California is entering its fifth year of drought and is in the midst of decision-making about the future of the state’s climate goals. California’s water infrastructure represents one of the state’s largest energy users, consuming 19% of the state’s electricity for treating, pumping, and conveyance. The greenhouse gas (GHG) emissions associated with California’s water use are equal to the emissions from more than 7 million cars. This is what we call the water-energy nexus, and it is the next frontier for California’s climate and energy leadership. Advanced Energy Economy recently provided policymakers with our business-based perspective on it.

Earlier in June, AEE published a white paper entitled Bringing California’s Water-Energy System into the 21st Century: Addressing Greenhouse Gas Emissions through Technology. The white paper offers strategies to address the water-energy nexus in order to achieve the state’s overarching climate, energy, and water conservation goals.

Between passage last year of Senate Bill 350 (de León), ongoing implementation of AB 32, and open regulatory proceedings at the California Public Utility Commission (CPUC) on the water-energy nexus, now is an opportune time to pursue the co-benefits of integrated water-energy-GHG reductions through a holistic, systematic, and cost-effective strategy. AEE’s white paper defines the challenge as “driving the optimization of water and energy systems to minimize risk and greenhouse gas emissions, and to maximize resource efficiency and resilience.”

AEE sees particular promise in measures to reduce energy consumption through water re-use; generate electricity onsite at wastewater treatment plants, taking advantage of the energy content of wastewater; and invest in advanced metering and data analytics, to reduce truck rolls for manual meter reading, provide customer savings, and cut leakage losses. But realizing these benefits requires not just recognizing the water-energy nexus but incorporating it in policy and programmatic efforts to achieve the state’s climate goals.

Here is how AEE sees some of the challenges and opportunities in addressing the state’s water-energy nexus:

Bringing water into policy discussions and funding opportunities. The water-energy nexus has gained significant traction as a topic of formal discussion in Sacramento over the last few years, especially through the Water Energy Climate Action Team jointly chaired by the State Water Resources Control Board and the California Energy Commission. But water is still largely left out of many energy policy conversations – and is shut out of many funding opportunities, notably the Greenhouse Gas Reduction Fund (GGRF). Neither behavioral science tools nor critical infrastructure improvements that help in the collection of water use data are eligible for GGRF funding, for instance, despite the benefits such measures could reap in reducing GHGs from wasteful water use.

Coordinating funding streams and accounting mechanisms. The white paper notes that coordination is necessary to ensure effective implementation and promote innovation. As the chief regulatory body providing direction on the spending of cap and trade auction revenue, the California Air Resources Board (CARB) can play a key role by prompting consistent accounting protocols across agencies for measuring the embedded energy and GHG emissions of water to achieve maximum reductions. Existing tools, such as the CPUC’s water-energy cost effectiveness calculator, can likewise facilitate collaboration between various stakeholders.

Leveraging public funds to attract private capital. Policymakers and program staff should seek opportunities to attract private capital for water conservation. While many of the current programs are structured as grant programs – critically important for innovation and early stage technology development – a full spectrum of financing is needed to leverage available public funds and scale the capital available for research, demonstration and deployment. Because of its existing relationships with the bond markets and its broad mandate, the California Lending for Energy and Environmental Needs (CLEEN) Center at I-Bank is well suited to lead with this effort. By providing targeted incentives for this growing sector, coordinating funding across a variety of programs and agencies, and seeking opportunities to attract private capital to leverage available funds, California can lead the development of technologies and business models that encourage conservation of both water and energy, providing an important co-benefit to the state’s focus on GHG reduction.

To provide direction on the best use of resources and program dollars to advance integrated thinking and joint action on water-energy-GHG reduction, the white paper offers two sets of recommendations: 1) technology and finance solutions, and 2) policy recommendations for the near-term (see table below).

California faces a huge, but not impossible, task in achieving its climate goals beyond 2020, meeting the water supply needs of the 21^st Century, and reducing energy consumption simultaneously. By expanding the toolbox to better support innovation and coordinated action, the state can unlock the tremendous benefits of deploying the right combination of effective policy, technology, and cross-cutting financial mechanisms to do all three. The white paper puts forth concrete strategies to this end. AEE will continue to work toward more effective ways to address the water-energy nexus.