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How Much Energy are We Flushing Down the Drain?

California is in the middle of a drought. In the Bay Area, that has meant day after day of glorious, uncharacteristically sunny winter weather. But, I am haunted by media images of dry creek beds and by my own mental images of driving by the Rim Fire near Yosemite last summer. Who knows what this summer will bring.

The drumbeat of media coverage on the drought had led me to think harder about the water-energy nexus. At a high level, that phrase encapsulates two profound facts: energy production is extremely water intensive and water provision is extremely energy intensive. (At this point, we can’t really say “water production,” but as we add more desalination capacity, production becomes more apt.)

I’ll focus on the second of those two facts, but this article on the water used for fracking relates to the first.

Providing Water to Homes, Businesses and Farms Requires A LOT of Energy

The energy intensity of water delivery hit home to me several years ago when my husband, who works for an electricity generator, spent the day at a California Public Utilities Commission workshop on low-flow toilets. Why would an electric generator care about toilets?! It turns out that pumping, conveying, heating, and treating water are all highly energy intensive.

An Energy Efficient Toilet?
An Energy Efficient Toilet?

In fact, several years ago, the California Energy Commission calculated that 19 percent of the state’s electricity and nearly 30 percent of its natural gas consumption went to moving, heating and treating water.

I’ve delved into these calculations, and not all of the energy attributed to water is in my view actually driven by decisions that we would normally think of as water-usage choices. For instance, the calculations include things like heating water for sterilization in food processing. I can imagine a sterilization technique that didn’t use water but still used energy, and sterilization is ultimately driven by decisions about processed food consumption.

A recent paper from the University of Texas similarly calculates the share of U.S. energy related to water. The authors distinguish between “Direct Steam Uses,” which includes things like sterilization and “Direct Water Services,” which are driven by what I think of as water-based decisions. The authors estimates that the two categories together account for 13 percent of the nation’s energy and Direct Water Services account for 8.5 percent of the nation’s energy.

The energy cost of H2O also depends on where you live. Californians use more energy-intensive water because we use more groundwater and less surface water, and we move it over longer distances. My water provider, East Bay Municipal Utilities District, charges an, “Elevation Surcharge,” which they describe as, “based on the energy costs of pumping water to higher elevations.” For households in the hills above 600 feet, the surcharge adds more than $1 per hundred cubic feet to a base price of roughly $2.50 per hundred cubic feet. Not all utilities have this adder.


As an energy economist, I hear a lot about positive  – in the sense of reinforcing – feedback loops that could result from climate change. Rising temperatures, for example, will require more electricity to power air conditioners, and, right now, electricity production is the country’s main source of greenhouse gas emissions. A drier California climate might be an example of a negative feedback: more droughts will force us to rationalize the ways we use water—and save energy, in the process.

But, how do we rationalize our water use? We should start by rationalizing water pricing. I know this might sound like the knee-jerk economist answer, but the water world has many examples that violate simple Econ-101 principles. In a nutshell, water is a scarce resource, and we treat it as though the basic input were free. In Los Angeles, for instance, the Department of Water and Power subsidizes houses on bigger lots by giving them more cheap water. Water usage in the agriculture sector, which accounts for 80% of California’s total water consumption, is a whole mess in and of itself, symbolized in my mind by the rice paddies in the Central Valley.

Rice Paddies in the Central Valley

The water economist, David Zetland, has made scarcity pricing for water his battle cry and has written a book on Living with Water Scarcity. As Timothy Egan in the New York Times has said, we cannot “out-engineer a fevered planet.” But, we can move towards rational pricing policies that help us make better decisions about our planet’s scarce resources.



Catherine Wolfram View All

Catherine Wolfram is Associate Dean for Academic Affairs and the Cora Jane Flood Professor of Business Administration at the Haas School of Business, University of California, Berkeley. ​She is the Program Director of the National Bureau of Economic Research's Environment and Energy Economics Program, Faculty Director of The E2e Project, a research organization focused on energy efficiency and a research affiliate at the Energy Institute at Haas. She is also an affiliated faculty member of in the Agriculture and Resource Economics department and the Energy and Resources Group at Berkeley.

Wolfram has published extensively on the economics of energy markets. Her work has analyzed rural electrification programs in the developing world, energy efficiency programs in the US, the effects of environmental regulation on energy markets and the impact of privatization and restructuring in the US and UK. She is currently implementing several randomized controlled trials to evaluate energy programs in the U.S., Ghana, and Kenya.

