impact of climate change on the water industry and water regulation david k. baker, president...
TRANSCRIPT
Impact of Climate Change on theWater Industry and Water Regulation
David K. Baker, President
Indiana American Water
Michigan American Water
MARC - Traverse City, MI
June 2009
Presentation Overview
• Interrelationship between Water & Energy
• Water Industry Greenhouse Gas Profile
• Impacts of Climate Change on the Water Industry
• Required Water Utility RE-actions to the impact of Climate Change
• Midwestern Burden? Cap and Trade impacts on Water Industry
• Regulatory actions to support consumers and investors
• Climate Change – Exacerbating the Global Water Crisis
2
Utility Only
O&M Only
Both
Where We AreWe manage more than 350 individual water systems across the country
Every day we operate and manage:
• 45,000 miles of distribution and collection mains
And more than:
• 80 surface water treatment plants
• 600 groundwater treatment plants
• 1,000 groundwater wells
• 40 wastewater treatment plants
3
American Water Subsidiaries
4
Interrelationships Between Water and Energy
5Source: US Department of Energy, Dec 2006
Greenhouse Gas Profile – Water Utilities AW Inventory of GHG Emissions
6
Emissions Source Category Fuel Quantity Units
Emissions (Metric Tons
CO2e)
Percent Total
Emissions
Stationary Combustion Natural Gas 5,102,952 therms 26,998 3.60%
Diesel 341,981 gallons 3,457 0.50%
Mobile Combustion Gasoline 2,409,305 gallons 22,591 3.00%
Diesel 401,922 gallons 4,053 0.50%
Purchased Electricity Electricity 1,089,424,091 kWh 691,011 92.40%
Total Emissions 748,110 100.00%
Emissions in metric tons CO2e includes CO2, N20 and methane emissions
Emissions from flared methane gas and HVAC were both <0.5%
• Energy costs (primarily Electricity) can range from 20% to 60% of a water utility’s operating budget
• At INAW/MAW, this translates to over 50% of total
production costs per year
• Most energy is consumed in pumping water
• According to Scientific American: Lake or River Source .37kWh/m3 (cubic meter) Groundwater .48 Wastewater treatment .75 Wastewater reuse 1.75 Seawater 5.54
Costs of Water Production and Distribution Contributing to Greenhouse Gases
7
Climate Change – Water Related Impacts:
• Rising Temperatures: 11 of the 12 warmest of the past 150 years have occurred since 1995, with an increase of approx. .6 degrees C
• Increasing Evaporation and corresponding precipitation – regional increases and decreases
• Melting of polar ice caps - rising sea levels range from .2 - .6 m*
• Increased extreme events: intensified hydrogeologic cycle which increases floods, droughts and tropical storms
• Anecdotal evidence abounds recently in Midwest with flooding and droughts
8
*Intergovernmental Panel on Climate Change, Fourth Assessment Report, 2007
9
Impacts on the Water Utility Industry
• Water Quantity Impacts: reduced in-stream flows, earlier and more intense seasonal snowmelt, reduced aquifer recharge Major increases in demand with peaks coinciding with periods of restricted
supply
• Water Quality Impacts: increased run-off leads to increased sedimentation and pathogen loading, urban storm water runoff, combined sewer overflows, increased algal blooms
• Unique Coastal Impacts: rising sea levels may lead to salt water intrusion of groundwater
• Infrastructure Impacts: increased main breaks due to soil shrinkage and settling, reservoir management due to runoff timing and intensity flood control and water supply considerations
• Collaborate, understand, predict: Climate Leaders, a voluntary EPA partnership with US Companies to develop long term, comprehensive strategies
• Reduce energy consumption: increased pump efficiencies – VFD’s, testing SCADA optimization Storage and pumping management Conduct energy audits
• Developing Alternative Water Supplies: Desalinization - more than 50% of the US population lives within 50
miles of seawater Making Desalinization more efficient
Appropriate Water Industry Actions in Response to Climate Change
10
Appropriate Water Industry Actions – continued
11
• Reduce Non-Revenue Water: enhanced pressure management leak surveys, cost benefit analysis enhanced leak detection activities, acoustic technologies
• Maximize Reuse Opportunities: reuse of gray water and wastewater for sanitary and irrigation needs continued research and special projects (Sullair Building, Gillette
Stadium)
• Water Conservation: customer education, in-home water saving devices Indiana’s first state-wide comprehensive wise water use plan promote low-use appliances
Appropriate Water Industry Actions – continued
• Construction of facilities with enhanced Sustainability: lower energy use design reduced waste disposal efficient, regional approaches maximization of existing infrastructure
• Energy Efficiency “Starts at Home”: Increase efficiency/decrease use of mobile combustion – vehicles Fugitive Emissions: Refrigeration and Air Conditioning Stationary Combustion: Water Heaters, on-site generators, pumps
12
13
Results of Previous Energy Audits (2003-2006)Recommended Improvements
(E.g. replace impellars, install VFD's, install high efficienty lighting)
PAAW System Capital Cost ($) Annual Savings ($/yr) Payback (years)
PITTSBURGH $673,500 $197,561 3.4
MECHANICSBURG $148,500 $64,305 2.3
NEW CASTLE $17,400 $58,454 0.3
MILTON/WHITE DEER $78,000 $40,777 1.9
INDIANA $32,000 $31,460 1
HERSHEY $12,000 $28,700 0.4
ELLWOOD $33,500 $24,569 1.4
BUTLER $3,000 $12,249 0.2
14
The “Midwestern Burden?”
• The controversy is “on” in the Hoosier State – Cap and Trade legislation
• Production of Midwestern energy is carbon based: 94% of Indiana’s energy is coal produced
• Impact on electricity rates may be as much as 40%
• Dependent upon purchase of emissions allowances – dramatic impact on water utility costs
Regulatory support of Climate Change related Utility Actions and Investments
• Economic support of research and climate change planning• Support of NRW reduction studies and leak detection capital• Collaboration and support of long-term sustainable infrastructure• Expansion of Infrastructure Surcharge Recovery programs to
include necessary replacement capital to support response programs
• Continued and enhanced support of industry consolidation and related efficiencies
15
16
Regulatory support of Climate Change related Utility Actions and Investments
• Support of Conservation Programs Appropriate Cost recovery for program investments Customer rate restructuring to curb demand (inclining blocks,
irrigation rates)
• Revenue levelization to deal with flood/drought cycles• Appropriate surcharges/trackers for energy cost recovery between
rate cases• Long range comprehensive planning rate treatment• Establish appropriate rates of return on equity to support new
infrastructure investment
The Water Industry is the most Capital Intensive of All Utility types
Capital Intensity
$3.48
$1.36
$0.82$1.15
$1.63
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
1-Water 2-Electric 3-Comb E&G 4-Gas Dist. 5-Tel Cos
Source: AUS Utility Reports
17
Levelization of RatesEssential to attraction of appropriate investment
Fixed 75%
Variable25%
18
Fixed28%
Variable 72%
COST REVENUE
Fixed Cost vs. Fixed Revenue – The Quest for Balance
Climate Change will exacerbate the Global Water Crisis
19
• Water is the basic key to life – human and economic sustainability
• Water resources are the foundation of economics – arid countries battle for
the water resource
• Our Nation’s Security is directly linked to water
• Worldwide, 1.1 Billion people lack access to safe drinking water
• 2.6 Billion people lack access to proper sanitation
• Water related illnesses kill over 2 million people per year, most of them
children
Impact of Climate Change on the Water Industry and Water Regulation
- - - END OF PRESENTATION - - -
20