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power-water nexus


WIFIA was approved:

https://www.epa.gov/wifia

Good news for water funding, but still a drop in the bucket of what is needed

 

Power utilities are not really interested in coal regardless what Congress and the President do to encourage it.

https://www.pressreader.com/usa/orlando-sentinel/20170208/281784218834781

Are we surprised?  Coal is dirty and creates obvious problems.  Coal emissions caused English kings to ban coal in London 400+ years ago.  Coal jobs are not coming back.  Nor are manufacturing jobs.  It has nothing to do with China – everything to do with technology (robots).

Broward College is seeking $29 million for classroom upgrades because there are not enough seats in the classrooms.  The rooms are cramped and the “old seal with a  wooden table on top isn’t big enough to accommodate students today.”  It doesn’t take much to read between those lines.  About like Texas making manholes 28 inches in diameter because the guys cant fit into the smaller ones anymore….

But Beijing is sinking:

http://www.independent.co.uk/news/world/asia/beijing-is-sinking-into-the-ground-says-report-a7114201.html

Not sure how that correlates, but interesting….

 

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Water and wastewater utilities spend a lot of time dealing with current issues =- putting out “fires.”  But there are larger trends that will affect the industry.  Here are a couple recent topics that we should consider in our industry:

Will robots be doing all our repetitive jobs?  If so what does that mean for all the people doing those jobs now.  Most do not require a lot of skills, and many of those in the jobs that will be lost, do not have the skills for other jobs?  Does the $15 per hour minimum wage accelerate this transition?  How does this affect the water industry?  Meter readers might be replaced with AMR systems.  Customer service is already migrating to direct banking.  There is a change coming.

What does the driverless car mean for us?  I am thinking about an old Arnold Schwartzenegger movie.  For utilities the issue may be how we interact with unmanned vehicles, especially when what we do can be disruptive to traffic.  What happens if those cars get into an accident?  And Warren Buffett is thinking about the impact of this on the insurance industry.  He owns a lot of GEICO stock.  It is doubtful many utility vehicles will be unmanned, in the near-term, but do our manned vehicles and the potential disruption leave us open to greater risk of loss?

Speaking of Warren Buffett says the economy is far better than certain candidates suggest.  I tend to trust Mr. Buffett.  He’s been doing this a long time and has been fabulously successful.  But he notes structural changes to the economy like those noted above, are ongoing.  That will create conflict for certain professions that migrate to automation, much as manufacturing did in the 1970s.  He raises concern about what happens to those workers and suggests that we have not planned enough for those workers who get displaced as the economy undergoes continuing transitions.  In the late 1970s we had CETA and other jobs training programs as we moved from manufacturing to other jobs.  He does not see that in place now.  The at-risk – the poor, minorities, the less educated, rural citizens…. in other words, the usual groups will be hit harder than the rest of the population.  I don’t hear that discussion on the campaign trail but utilities may want to follow these trends is the hope that we can acquire some of the skillsets that we need.  Or provide that training.

Florida’s flood protection plan received a C- from a study called States at Risk.  It said Florida lacks a long term plan for rising seas, despite being vulnerable.  On an unrelated note, the state is expecting insurance premiums to increase 25% or more for flood insurance for homeowners.  And local officials are working busily on FEMA maps to exclude as many properties as possible from flood insurance requirements.  Maybe those things are all related, just at opposite purposes, but who is going to get the calls when flooding occurs?  Storm water utilities, and sewer systems where the manholes are opened to “facilitate drainage.”  The question is what the ratings are for other states as Florida was not the least prepared nor is it the only state with exposure.

A final current trend to think about is this:  Current sea level rise projections have increase the high end, but remained steady for the 50 percentile case.  By 2200 we may see seas at 10 ft higher. That would be a major problem for south Florida.  But the world population will be over 15 billion, which exceeds the carrying capacity of agriculture (at present projections and techniques).  It also places over half the world in water limited areas.  So sea level rise is going to be huge in south Florida, but will concern be localized because of more pressing issues?   Is the number of people going to be our biggest issue in 2200?  Note both will be critical for a large portion of those 15 billion people, but the solution to either is…..?

