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Why the cool kids are flocking to energy and not water economics

Maximilian Auffhammer, professor, international sustainable development | March 11, 2014

Why do kids like to go to birthday parties? Because there is lots of sugar and other kids. Academic economists are not that different. Energy economics has attracted a lot of new bright minds, both young and not so young. The reason is simple: It’s an important topic; the people working in this space are people you want to hang out with (yes Severin, Lucas, Catherine, and Meredith, I mean you); and there are lots of really good data (the sugar).

What surprises me is that water economics has not experienced the same influx. Although there are some world class economists working on this important resource, there is no rush into this field. The reason for it is simple: The data are terrible.

Why am I thinking about this?  The repeated calls for me to conserve water during this drought. They go something like this. “Dear Dr. Auffhammer, please reduce your water consumption by 20% this summer. There’s a drought. Thanks a lot. Your utility.” Well here is a letter I am sending to my water utility:

Dear Sir/Madam:

I received your very nice note asking me to conserve water. It was printed on recycled paper and all future generations and I thank you for it. But I have three issues with your call for conservation:

1.   I get a letter every three months telling me how much water I consumed. I have no idea or way to figure out how much water the drip irrigation I put in with my bare hands uses (compared to the inefficient spray system the previous owner had). Trust me. I tried. I lifted the 30 pound concrete plate over my water meter and chased away a few black widows the size of chickens to find out that my water meter is analog (yes with a needle). Even running my irrigation system at full speed for 15 minutes did not move it significantly.

There must be a better way. I can monitor real time electricity load for my house using my cell phone and a rainforest gateway. It must be possible to replace the 19th-century meter on my house with something that uploads consumption data to my phone. The black widows want to be left alone.

2.   How about charging me more for water when it’s scarce? In summers when there is a drought, charge me more! It does not have to be perfect, but if you raised my second tier rate by 25% I would decrease my consumption significantly. Even without a meter. I am scared of second tiers. 

3.   How about you roll out some real-time meters and let us energy people do some experiments in your service territory! The electric utilities (e.g. the cool kids) are doing it and are learning a lot from the essentially free consulting (I know how much McKinsey charges) from us academics. Some of the best work in energy economics has exploited randomized controlled trials to help us better understand households’ responses to quasi-shaming (Hunt Alcott’s work on OPOWER), used service territory borders to better understand the price elasticity of electricity demand, analyzed the magnitude of the rebound effect and so on and so on.

While I understand that this is a major change in the way we study water demand, now is the time. Monitoring has become much cheaper and the information we gain from better monitoring will lead to a better understanding and potentially more efficient allocation of water.

We will gladly help you look at the effects of shaming your neighbors. We could have a start-up called H2Opower! We will help you run experiments which will evaluate the effectiveness of different pricing strategies! The opportunities are endless. 

Best wishes,

Dr. Max

Cross-posted from Energy Economics Exchange (tag line: Research that Informs Business and Social Policy), a blog of the Energy Institute at Haas.

Comments to “Why the cool kids are flocking to energy and not water economics

  1. One of the challenges is the disconnect between electric and water infrastructure. Notice that there isn’t any electricity anywhere near your water meter, which is a mechanical meter and just off the main line buried at the street. This makes moving the data anywhere else much more difficult than electric meters that have their built in energy source, or even gas meters that are often near an electrical box on the house.

  2. Dear Max: Thanks for your witty and wise remarks. I have a question for you: Is it really true that 80% of the water used in California is used in agriculture, and 15+% in industry? If so, shouldn’t somebody be writing nice letters to agribusiness and industry asking THEM to reduce their water usage?

    I am happy to conserve, but worry that it won’t do much good . . .

    Your pal,
    Alix Schwartz

  3. Your are right that a uniform charge for water with NO REDUCTIONS would exactly motivate all people equally to use less water. EXCEPT poor people would be hurt more than wealthy (who can afford the higher charges). Making it illegal to water lawns (so much, so often, or at all) is a good idea if the politics will allow that.

    It gets my goat that golf greens are likely (I really don’t know) to be charged less for water than households are. I think they should be charged MORE.

    The really big users of water are likely to be industrial users and farmers. They are charged less, I suppose, but the key to getting efficiency (say drip irrigation, which you mention) is to keep prices hight. People should pay for what they use. (True of energy as well. True of the pollution made by industry and agriculture, too).

  4. Max: When the drain line under my kitchen sink (new with the house in 1926) became permanently clogged, I took out the p-trap and replaced it with a 5-gal. bucket, which I drained into the bathtub. I learned a lot about how much water I was using–the hard way.

    But it got me curious, and while I love looking up my PV output and electricity usage via my smart meter and the PGE website, getting useful information about water usage isn’t too hard, at least if your house has a good water meter.

    My water meter is right out on the curb, and is accurate down to about 0.01 cubic feet. There are 7.48 gallons per cubic foot, and 16 cups per gallon, so the meter reads down to 1.2 cups.

    It’s tedious, but you don’t have to conduct the following experiments very often. (Sounds like my meter is more modern than yours.):

    Turn off all sources of water. Read the meter. Go inside the house, flush to toilet, read the meter. Take a shower, read the meter. Wash dishes, read the meter. You get the idea.

    To check for any leaks: Read the meter. Go to bed. If you pee in the middle of the night, don’t flush. Get up in the morning, read the meter. My house doesn’t leak, which is surprising given much of the plumbing is circa 1926.

    I learned that low-flow toilets and shower heads really aren’t. Washing your car isn’t that bad. Hand washing dished is a joke. Stop being compulsive, just put them in the dishwasher, which uses very little water. The amount of water we waste waiting for it to get warm is ridiculous.

    Smart water meters would be fun, but the reality is that agriculture uses 75% of California’s water, so the innovation really needs to be there, and it is coming. There are some amazing remote sensing/GPS-based technologies that are already being used. Trouble is that more efficient water delivery systems will require considerable capital investment.

  5. Dear Max: During the last drought, my wife and I moved to reduce our water use as much as possible. We bought a water-saving toilet, put in a drip irrigation system, and replanted our front yard with native drought resistant plants (goodbye lawn, you won’t be missed). I take Navy showers (turn off the water when soaping up), and don’t shave or brush my teeth in running water. We have a super-efficient ASEA dishwasher.

    I was proud to show a 25% reduction in our winter water bill, and 33% during the summer/dry months. Now, of course, EBMUD will surely ask everyone to reduce by some fixed percentage, thus penalizing us for having acted early.

    I agree that a two- or three-tier system is much fairer, provided they can actually figure out what the “average” use is for a household like ours in a house like ours in the area where we live. I am skeptical to say the least.


  6. According to a news story on March 10, 2014, there are many users in northern, central and southern California who are charged a flat rate for water. “People without meters are charged a flat monthly rate in those areas for water, usually between $20 and $35 a month. And those communities use 39 percent more water per capita than the state average, according to an analysis of state Department of Water Resources records by this newspaper.”

    So even if you monitor your usage for water usage, there is no incentive, other than the obvious moral incentive, for many folks to discontinue to water their lawns and fill swimming pools in Sacramento and the Central Valley and Bakersfield.

    Thank you for your comments.

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