She received a PhD in Economics from MIT in 1996 and an AB from Harvard in 1989. Before joining the faculty at UC Berkeley, she was an Assistant Professor of Economics at Harvard.

35 thoughts on “How Much Energy are We Flushing Down the Drain? Leave a comment

  1. I missed Michael Colvin’s early comment regarding “optimization”. When the CPUC puts its mind to “optimizing” things, there’s no discouraging them, but in my long experience, centralized optimizations are fraught with problems, and California has had more than its share. Exhibit number 1 is the California ISO, which centrally “optimizes” the grid but requires 600 different charge codes to move money between producers and consumers. Just how are we supposed to use that information to price the energy component of supplying water?

    When it comes to pricing water or electricity or any of life’s other necessities, the simpler the better. If it’s at all complicated, someone will figure out how to exploit the loopholes that are part and parcel of complexity. Regulators will only make things more complicated when they try to patch the holes, at which point market participants have to deal with gratuitous risks and costs.

    • Mr. Ellis, thanks for mentioning this ISO grid- very interesting! I “only” see 168 codes at
      but maybe that’s the wrong source of info. My take on this sort of thing is that the complexity is real but the incomprehensibility is an *artifact* of poor organization (I manage a very large database of recharge information for a University department so I have a nerdy and possibly overly optimistic outlook ). GROUPING is the key here, so if a few sensible categories of codes can be established and applied visibly to the grid, a lot of the confusion and scope for mischief can be overcome by simple transparency. If each code falls into one of a few, easily-understandable categories, the scope for gaming the system will be reduced because each one will be fish, fowl or other, with an appropriate price.

      Does that make sense? Am I overly optimistic? By the way I’m not counting on the PUC to do this on its own, but I bet we could get a bipartisan legislative committee together on this because almost everyone likes bringing order to bureaucracy.

      • Yes, you’re over-optimistic. We are quite good at “optimizing” our own lives because we forsee and bear the consequences, but bureaucrats (or anyone, really) are not so good at choosing what’s “best” for us. That’s why it’s better for them to set broad guidelines that allow people to find their own, best mix of actions/solutions/etc.

      • Nils, neither the CPUC or legislature has control over the CAISO pricing policies. It’s a nonprofit corporation that is governed by FERC. And FERC is very hands off on these issues.

  2. The best way to reduce inefficient water usage is to not subsidize its usage at all. Charge as much as the market will bear.

    People should live where the water is, not transport it long distances to where it’s not. Does no one see the absurdity of farming rice in the desert or pumping water up a hill in the East Bay. I think that if those who lived on hillsides had to pay the full freight of the pumps and energy and maintenance of those pumps; then they might not live on hillsides. The same is true for the desert rice farmer. The construction of the pumps in the East Bay and the dams and canals in the desert were political choices, not economic choices. If economics ruled in those two cases, they wouldn’t have happened.

      • See above: almost all of the water supplies are provided by public entities that cannot charge “what the market will bear.” Politically full scale privatization of water supplies is a complete non-starter so don’t even go there.

        • Hi Richard! Re: “See above: almost all of the water supplies are provided by public entities” I’ll clarify that there 8are* ways to allocate scarce water among farmer-clients to a public agency without exploiting them. I discuss the general issues with markets in my book, but in this case, the all-in-auction for RE-allocating rights (without “takings”) is one useful option. The paper is here ( and I’d be interested to know what you think of this idea. By my reckoning, it could be used — with a few minor tweaks — in any ID, GCID, for example.

        • [different login] Hi Richard! Re: “See above: almost all of the water supplies are provided by public entities” I’ll clarify that there 8are* ways to allocate scarce water among farmer-clients to a public agency without exploiting them. I discuss the general issues with markets in my book, but in this case, the all-in-auction for RE-allocating rights (without “takings”) is one useful option. The paper is here ( and I’d be interested to know what you think of this idea. By my reckoning, it could be used — with a few minor tweaks — in any ID, GCID, for example.

      • Michael, Prop 218 strictly limits water pricing to “average cost.” While there are creative solutions, like the CBFR structure recently approved by the Yolo courts (but may soon face demise at the hands of the voters), market based auctions are almost certainly prohibited.

        David, I studied how voting rules affected the willingness of agricultural water districts to participate in more market-based conservation strategies. Districts using one-person/one vote were very reluctant, while property-based voting districts were more open. (Westlands is one such district.)