 


photo 2A week or so ago, on a Sunday afternoon, I flew across Middle America to Colorado for a meeting and was again struck by the crop circles that dominate the landscape west of the Mississippi River.  They are everywhere and are a clear sign of unsustainable groundwater use.  I recently participated in a fly in event for National Groundwater Association in Washington DC, where several speakers, including myself, talked about dwindling groundwater levels and the impact of agriculture, power and economies.  The impact is significant. Dr. Leonard Konikow, a recently retired USGS scientist, noted that he thinks a portion of sea level rise is caused by groundwater running off agriculture and from utilities and making its way to the ocean. He indicated that 5% of SLR each year was caused by groundwater runoff, and has upped his estimates in the past 10 years to 13%.  This is because it is far easier for water to runoff the land than seep into rocks, especially deep formations that may take many years to reach the aquifer.  And since ET can reach 4 ft below the surface, many of the western, dry, hot areas lose most of this water during the summer months.  Hence the impact to agriculture, and the accompanying local communities and their economies will be significant.

It should be noted that the US is a major exported of food to much of the world, including China, so the impact on our long-term economic trade may be significant.  Fortunately the power industry has historically preferred surface waters, but must as power demands increase, they have begun to explore groundwater in rural areas without access to surface waters.  Keep in mind that air-cooled power plants are 25% or more less efficient than water cooled systems and many of these communities lack sufficient reusable water supplied to substitute for cooling.  Hence the projection is a long term negative impact on all of us.

So the question is why isn’t the federal government talking more about this problem?  Is it fear of riling up local political officials that see growth at all costs as necessary?  It is private rights arguments that may spawn lawsuits?  Is it a lack of interest in long-term?  Or the idea that “we have always found a way”. Or is it just buried heads in the sand, leaving the next generation to deal with the problem?  A big issue, yet we do not talk enough about it.  Maybe this is not a surprise since we have not gotten very far with the discussion of limited oil, precious metals, phosphorous or other materials, and unlike them, water appears to be renewable globally.  But water is location specific.  If you have it, great.  If you lose it, a problem.  There are several recent journal articles that make the argument that much of the strife in the Middle East and Africa is water depletion related: water depletion kills local economies.  So we need to ask –what happens if we ignore the looming crisis?  Do we create more “Bundy-type” actions in the rural, dry west because they already lack water?  I suggest it is a cause for concern.


In an interesting twist of fate, USEPA caused a spill on the Animas River when a staffer accidently breached a dike holding back a solution of heavy metals at the Gold King mine because the misjudged the pressure behind the dike.  Pressure?  The spill flowed at 500 gpm (0.7 MGD), spilling yellow water spilled into the river.  Downstream, the plume has travelled through parts of Colorado, New Mexico and Utah, and will ultimately hit Lake Mead.  Officials, residents, and farmers are outraged.  People were told not to drink the water because the yellow water carried at least 200 times more arsenic and 3,500 times more lead than is considered safe for drinking. The conspiracy theorists are out.  The pictures are otherworldly.

colorado-mine-spillRayna Willhite holds a bottle of water she collected form the Animas River north of Durango Colo., on Thursday, August 6th, 2015. About a million gallons of toxic mine waste emptied out of the Gold King Mine north of Silverton that eventually made it into the Animas River. (Jerry McBride/Durango Herald via AP)

0807 colo spill epa-spill-

But they are all missing the point, and the problem.  This is one of hundreds of “legacy disasters” waiting to happen.  We are just surprised when they actually do.  A legacy disaster is one that is predicated on events that have happened in the past, that can impact the future.  In some cases the far past.  There are two big ones that linger over communities all over the west and the southeast – mines and coal.  Now don’t get me wrong, we have used coal and needed metals form mines.  That’s ok.  But the problem is no one has dealt with the effects of mining or coal ash for many years.  And then people are upset.  Why?  We can expect these issues to happen.

