2016 CA Summit - Building a Renewable California

The Water-Energy Nexus

• Water and energy are deeply interconnected in California:
  • Water is used to generate electricity via hydroelectric dams; hydro accounts for ~15% of the state's energy supply in normal years but dropped to as low as 5% during the depths of the drought.
  • Energy is required to move and treat water; approximately 20% of California's total energy consumption is dedicated to water conveyance and treatment.
• Drought-induced water conservation served as an unintended energy conservation measure:
  • Over a 15-month period, 38 million Californians reduced water usage by 25%, significantly lowering the energy required to pump water.

Regulatory and Structural Challenges

• Water and energy regulation currently operate in silos:
  • Energy is regulated by the California Public Utilities Commission (CPUC).
  • Water is regulated by the State Water Board and Regional Water Quality Control Boards.
• There is growing policy momentum to integrate these sectors:
  • The CPUC is exploring combined incentive programs that fund efficiency measures for both water and energy.
  • Utilities are investigating the use of smart meter data infrastructure to simultaneously track water usage, mirroring the detailed electric data currently available.
• Ratepayer friction exists due to rising costs despite conservation:
  • Rates are increasing even as usage declines, driven by the need to maintain 24/7 infrastructure access regardless of volume used.
  • This disconnect between lower consumption and higher bills creates political and communication challenges for utilities.

Pricing Models and Rate Structures

• Utilities are shifting toward fixed charges and tiered pricing to ensure cost recovery:
  • San Diego County Water Authority and other retail agencies utilize "base service" charges, meaning customers pay for infrastructure access regardless of usage volume.
  • California electricity rates are moving toward a two-tier structure (down from four tiers) to balance conservation signals with the burden on low-income customers in high-heating/cooling zones.
  • Tiered water pricing is currently challenged by Proposition 218, which limits charges to the cost of service delivery rather than allowing rates to cover broader conservation goals.
• Time-of-use (TOU) pricing is being explored to align consumption with renewable generation:
  • "Matinee pricing" proposals suggest extremely low electricity rates during midday when solar generation is high (e.g., March–May) to incentivize heavy water users, such as farmers and irrigation agencies, to pump water during these periods.
  • Water agencies already perform TOU optimization internally by treating and pumping water during low-cost energy windows, but customer-facing TOU water pricing is currently limited due to the lack of physical storage constraints at the point of use.

Storage and Grid Integration

• Pumped hydro storage is being re-purposed to balance renewable energy grids:
  • The traditional model (pumping at night, generating during the day) has reversed; systems now pump water uphill during the day when solar energy is cheap and generate power in the evening shoulder periods (3 p.m. – 8 p.m.).
  • San Diego Gas & Electric is partnering with water agencies on a 500 MW pumped storage program to help stabilize the grid.
• Alternative storage technologies are being deployed:
  • Ice storage systems freeze water during low-cost solar hours to provide air conditioning cooling during peak demand.
  • Battery storage markets are expanding, with software-controlled systems managing rooftop solar, batteries, and grid imports.

Supply Diversification and Future Innovations

• California is pivoting toward local supply solutions to reduce reliance on imported water:
  • Potable reuse (treating wastewater to drinking standards) is a primary focus for the San Diego region.
  • Stormwater capture via cisterns is being tested in Los Angeles to recharge groundwater and reduce pollution runoff.
  • Graywater systems are being implemented in new subdivisions for irrigation, though health regulations remain a constraint.
• Greenhouse gas emissions are being managed despite reduced hydro output:
  • The rapid expansion of solar energy has muted the expected rise in GHG emissions that would typically result from the loss of hydroelectricity.
  • The state aims to reduce greenhouse gas emissions by 40% below 1990 levels between 2020 and 2030.

Infrastructure and Market Efficiency

• Aging infrastructure requires significant capital investment:
  • Water mains in Los Angeles and the Delta levees are reaching end-of-life and pose seismic risks that could disrupt supply for millions.
  • Modernization of the Delta conveyance system is a top priority for the state to ensure water security against climate change and earthquakes.
• Water transfer markets are inefficient compared to international standards:
  • Water trades in California can take months or years due to complex regulatory approvals, whereas markets like Australia execute transfers in seconds.
  • The Delta acts as a severe bottleneck, limiting the ability to move water from surplus areas (north) to demand areas (south).
• Utilities are actively partnering with third-party innovators:
  • Southern California Edison is testing new technologies (e.g., storage paired with gas peakers) through advanced technology labs and university partnerships.
  • Integration of rooftop solar has been streamlined, reducing interconnection times from 30 days to 1.2 days.