Research > Natural Resource Economics and Policy Research Program

Electricity and the Water-Energy-Food Nexus in Texas

Human and natural systems are tightly linked, and the interconnections between the two are highly pronounced between water, energy, and food systems (WEF). We are faced with the challenge to solve a set of complex problems which pose a fundamental threat to society. Humans manage natural systems, and changes in natural systems provoke changes in management. Understanding the connection between natural systems and human systems requires a comprehensive modeling effort that addresses these interdependencies.

Thermoelectric cooling represented 45% of all water withdrawals in Texas in 2010, and because of the state’s large electricity demands and the substantial fleet of plants cooled via recirculating cooling technologies, Texas power production is more water-consumptive on both a per megawatt basis and in total than any other state. If renewable energy policy or global energy prices significantly alter the profitability of thermoelectric power production, this would alter the water availability for other sectors. However, if fresh water supplies become scarcer because of climatic change, or the excess mining of fresh-water aquifer supplies, this could alter the demand for electricity, and the operation and stability of the electricity grid. Any combination of these effects could change water availability for food production, quality of irrigation water, yields to be expected at the field and sectoral level, and the maintenance of legal obligations for water deliveries via compacts and water sharing agreements.

We are working on a holistic WEF nexus analysis which incorporates hydro-economic modeling to determine optimal water allocations across sectors, and a high-frequency electricity grid model that combines boiler-level electricity plant operations with a power plant cooling operations model. Our goal is to determine the effects of renewable energy policy, climate change effects of water availability at the basin level, and water quality effects via fresh-water supply mining from aquifer pumping.

Fact Sheets:

• Regional Economic Model for Drought, Energy Policy, and the Food-Energy-Water Nexus in Texas

Drought and Energy Production: The Effect on Electricity Supply

During the 2011 drought, Texas electricity prices rose as generators with water-intensive cooling technologies cut back production. We have termed this an “exceptional drought” as it is more severe than 95% of all droughts. We investigated the causal effect of the exceptional drought and electricity supply using a fixed effects model. We are finding that the impact of exceptional drought on electricity supply varies with the cooling technology type used by the generator. Generators with water-intensive cooling technologies respond to exceptional drought conditions by raising their average bid prices. However, generators that use dry cooling technologies do not raise bid prices but do increase the total quantity bid during exceptional drought periods. These changes in bid prices have a measurable effect on dispatch and lead to lower emissions plants being dispatched during exceptional drought. Given that exceptional drought intensity and duration is forecast to increase over the coming decades, these findings have important implications for electricity market regulation.

Fact Sheets:

• Weather Variability and Energy Production The Effect of Drought on Electricity Prices

Defensive Investment in Water Hardness Reduction

Water hardness in municipal water supplies can cause serious economic damages to households and industry. These damages include a decrease in the efficacy of the soap and cleaning products, shortened service lives of the household appliances, and increased distaste of drinking water. In this study, we measure the willingness to pay (WTP) for a reduction in water hardness by households for reasons other than a perceived or actual health risk, and the attributes that affect this WTP. We calculate marginal WTP (MWTP) to pay for one-unit TDS reduction by calculating the ratio damages avoided to price. The results indicate that households would be willing to spend on average $11.70 per year to reduce water hardness to a 500 ppm level.

Fact Sheets:

• Defensive Investment in Municipal Water Hardness Reduction