Navigant Research Blog

California Water Summit: A New Landscape for Water Management

— June 21, 2016

??????????????????Drought is not new to California, but 2012-2015 has been the driest 4 consecutive years in history. With climate change forcing us to face the idea of a new normal, the biggest question is: What if the next drought is even worse? This year’s California Water Summit highlighted how the discussion around California’s water situation is shifting focus from emergency measures to long-term preparation. This will require stakeholders to generate new solutions to address water management, both from the top down and the bottom up.

Top Down: Putting the Right Systems in Place

The California Department of Water Resources has been managing the variety of funding opportunities available to public utilities and others through Proposition 1. One focus area relates to the implementation of the Sustainable Groundwater Management Act (SGMA), which requires the formation of Groundwater Sustainability Agencies (GSAs) to oversee the management of the groundwater basins that provide over half of California’s water in dry years. The process of forming GSAs requires the input of many stakeholders on how to protect our watersheds from unsustainable use. As this effort evolves, it will be important to help these entities organize effectively and meet their planning requirements.

Another hot topic as resources become scarcer is that of water rights. Nobody wants to lose their access to water, but things have definitely changed since this fragmented system was put in place, resulting in suboptimal use of a precious resource. The summit called upon a number of Australians to share their experiences with the electronic water markets implemented in response to a culmination of factors, including their own drought that lasted over a decade. Though the endeavor was technologically challenging, the Australians said the largest obstacle was political inertia.

The California Water Summit also exhibited a strong focus on recycled water as an important water supply. Case studies showed the criticality of regulation and investment that support this resource as consumers become more comfortable with expanding its uses.

Bottom Up: Aligning the Resources

The Pre-Summit Workshop was dedicated to public-private partnerships, termed P3s, as a way to spur investment in water infrastructure. Various opportunities were discussed throughout conference sessions, including grant funding, which can take up to several years to secure. The summit wrapped up with a number of case studies that highlighted the importance of involving various stakeholders at every step in the process. One set of stakeholders to be particularly aware of is disadvantaged communities, as these sometimes overlap with areas hardest hit by drought.

Infrastructure is composed not only of large civic construction projects, but also of the more subtle IT networks that enable more precise management of water-related systems. These investments are also necessary as utilities seek to eliminate inefficiencies from leaks and other sources of waste. As the saying goes, “You can’t manage what you don’t measure.” We can expect increasing focus on (and hopefully investment in) California water data over the next few years.

 

Utility Programs May Be Doing More than We Give Them Credit For

— February 24, 2016

light bulbsMany utilities run programs that incentivize their customers to buy increasingly efficient devices, with the ultimate goal of making these efficient devices the new normal. These programs are often accompanied by marketing campaigns to educate the public about the new technology and encourage people to adopt it. The long-term strategy is that this combination of incentives and messaging makes customers more comfortable with new technology, eventually leading them to purchase it regardless of whether or not it is still being incentivized by the utility. Making this change to the norm is called market transformation.

The accounting that goes into determining how much savings utilities can claim for this market transformation process is tricky. Let’s use lightbulbs as an example. Utilities are supposed to be able to claim credit for purchases of efficient lightbulbs that their programs are responsible for influencing. While it’s easy to count how many lightbulbs the program incentivizes each year, calculating how many efficient lightbulb purchases the program influenced is not that simple.

Determining Influence

First off, there are people who bought incentivized lightbulbs but who would have still bought the more efficient lightbulbs even if the program didn’t exist. These customers are known as free riders and shouldn’t be counted; the number of free riders in a program is often estimated and subtracted from program sales.

There are also people who may have received one efficient lightbulb in a kit and decided to purchase a few more without getting the incentivized price. These extra purchases are called program participant spillover. Beyond that, there are people who learn about the benefits of the new technology—from program advertising, retailers stocking more of the efficient technology on their shelves, and price reductions from increased sales volumes—and purchase it without the incentivized price; this is called non-participant spillover. “Market effects” is the term used to describe these spillover purchases and others that aren’t counted because they are very difficult to estimate; however, the utility should get credit for influencing these purchases.

Navigant’s Market Transformation Model endeavors to measure the full impact of utility programs by forecasting what would have happened in the market without the program and comparing this to actual market activity. The Market Model has been used to estimate the market effects of lighting programs in both the residential and commercial sectors. In Michigan, the model was able to show that utility programs were making a larger impact on the market than just the number of lightbulbs being incentivized. By correctly attributing market effects beyond the sales incentivized by programs, we can give utilities the credit they deserve and better support them in spurring the shift to more efficient lightbulbs and other devices.

 

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