate Plan discusses the energy-water nexus and summarizes actions the state is taking to address it, such as the state’s Renewable Energy Standard and its potential to reduce water use for electricity generation, and conservation measures that water utilities are implementing.
The final draft of Connecticut’s State Water Plan, released in early 2018, incorporates several energy considerations. The plan is designed to help planners, regulators and lawmakers make informed decisions about managing the state’s water resources in a consistent manner. It encompasses scientific information, policy recommendations and forward-looking steps that create a framework for future water management laws and regulations. The plan includes several provisions related to the energy-water nexus, including a requirement to establish guidelines or incentives for water conservation that include energy efficiency. The plan recommends several near-term steps to take toward its implementation, one of which is to consider topics including the energy-water nexus and how to harmonize energy priorities with stewardship of the state’s water resources. The proposed future water management options discussed in the plan include using non-potable water and flood control impoundments for power generation facilities, among other uses. The plan also recommends incorporating existing local and state plans, such as energy plans, into water management.
Texas, which has a restructured, competitive energy market, does not tend to employ centralized energy planning and has left decisions about water use for energy generation up to the energy market. Nonetheless, the state is trending toward more water efficient generation approaches due to the growth of natural gas and renewables. Also, since generators need to acquire and pay for water rights or purchase municipal water, they are choosing low water generation technologies since they are subject to more flexible siting requirements. Due to the competitive prices for wind, and now solar power, Texas has seen rapid expansion of these generation sources, which do not require water to operate.
The state has also seen rapid growth in natural gas combined cycle units, which have much lower water requirements than the coal or nuclear plants they are displacing. Texas has also been adding water-efficient fast-response natural gas reciprocating engines and energy storage to help integrate variable wind and solar generation. Since this electric generation technology uses almost no water, it can be located where the plant is optimized for location and need, rather than based on where water resources are located.
Create Environmental Permitting Requirements for Power Plants
States may address water protection and conservation by requiring consideration or analysis of the facility’s potential effects on the environment, including water sources, habitats and wildlife. Most states consider environmental impacts in the permitting or approval process for generation facilities. For example, in South Dakota, the state’s Public Utilities Commission is authorized to prepare or require the preparation of an environmental impact statement prior to issuing a permit.
Several states require permitting authorities to consider the effects of the proposed facility on water resources and aquatic species and their habitats. New Hampshire requires certain facilities to receive a Certificate of Site and Facility from the Site Evaluation Committee. Approval is contingent on permit applicants demonstrating that facilities will comply with state environmental, fish and wildlife standards, among others. The committee is required to review the proposed facility’s impacts on fisheries, wildlife habitats and endangered species.
Similarly, in Arizona, the state permitting authority is required to review environmental concerns when certifying proposed power plants. The authority has denied at least one power plant its Certificate of Environmental Compatibility due to the potential for groundwater depletion and the loss of habitat for an endangered species.
Washington requires generation facilities with a capacity of 350 MW or greater to obtain approval from the Washington Energy Facility Site Evaluation Council. Before recommending approval of the Site Certification Agreement to the governor, the council must determine that constructing and operating the facility will have minimal adverse effects on the environment and ecology of the state waters and aquatic life.
New Mexico generating plants with a capacity of 300 MW or larger are required to obtain a siting permit and the state’s Public Regulation Committee requires these facilities to obtain several other permits before it issues a siting permit. Power plants that impound water and/or discharge to groundwater must also apply for a groundwater discharge permit.