One major problem is that both are often located adjacent to or uphill from rivers.  That’s a disaster waiting to happen.  The King Gold mine is just the latest.  We had recent coal ash spills in Kingston, Tennessee (TVA, 2008) and the Dan River in 2014 (Duke Power). The Dan River spill was 30-40,000 tons.  Kingston cleanup has exceeded a billion dollars.  Coal ash is still stored at both places.  Next to rivers.  We had the federal government build ion exchange facilities in Leadville, CO and Idaho Springs, CO to deal with leaking water from mine tailings from the mountains. Examples are in the hundreds.  The photos are of the two coal spills, mine tailings that have been sitting the ground for 140 years in Leadville and one of the stormwater ponds – water is red in Leadville, not yellow.

kingston_coalash POLLUTE-master675 IMG_4803 IMG_6527 (2015_03_08 17_53_48 UTC)

When the disaster does occur, the federal government ends up fixing it, as opposed those responsible who are usually long gone or suddenly bankrupt, so it is no surprise that EPA and other regulatory folks are often very skeptical of mining operations, especially when large amounts of water are involved.  We can predict that a problem will happen, so expensive measures are often required to treat the waste and minimize the potential for damage from spills.  That costs money, but creates jobs.

For those long gone or bankrupt problems, Congress passed the Superfund legislation 40 years ago to provide cleanup funds.  But Congress deleted funding for the program in the early 2000s because they did not want to continue taxing the business community (mines, power plants, etc.).  So EPA uses ARRA funds from 2009.  And funding is down from historical levels, which makes some businesses and local communities happy.  The spectre of Superfund often impacts potential developers and buyers who are concerned about impacts to future residents.  We all remember Love Canals and Erin Brockovich.  Lack of development is “bad.”  They ignore the thousands or jobs and $31 billion in annual economic activity that cleanup creates, but it all about perception.

But squabbling about Superfund ignores the problem.  We continue to stockpile coal ash near rivers and have legacy mine problems.  Instead we should be asking different questions:

WHY are these sites permitted to store ash, tailings, and liquids near water bodies in the first place?  EPA would not be inspecting them if the wastes were not there.

WHY aren’t the current operators of these mines and power plants required to treat and remove the wastes immediately like wastewater operators do?  You cannot have millions of gallons of water, or tons of coal ash appear overnight on a site, which means these potential disasters are allowed to fester for long periods of time.  Coal ash is years.  Mine tailings… well, sometimes hundreds of years.

One resident on the news was reported to have said “Something should be done, something should be done to those who are responsible!”  Let’s start with not storing materials on site, next to rivers.  Let’s get the waste off site immediately and disposed of in a safe manner.  Let’s recover the metals.  Let’s start with Gold King mine.  Or Duke Power.  Or TVA.


Interesting that while we all love low gas prices and the low cost of energy is fueling an expansion of our economy, including the first gains in middle income salaries since 2008, the states reliant on oil and gas may be facing real problems financially.  A year ago I read an article that noted the reluctance of North Dakota residents and politicians to invest in roads and other infrastructure despite the influx of oil money.  Keep taxes low was the mantra.  SO they did.  A recent Governing magazine article notes that a dollar drop in oil means $7.5 million decrease in revenues for the State of New Mexico.  Since oil has lost about $30 a barrel in the past year – that is $200 million loss.  Louisiana sees a $12 million cost/dollar drop so they have $171 billion less to work with.  Alaska, perhaps the most oil dependent budget (90 percent) has a $3.4 billion shortfall, but $14.7 billion in revenues.  Texas, North Dakota, Oklahoma and Kansas are other states facing losses.  Fast growing states like North Dakota and Wyoming now have hard decisions to make.  Growth in Texas, Oklahoma, Louisiana and Arkansas may be cut by 2/3 of prior estimates as a result.  A double hit on anticipated revenues.