        Westlands has in place a “bulletin board” intradistrict water market that allows trading among growers already. Interdistrict trading is somewhat limited by CVP and SWP contract requirements.

  3. I think there is an interesting, Econ 101 story to an issue with electricity/energy in water pricing: the average vs the marginal cost of water.

    I looked into water pricing once during a drought. I believe (from memory) that the EBMUD rate was $4 per *thousand* gallons or 4 cents per ten gallons. For a 20 minute shower at 2.2gpm, this is about $0.17 for the water (not the heating of it) of a shower, or less than 1 cent per minute. In America, I doubt there’s anyone who will take a shorter shower because the per minute cost of water goes to 18 cents; the enjoyment we get from showers is just too great. Another way to put it is that the elasticity of demand for water is very low for most indoor household uses.

    The bulk of water California uses is surface water, which is cheap and I can believe that is supplied at less than $4 per thousand gallon. But on the margin, the energy needed to get groundwater and desalinization is probably higher than $4. Let’s say this water is $50 per thousand gallon. But, if the costs for marginal water is spread across all gallons sold (prices=average cost), then the outcome will be an economically muted signal: water that is something like $8 per thousand gallon.

    Now, people will argue that a doubling of water rates is exorbitant, that the burden is regressive, and that water is a necessity and can’t be priced. As economists, we see the inefficiency of marginally spending $50 to make something that is later sold for $8. We’d be in the minority of saying that, in peak times, even $8 is too cheap. We need $50 per thousand gallon water, at least at the margin.

    At that price, a shower now costs $2 instead of $0.17. I’ll probably still take my showers, but maybe I’ll cut a minute off per day and buy myself some Starbucks once a month.

    In the regulator’s mind, economic efficiency ranks far below angry citizenry and “price stability”, so I doubt we’ll see peak-pricing for water. At least not until we start seeing peak-pricing for electricity.

    The deceptive thing is the potentially large difference between average and marginal energy costs for water.

    • Howard — good point. Most water *is* sold at average cost (among sources AND among customers), which weakens behavior at the margin. For water, that’s big and one driver of sprawl (cheap distribution) and over-consumption (missing scarcity pricing). I prefer to recommend higher prices as the cost of reliability. A $2 shower is better than no shower at all 🙂

      • Because most water utilities are publicly-owned, they are limited in their ability to price at other than average cost. Prop 218 limits this ability even further. In addition water utilities are even more capital intensive than electric ones. They require a stable revenue source and too much reliance on marginal cost prices creates instability that risks recovery of invested dollars. That can lead to municipal bankruptcies.

      • Re: “Because most water utilities are publicly-owned”, I think you’re assuming too much wrt 218. I’ve written on ways to interpret “cost of service” to stay within 218 constrictions ( as well as how to raise prices for scarcity WITHOUT destabilizing finances. I know that you’re a real veteran on water policies, but I’m not sure you’ve seen these ideas. My book offers a succinct ($5) version of the material, but you can piece it together from my blog posts (start here:

      • A couple of years ago the El Dorado Irrigation District (EID) modified how they allocate costs- in response to some rather costly system wide upgrades that needed to be paid for. EID moved from a 70/30 commodity/base(ie fixed) allocation of costs model to a 50/50 model. The current hot topic is how to preserve what was historically water rights that were granted to folks who had Ag water supplied via open ditches for their irrigation needs. With the development of the county over the last 30 years some folks would like to increase the costs for water for certain classes of customers.

        How to address the lack of supply this year is a bit of a concern for the district as all rate classes increased their 1st quarter potable water usage………….

      • I’m on the Davis Utility Rates Advisory Committee and I know the CBFR authors very well. I like the approach, but it’s probably at the limit of what Prop 218 will allow.

        BTW, I think that EID instituted a water trading scheme at some point.

      • Richard and David,

        EID upgraded it’s open Ag ditches to potable water (pressurized) awhile back (est. 1980 or so). I am not a customer of EID so I don’t have the details of the deal as the saying goes… but it sounds like the former ditch class of customers agreed to the change, which allowed EID to minimize evaporative losses in the system, and trade some of the water for uses down the hill- in El Dorado Hills. The GM of the district is very knowledgeable and helpful if you want the rest of the story.

  4. A couple of points. First, based on my readings of some of their filings and their participation in the wholesale (CAISO) energy and ancillary services markets, the State Water Project is probably one of the more flexible users of electricity in California. It’s possible they could do more, but at least they aren’t sitting on their hands.

