Demand-Side Management (DSM) for Water

Photo by Michael (Creative Commons, username: fallsroad) 

Transporting and treating water to provide clean drinking water and treated wastewater is highly energy intensive. Water and wastewater treatment account for about 4% of U.S. annual electricity use (EPRI 2002), representing $14 billion of a $353 billion market (U.S. Energy Information Administration). The California Energy Commission calculated that 95% of the energy savings of proposed energy-efficiency programs could be achieved at 58% of the cost through water-efficiency programs instead (Klein et al. 2005). At the same time, wastewater itself is carbon and nutrient-rich, and thus a potential source of energy. This water-energy nexus provides significant opportunity for concurrent energy, water and cost savings.

As water demand increases, additional costs will be borne by treatment and delivery systems, including expenditures associated with acquiring access to new water resources, development of new infrastructure, and enhanced treatment. Still, many of the costs associated with our water systems remain external. As pressure on water resources continues to escalate, the market may see attempts to internalize more of these costs (i.e., regulation of non-point source contaminants, TMDLs, enhanced treatment requirements, energy standards, etc.), further increasing the costs of expanded water systems. Creating virtual capacity in water and wastewater facilities via demand-side management, smart water systems, enhanced efficiencies and water reuse, has the potential to avoid both these costs and associated energy expenditures.

Electrical utilities have successfully employed demand-side management (DSM) techniques as a way of offsetting the need for new generation capacity. DSM programs have been successful largely because they are cost-effective, meaning the cost of energy-saving measures is less than that of capacity expansions. A study out of the Lawrence Berkeley National Laboratory (Eto et al. 1996) evaluated the cost effectiveness of 20 utility-sponsored commercial lighting DSM programs, and found the ratio of utility avoided costs to program (administrative, incentive and consumer) costs ranged from 1.1 to 6.4. 

Similar management techniques are now being employed in the water sector. IBM recently partnered with the City of Dubuque, Iowa in the Smarter Sustainable Dubuque Water Pilot Study, where they deployed smart water meters in 303 in homes in the city and compiled three months of water use data. Over the course of the pilot study, consumers reduced their water use by 6.6%; extrapolated to a full year, the data suggest the community would save 515,000 gallons of water (or 3,400 gallons per household), an aggregate savings of $191,000 annually. 

Yet, the economics of this program are not clear. A variety of structural impediments — including relatively flat cost curves for water, a misalignment between the costs and benefits of water conservation programs attributed to customers and those attributed to utilities, and building codes and regulations that inhibit water reuse – make the financial, logistical and policy issues for water DSM programs difficult. As an exercise, I evaluated the financial benefit to me of halving both my monthly energy and monthly water use. The results are instructive: reducing my month energy use from 2000 to 1000 kWh would reduce my energy bill from $115 to $60 per month, saving me $55 or 48%. In contrast, reducing my summer monthly irrigation water use from 15,000 gallons to 7,000 gallons reduces my water bill from $49.31 to $46.11, a whopping savings of $3.20 or 6.5%, or approximately the cost of a latte. Yet, were everyone in my community to similarly reduce their water use, my guess is that significant savings in the way of reduced electricity costs for wastewater treatment, avoided water rights costs or eventually avoided capacity expansions, would accrue to the water and wastewater utilities. If money were the only reason I am working to reduce the water use in my home, I’m afraid my water bill wouldn’t even move the dial. 

Cost Savings Associated with Energy and Water Use Reductions