Energy and water are highly interconnected. In addition to the energy required at a household level to heat water, water treatment and provision tend to be energy intensive. Similarly, water is crucial to energy life cycle and used in extraction, refining, and electricity generation. Therefore, the relationship between water and energy is often referred to as the energy-water nexus.
The western United States historically struggles with water shortages causing regional water supply concern. Many of these states lead the nation in fastest-growing municipalities, increasing demands for both energy and water. Plans for utility expansion have become hotly debated topics as existing utility plants struggle to provide electricity while remaining within water uptake and disposal regulation. Finally, climate change is expected to prolong draught periods and increase water shortages. However, a recent study by two researchers from Synapse Energy Economics, published in Energy Policy, suggests that climate change policies could exasperate the problem, making the energy-water nexus increasingly complex and controversial.
While climate change tends to exasperate the water scarcity problem in the southwest, climate mitigation strategies may be adverse to water conservation. To date, the most effective carbon reduction strategies in power plants are the relatively new carbon capture and sequester (CCS) technologies. While decidedly effective at eliminating greenhouse gas emissions, CCS technologies also tend to be highly water intensive. Meanwhile water reduction strategies are less efficient and more expensive. The best available water reduction practice for the energy sector requires switching from a wet cooling system to dry cooling. This can increase capital costs by a factor between three and seven while creating a 2% energy efficiency reduction. Therefore, carbon policies and water reduction costs have important implications on water availability in the West.
This particular study examines the range of carbon and water prices that would create a change in carbon emissions and water usage under four possible policy frameworks: 1) limiting carbon emissions, 2) limiting water use, 3) limiting both carbon emissions and water use, or 4) maintaining the status quo. The study finds that although it is technically possible to reduce both carbon emissions and water use at the same time, this will come at an enormous economic cost, particularly in terms of water reduction.
A reasonable carbon tax over $50 per ton of carbon would create incentives for carbon reduction. For similar changes to take place in water reductions, water prices would have to rise above the cost of desalinated water, an unrealistic price for consumers in the western United States. Moreover, while a carbon tax would be relatively efficient in decreasing the ppm of atmospheric carbon, even a stringent water policy would only decrease water consumption by single digit percentages within the energy sector.
Therefore, in terms of cost efficiency in electricity sector, the energy sector can make significant carbon reductions but struggles with water consumption reduction. A carbon tax of $50 could reshape western electricity generation pushing towards carbon reducing technologies such as CCS or nuclear power. However, this could lead to increased water shortages especially since water reduction technologies are relatively ineffective and cost-prohibitive. These tradeoffs show the United States still needs to make significant technological gains in order to attain both energy efficiency and water resource conservation. Requiring the energy sector to reduce water usage would lead to exorbitant water costs in the western United States. However, both climate change and the possibility of a climate policy may create further threats to the region’s water supply. Therefore, western states should consider looking outside of the electricity sector to find solutions to their growing water crisis.