The State's Water-Energy Nexus

The “water-energy nexus” has received a lot of attention since Energy Commission staff issued a report, California’s Water-Energy Relationship, in support of the 2005 Integrated Energy Policy Report (IEPR).

Prior to this report, there was a general recognition that water and energy are related. The most recognized relationship in California was hydropower – production of electricity from moving water. What distinguished the 2005 staff report from all other prior studies was the recognition that significant quantities of energy are used to “produce” water (e.g., by pumping groundwater), to pump water across the state, to treat and distribute water to “end users” (customers), and to collect, treat, and either dispose of or recycle wastewater. Additional energy is used by customers during use or consumption of water (e.g., for pumping or heating water, for cooling, for cleaning, and a wide variety of other purposes).

Photo credit: Drought resilience, Shutterstock 439945252
Photo credit: Drought resilience, Shutterstock 439945252

Energy Embedded in Water, or Embodied Energy

The Energy Commission staff’s estimate of water-related energy use was significant – as much as 20% of all electric use in the state – piquing the interest of state policymakers about the potential to save substantial quantities of energy by saving water.

To evaluate opportunities to avoid (thereby “saving”) energy inputs to water, Energy Commission staff proposed a “Water Use Cycle” framework for documenting energy inputs to water by system or function, and then estimating the average amount of energy “embedded” in a unit of water at various points in the water use cycle. The average amount of embedded energy, typically expressed as kWh or therms per acre-foot or million gallons, is referred to as the “energy intensity” of a unit of water or wastewater. This simple framework provided a simple and transparent means for estimating the amount of energy that could be saved at different points in the “Water Use Cycle”. (The CPUC adopted the term “Water Cycle”.)

Since 2005, other parties have evaluated opportunities to save energy embedded in water (sometimes referred to as embodied energy). While the initial Water Use Cycle diagram has adapted by other state agencies to better fit the goals and objectives of their own programs, the fundamentals remained: the amount of energy used to perform water and wastewater functions are deemed “embedded” in water, enabling programs to target reductions of energy by reducing water production and use.

Recognizing that different state agencies use their own data and protocols to compute energy embedded in water, Figure 1-1 illustrates the general approach.


Adapted from California’s Water Energy Relationship, Figure 1-1 California’s Water Use Cycle, California Energy Commission, CEC-700-2005-011-SF.

Understanding water sector electric data is important for several reasons:

Electric Reliability

Understanding how and when the water sector uses electricity can help to identify opportunities for electric reliability support. Specifically, the water sector tends to have significant opportunities to integrate energy efficiency, demand response, distributed clean/renewable generation, and energy storage into their systems and facilities. These four electric resources are essential building blocks for long-term electric reliability.

Energy Investments in Water Programs

California’s regulated energy utilities (both electric and gas) have been authorized by the California Public Utilities Commission (CPUC) to invest energy ratepayer funds in “water-energy nexus” programs that achieve both water and energy benefits contemporaneously. Two key metrics determine the amount of energy benefit that accrues to energy ratepayers by saving (or “making”) water:

1 - Direct Energy Savings – The amount of energy that is saved by any particular measure or strategy while creating a water benefit, and

2 - Indirect (“Embedded”) Energy Savings, also referred to as “Energy Embedded in Water” – The amount of energy inputs to water resources and water and wastewater systems and facilities that can be “avoided” (saved) by saving water.

Recycled Water

Recycled water has a special place in the CPUC’s water-energy nexus programs and methodology. Understanding Tulare County’s water sector energy use helps to compute the energy value of recycled water which then determines the amount of energy sector investment that can be used to help water and wastewater agencies increase the quantity and quality of recycled water.

CPUC approved regulatory protocols are used to measure Direct Energy Savings. A CPUC approved methodology also governs the measurement of Indirect (“Embedded”) Energy in Water. Under the embedded energy methodology, energy inputs to water resources and to wastewater treatment are summed along all segments of the water supply chain. The resultant metric, referred to as the “Energy Intensity of Water”, is the amount of energy savings that can be claimed as “energy resources” when implementing a water saving strategy or measure. This metric determines the amount of energy utility incentives that can be invested in strategies and measures that achieve water benefits.