    Second, the price of electricity paid by concerns involved in moving and treating water (and all other consumers for that matter) should be based on economic fundamentals (supply and demand), but as is the case with most electricity pricing, that almost never happens. Instead, electricity prices are heavily influenced by political pressure. When policymakers promulgate rules and policies that attempt to fix shortcomings in electricity pricing, they create all sorts of perverse incentives that probably make things even worse. On that basis, I’m skeptical of whatever decision the CPUC reaches in the docket Michael Colvin refers to.

    Third, I have no idea why rice is grown in California or how rice growers are allotted water in times of scarcity, but it certainly makes no sense to be growing a crop that requires so much water in a semi-arid climate.

    Fourth, I highly recommend Marc Reisner’s excellent book, Cadillac Desert. It explains a lot about water policy in the west, including the backstory to the movie Chinatown. Amazon carries it:

    Finally, one of my favorite cliche’s, “Whiskey’s fer drinkin’, water’s fer fightin’ over.” It’s absolutely true.

    • See my comment about rice above. California is the most productive rice region in the world. It’s grown mostly on lands that were largely tule marshes prior to reclamation along the Sacramento River. They also have superior water rights to everyone else–you’ll need to buy them out completely if you want to take their water. Regardless it would be foolish because the natural habitat would require about the same amount of water. The only difference now is that their supply is managed behind Shasta Dam.

  5. Pumping water is an ideal application for counter-balancing intermittent renewable generation (solar and wind). Water users often don’t care exactly when the water is moved, but only that the storage system never gets empty. So water pumps could be used for spinning reserves and other real-time behavior, with prices low when it’s windy and sunny.
    It sounds as if Calif. water rates, at least for agriculture, don’t accomplish this. From a recent PG&E press release: “About 1,000 farmers and ranchers use the AG-R and AG-V agricultural electricity rates that were due to expire on March 1. They would have been switched to a different form of time-of-use rates, which would encouraged farmers to limit watering times to narrow windows and could potentially draw down water levels to the point where some pumps might lose suction and prevent irrigation.” Pushing load into narrow predetermined time slots (which is what time-of-use does) is exactly counter to this. The other big water pumping loads are presumably the S. California water districts, plus municipal sewage and water supplies. I have no idea what kind of rates they pay.
    So, better pricing on electricity used to move water could be a nice supplement to smarter water pricing.

  6. “For households in the hills above 600 feet, the surcharge adds more than $1 per hundred cubic feet to a base price of roughly $2.50 per hundred cubic feet. Not all utilities have this adder.”

    Some years ago, at a conservation seminar [at a VC event], I spoke with Santa Clara Valley water folks. I do not recall the details of the discussion, but an energy cost [pumping, processing, etc] of 0.25Kwh per gallon sticks in my head. IF THAT Is anywhere near true, we have a huge problem/ opportunity.
    Does anyone know how to quantify [on average] the statewide energy ‘cost’ of potable water.

  7. Professor Wolfram,
    I grew up a few miles from the Yolo Bypass which is a big rice-growing area. It’s watered by winter overflow directed there from the Sacramento River (except in dry years). My question is, how much irrigation water is *really* required by rice fields, over and above what they receive during the high-water stage of the Sacramento River? The Bypass is a flood-avoidance measure (to avoid over-topping the levees)- is it really a clever scheme by rice growers to get free water, or a defensible two-for-one engineering feat?
    -Nils Ohlson

    • Nils — It’s a bit of both. It’s common to irrigate rice with flood water, but there are sure to be compromises between irrigation and flood efficiency.

    • Rice growers had water rights from the nineteenth century. They sold those rights to the USBR in the 1940s to supply the Central Valley Project. Rice growers got a more stable water supply in return. But the growers were always there first. Also, about 40% of the rice lands can grow ONLY rice. The alternative of tule marshes would consume about the same amount of water.

  8. Catherine

    Great article, as always. I note that in California, there are great efforts underway to quantify the embedded energy in water. The CPUC has recently launched a rulemaking to get at some of these water/energy nexus matters. (R.13-12-011). Once we have a better sense of this, we can start making optimizations on who pays for some of the efficiency upgrades. I observe that some of this is technological improvement while most of it is utilizing off the shelf technologies, if the ratemaking and financial incentives were properly aligned.

    • As someone who has seen plenty of optimization trainwrecks, I worry about the CPUC’s method. Why not set a simpler standard (pay full cost of water/energy) and let customers and utilities decide how to optimize?