The comparison is interesting financial straights experienced by the “property value” states like Florida, Nevada and Arizona before and after the economic collapse in 2008.  Florida politicians couldn’t wait to cut taxes and slow spending during boom years, then got caught badly after the 2008 recession when property values dropped in half and state sales tax revenues (tourism) dropped steeply.  They ran out of reserves and refused to raise taxes (after cutting them), so cut things like education and health care to balance the budget.  Not sure how either helped low and middle class Floridians get back on track since Florida has primarily create low wage jobs since that time, not high paying jobs.  We are paying the price still.  I am guessing Nevada and Arizona are similar.

We clearly have not learned the lessons of the many mill towns in the south or the rust belt cities of the Midwest that encountered difficulties when those economies collapsed. Everyone refused to believe the good times would end.  Now Detroit is half of its former self and Akron has the same population as it did on 1910.

The moral of the story is that booms great, but short term.  Diversity in the economy is a key.  Florida will continue to be subject to economic downturns more severe than other states when it relies primarily on tourism and retirees to fuel the economy.  Detroit relied on automobiles, Akron rubber and chemicals, Cleveland steel, etc.  Some day the Silicon Valley will suffer when the next generation of technology occurs that makes the current works obsolete.  It is what happens when you are a “one economy” town.  It is also what happens when you believe the booms are “normal” and fail to financially plan by putting money aside during the boom to soften the subsequent period.

An argument could be made that if the federal government had not enacted tax cuts in 2000 when the budget was finally balanced and surpluses were presumed to loom ahead, we could have banked that money (or bought down our debts), and the amount of borrowing would have been less in 2008.  Buying down debt when times are good is good business.  So is putting money in reserve.  The question is why the politicians do not understand it.  We can run government like a business financially, but takes leadership to do it.  It takes leadership to explain why reserves are good and tax cuts are a future problem.  It takes leadership to make hard decisions like raising taxes, spending more on infrastructure, requiring people to move out of flood plains, not rebuilding in vulnerable areas, and curtaining water use policies when they damage society.  Leadership is making decisions that help the needs of the many, versus the needs of the few.  Oh wait, I see the issue now.  We need Spock to lead us…

 


Power costs are stable.  Gas prices decreased markedly in 2014 Oil futures are low compared to 2013 and earlier.  .  Production is constant.  Low energy likely is fueling an economic expansion.  Gas economy in vehicles is at an all-time high.  Fuel efficiency lowers GHGs and cuts oil imports.  America is less reliant on foreign oil.  We have more money in our pockets.  Utility power costs and vehicle costs are lower.  Generator operations are lower.  Life is great.  Or is it?

 

Well, that depends on who you talk to.  Politicians in states with in oil and gas based economies are scrambling to deal with large deficits in their budgets.  The railroads are not happy over the Keystone pipeline vote.  Green energy manufacturer are unhappy.  Environmentalists are unhappy.    Heck even the Koch brothers are probably not completely happy

 

The first issue is methane gas.  Pipelines and fracking operations lose about 6% of the gas. A Washington Post article estimates 8 million metric tons of methane is lost each year.  That is where we are trying to capture and transport it.  The Bakken fields lack pipelines for gas, so much if it may be flared.  The amount of fracking will continue (Florida Power and Light has said it will get into the business – but outside of Florida), so more exploration will likely lead to more methane escaping.  Why do we care?  Methane is 22 to 80 times the greenhouse gas that carbon dioxide it (depending on who you talk to).  It accounts for 9% of GHG emission in the US – a third of that from the oil and gas industry.  That gas is concentrated in the western US which makes them ripe for regulation.

 

Enter cap and trade.  The cap and trade “industry” has been opposed by the oil and gas industry for years.  However there are a number of groups –from Indian tribes to NextEra Energy are posed to benefit from cap and trade (C&T) rules.   They have reduced their carbon footprint enough that they can sell carbon credits.  It is doubtful that this Congress with pass C&T legislation, but much of the regulatory focus could be shifted if C&T was in place.  C&T could accelerate green energy efforts.

 

Green energy folks want continued subsides or policies that encourage increased green power supplies, improve technology and reduce prices – all at the same time.  Rolling out a major change in the energy picture is a huge investment that will not gain traction without policies to encourage it   At least for now, green energy creates more jobs per KW-hr than conventional oil and gas, primarily in research and development and product manufacturing.  Sewing up the patents would portend positively for America in the 21st century, much as sewing up the car, gas engine, and nuclear patents did for the 20th century.  He who owns the technology should benefit.  Unfortunately that isn’t the Koch brothers who are unhappy with green energy but are happy that lower oil prices might decrease the competition in the future when oil prices inevitably rise.  But America would be better off in a non-oil based economy in 50 years if we developed an energy policy to address these issues with a long-term view.

 

However, that would take a lot of business and political leadership to overcome some of those who do not want change.  These are people who have more money than the Concord coach makers who could not fight the technology change to automobiles in the early 20th century.  It also takes a vision of what America should look like in 50 years. We might be short on those visionaries.  And how will utilities be a part of it.


So what does this mean for water and sewer utilities. First, we’d love to stay out of the fray. Water and sewer utilities recognize that they are the “peak” power supply for electric utilities. The means to expand power supplies is made difficult by the rules for capital recovery for power utilities that penalizes peak and redundant power supply construction. It must be used and useful to qualify for a return. Hence NextEra builds inexpensive, small increment renewable wind systems to be made whole and encourages residents to reduce demands so they do not need to build more large scale capacity. That works as long as access to renewables or increases in efficiency are available. The use of federal subsidies encourages the used of new technology but without the subsidies, expect the construction to slow.

The European Union is looking to phase out renewable power subsidies by 2017, which may have fairly significant consequences for the European renewable market. The Koch brothers and the Tea Party operatives they fund through many organizations like the Institute for Energy Research, Americans for Prosperity and the Heritage Foundation, are fighting federal tax credits for wind, while backing tax credits for oil and gas. Why do the Koch brothers keep showing up? Because as we noted in a prior blog – they stand to lose profits if the US depends less on oil and gas IT si a problem with big money interests using that money for self preservation as opposed to progression of technology and ideas.

Think what would have happened 100 years ago if big money was allowed to control progress. And I have just the perfect scenario pitting two sides of my family. My mother’s great uncle made Concord coaches. As long as horse drawn carriages and coaches were the primary transportation options, they made money. OF course many cities and towns found that they spend much of their tax money cleaning up after the horses, one of the all-time yuckiest jobs. Tons of horse poop was cleaned up nightly on the streets on many cities. Images are available on line. Of course there was also the stench, disease, vectors, etc associated with all that poop.

Then came Henry Ford. My Dad’s side of the family were Detroiters. They got jobs in the Ford factories, and made money from services to autoworkers as well. The cities loved having cars – less poop. In fact Henry’s cars worked so well, that very quickly cities didn’t have to pick up poop. And the stench and disease decreased. Of course back then, my mothers’ family did not have the same means to buy influence to prevent Henry Ford from producing cars. My uncle went broke, but America and my father’s family in Detroit, benefitted greatly as a result of the new technology. I think we all benefitted from the automobile. Thankfully the coachmakers didn’t have money.

Using politics and influence to resist new technology seems unAmerican. Using subsidies to encourage is seems far more beneficial to society as long as those subsidies actually benefit society. Subsidies have long been a means for governments to alter consumer and corporate behavior and encourage new technologies. Subsidies for recycling steel, aluminum, glass, paper and other materials remained in place until the technology was cost effective to compete with new materials. Now recovered steel is cheaper than new steel materials. The subsidies had their effect. The same is true with aluminum and glass. Subsidies in the form of grants encouraged water and sewer utilities to upgrade treatment and install pipes to serve new customers. Now those are low interest loans because most of the cost effective connections have been made. It benefitted society.

Subsides have been used for years in the US and Europe to encourage renewable power use. The result is a reduction in renewable costs as more people invested in the technology. Greater supply means lower costs (economy of scale, and, theory of economic supply and demand), and subsides are designed to reduce purchase prices sooner than the market might otherwise. Otherwise most of these industries never get off the ground because they cannot get to cost effective production levels. Stay tuned.

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