Energy Investments in Drought Resilience

The Energy Commission’s landmark finding in 2005 – that saving water in California could save substantial quantities of energy[1] – resulted in a recommendation to identify cost effective energy savings strategies through water efficiency and reductions of energy use by water and wastewater utilities.

The Energy Commission, the Department of Water Resources, the CPUC, local water agencies, and other stakeholders should explore and pursue cost-effective water efficiency opportunities that would save energy and decrease the energy intensity in the water sector.

The State’s Recycled Water Policy was first adopted on January 6, 1977 via SWRCB Resolution No. 77-1. The Resolution set forth the following general principles for SWRCB investment:

Each state agency is charged with accomplishing a specific mission and vision, and each must accomplish its goals and objectives within the constraints of its jurisdictional and funding constraints. The CPUC, for example, is responsible for regulating the state’s four large investor-owned energy utilities (IOUs): Pacific Gas and Electric Co. (PG&E), Southern California Edison (SCE), San Diego Gas and Electric Co. (SDG&E), and Southern California Gas Co. The three electric utilities provide about 75% of the electricity used in California; the remaining 25% is provided by more than 40 publicly owned utilities (POUs) that range in size from very large (the Los Angeles Department of Water and Power serves 3.9 million customers) to very small (the smallest POUs serve less than 400 customers).[3]

The CPUC has no jurisdiction over the state’s POUs. Consequently, its methodology for computing the amount of energy investment in water strategies and technologies is limited by the energy inputs to water and wastewater system and functions, and energy use by customers in using water, that are provided by energy IOUs.

Similarly, although water and energy are related, in California the two resources have historically been managed separately. For example, the CPUC regulates both energy and water investor-owned utilities; but different rules, regulations, policies, and protocols apply. Some POUs provide both water and electric service; but even within those POUs, it is rare to find a program that seeks to optimize investments across both resources – the infrastructure, operations, capital improvement programs, and user rates are typically managed separately.

Challenges to Optimizing Public Investments

The State’s Recycled Water Policy was first adopted on January 6, 1977 via SWRCB Resolution No. 77-1. The Resolution set forth the following general principles for SWRCB investment:

Despite some efforts targeted at improving the energy efficiency of heating water, the state’s largest energy utilities have no authority to invest in programs that save cold water, regardless of whether the programs yield energy benefits. Because of the potential for reduced energy demand from these programs, the Energy Commission, the CPUC, utilities, and other stakeholders should more carefully examine investment in cold water savings. Water utilities do, of course, invest in programs that save water. Water and wastewater utilities also participate in programs to increase the efficiency of their operations. Given the interconnectedness of water and energy resources in California,

the fact that cost-effectiveness is determined from the perspective of a single utility and a single resource creates barriers to achieving greater energy savings from water efficiency programs. Water utilities only value the cost of treating and delivering water. Wastewater utilities only value the cost of collection, treatment, and disposal. Electric utilities only value saved electricity. Natural gas utilities only value saved natural gas. This single focus causes underinvestment in programs that would increase the energy efficiency of the water use cycle, agricultural and urban water use efficiency, and generation from renewable resources by water and wastewater utilities.

Source: 2005 Integrated Energy Policy Report. Energy Commission, Publication Number: CEC-100-2005-007CMF

Although most California customers purchase electricity, gas, water, and wastewater services, there is no single program that seeks to optimize public investment in all four of these resources and utility services.

[1] Klein, Gary, et. al. 2005. California’s Water-Energy Relationship. California Energy Commission. November 2005. Publication Number: CEC-700-2005-011-SF.

[2] California Energy Commission. Integrated Energy Policy Report. November 2015. CEC-100-2005-007CMF.

[3] Differences Between Publicly and Investor-Owned Utilities. California Energy Commission website: