The Energy-Water Nexus
In the previous issue of the Blue Gold series we discussed the broad and looming issue of depleting freshwater resources.
That will continue to be one of the central themes going forward, as we touch on related infrastructure, potential solutions, and lucrative investment possibilities that will emerge.
For now, I want to pin down exactly how and why we have water shortages when there is so much of it around us, before moving on to how industries are preparing and how you can profit.
Rivers at Risk
We’ve already covered drought-induced shortages affecting the American Southeast.
And we know water is scarce in generally arid areas like the Southwest, Middle East, Africa, the Australian desert, etc. But what about areas that seemingly have plenty of water?
A mix of growing population, pollution, poor management, and development has led to the surfacing of water issues in the most unsuspecting places.
Like I said last week, we hear this type of news all the time. We just never really put it all together. So naturally, it wasn’t hard to find egregious examples of water problems where you’d least expect them.
In fact, a similar report was just issued by the organization American Rivers yesterday.
The report doesn’t rank pollution, but rather ranks rivers most at risk of not providing the same way they did in the past, be it for freshwater, commercial fishing, agricultural supply, whatever.
The area at the top of the list this year? The Sacramento-San Joaquin River System — not the first place that comes to mind when you think about water shortages.
Here’s what was said about that Californian watershed:
Outdated water and flood management puts California’s largest watershed at the top of America’s most endangered rivers list for 2009. A recent breach in the delta’s 1,100-mile levee system could have dire effects on surrounding ecosystems, farming and agriculture, commercial fishing and California’s civil infrastructure. State and federal authorities are looking at alternative water-management strategies for the river system, which serves 25 million Californians and more than 5 million acres of farmland.
You can bet some serious investment will go into maintaining that river and related infrastructure with freshwater for the 25 million citizens on the line.
Also on the list is Mattawoman Creek, MD, where a highway development project is threatening clean water sources. And Saluda River, SC, where "excess levels of sewage waste threaten the drinking water of more than 500,000 South Carolina residents." And even little Laurel Hill Creek, PA, where "withdrawals will continue to exceed the creek’s reasonable capacity," putting the local water supply in jeopardy.
As you can see, water supplies are more vulnerable than you think. Remember, two thirds of the world’s population will be water stressed by 2025. That’s you and one of your neighbors.
Industries at Risk
As goes the water, so goes the industry. All of them — energy, agriculture, manufacturing. They’re all fully reliant on water for even marginal operation.
For example, it take 37 gallons of water to grow, package, and ship enough coffee to make one cup. A hamburger requires about 634 gallons to make it to your stomach.
But the most water-intensive industry of them all is energy. They are so tightly bound together that the relationship has a special name: the energy-water nexus.
It can take up to 168 gallons of water to get one barrel of oil from oil sands. And 800 gallons are required to generate one megawatt-hour of electricity.
The problem is mounting so quickly that spats are beginning to emerge over water rights.
In Colorado, according to Discover Magazine, "producing 1.55 million barrels of oil per day would require 378,000 acre-feet of water each year, compared to the Denver metro area’s consumption, which is less than 300,000 acre feet."
You read that right. Local oil shale production could consume more water than the entire Denver metro area. The Colorado Independent has said "there will be a major political battle over water rights."
And the public is already in an uproar as oil companies, including Shell and ExxonMobil, have raced to secure well over 656 billion gallons worth of water rights — enough to quench all of Denver for three years. Some of those are "senior" rights, which give the companies priority access to water, even in dry years.
So, you can understand the citizens’ concern.
And the oil companies’ eagerness to secure adequate water for their operations should underscore the reality of the problem.
But oil isn’t the only industry where water is causing worry.
The Wall Street Journal recently reported that "power companies are pulling back from plans to build traditional power plants that require steady streams of water to operate." That article also reported, "the electric-power industry accounts for nearly half of all water withdrawals in the U.S."
Residents across the country have objected to the construction of new power plants based on water woes. And major utilities like Sempra and Tri-State Generation have pulled the plug on building new plants as a result.
To combat the amount of water consumed by traditional power plants, utilities are increasingly turning to alternative technologies. A wind turbine, for example, "can save 200 to 600 gallons of water compared with the amount required by a modern gas-fired power plant to make that same amount."
And according to the WSJ, "solar arrays are gaining momentum because their water needs are minimal."
Who new alternative energy could be a tangential water play?
As these problems continue to develop, we’ll see increased attempts at improving water efficiency and related infrastructure. These will be billion-dollar initiatives that will create equal profit opportunities.
You’re witnessing the emergence of Blue Gold. Stay tuned to this series for more on the future business and investment implications of water scarcity. If you’re ready to begin profiting today, click here to join Alternative Energy Speculator, where we continually profit from the sector.
Call it like you see it,
Nick