      • Ok, I’ll bite.

        WHO decides what is a “full cost” and how transparent is the decision making and the rationale for it? Or to be blunt, how do we avoid the politically-motivated discounting of externalities when “full cost” is calculated?
        What is the price of species extinction (salmon, Delta smelt)?
        What is the discount rate for future costs that are easily quantified?
        What role will the Koch brothers and their ilk play in trying to keep true costs secret (such as aquifer contamination, irreversible salination of Westlands land, aquifer collapse from overpumping)?
        The technocratic challenge is completely overwhelmed by the political one, not that the former is small. BUT I wish you, and all of us, good luck.

      • The CPUC is trying to determine the embedded energy within water so that we can design and target programs that can save both water and energy. For example, we get a much bigger ‘bang for the buck’ doing leak loss detection than we do on shower head replacements. The goal is to diagnose which parts of the water system are more energy intensive so that we can spend public dollars with a more informed set of metrics. As they say, you can’t manage what you don’t measure…

      • (WP doesn’t allow extra nesting levels, but this is a reply…)

        @Nils — Political games can mess up any price/allocation, so all I can recommend is an “informed” process in which (1) citizens/community/politicians set environmental water flows and (2) remaining water is then allocated among economic (direct human) uses, such as irrigation, drinking water, etc. That (market) process will set a price on water. This is the best we can do in the absence (by definition, given personal preferences) of agreed values on ecosystem services. That answer gets at Smelt and discount rates. The Koch Bros and Westlands can circumvent this process, as usual, through corrupt pols or bureaucrats. You’re right about the challenges. My points are that (1) we need to recognize them before we can tackle them and (2) such a course is better than “co-equal” silliness.

        @Michael — I think that water customers are MUCH better at conserving water (and energy). CPUC should set a target for overall system use (=a cap, per my suggestion above, based on e-flows and/or market water allocations) and then allow water users to find solutions. Some will install low flow shower heads; others will take shorter showers. Command and control is inaccurate compared to incentives.

        I recommend my book to both of you. At $10, you’ll get much more sense out of me than this 😉

    • Michael,

      Energy and water issues have been a topic of concern for many a year in the foothills. You are likely already aware of some of SMUD’s activities….., but just in case:

      SMUD worked out an agreement with the various state holders for the water that flows in the Upper American River watershed as part of their relicensing efforts with FERC. SMUD can generate up to 688 MW of electrical energy from their various hydro facilities. After years of negotiations, 12 years, SMUD agreed as part of their relicensing to change the timing of water releases, and how much water they will divert to generate electrical energy. These changes that are now in place. The changes will result in less water being available to generate electrical energy- about 7% less if memory serves me. The diverted, or managed, flows will benefit the kayakers on the river as the class of rapids are going to be increasing at certain times.

      Click to access 2014-Spring-Confluence-Newsletter.pdf

      SMUD is still evaluating if the FERC approved pumped storage Iowa Hill project is the right way to go in terms of their generation, energy storage mix. SMUD’s efforts to minimize fire risks, noted in the web link, is to be commended.

      How the water gets used after SMUD is done with it is yet another story. Various parties have historical water rights dating back to the gold rush days. I have a dry Parker ditch on my country parcel not too far from where an existing underground culvert directs water to the El Dorado Irrigation Districts storage ponds down the hill from my location. I can confirm that water is flowing in the culvert as I just finished weed eating around an opening in it- which is used to capture some of the run off from the roads, hillsides, etc. for the various uses that they manage here in the foothills.

      My personal water/energy nexus isn’t part of EID efforts. My well is powered either from the grid (PG&E) or via our little PV system (which just so happens to have been put in place the same year EID put a large ground mount PV system in place-2006). We refrain from pumping water if at all possible during Peak times in the summer as we have a time of use meter and it’s 3 times as much $ for a kWh of electricity during these times. We plan on foregoing watering many of our fruit trees this year- other than to keep them alive- given the drought. Our little test vineyard will also be going without water this year- except to keep the vines alive.

    • The CPUC’s effort is much more about how to fund energy efficiency programs targeted at the water sector rather than finding water-energy efficiency measures. Several water industry efforts including both the California Urban Water Conservation Council and the Alliance for Water Efficiency ( have already developed the tools to measure embedded energy in water from the perspective of water utilities. The CPUC’s study looks more than an effort to figure out how to justify energy utilities NOT funding energy efficiency programs, unfortunately, based on the methodological approach that they’ve decided to take.

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