Restoring power to New York City after Hurricane Sandy was no easy matter. 69 power plants and 102 substations were in flooded areas. The storm surge, nearly two feet higher than expected, inundated the 13th Street substation, causing an electric arc.

“By 8 p.m., the world as we knew it had come to an end,” said Ralph Izzo, CEO of Public Service Gas & Electric. In a matter of hours, 85 percent of PSEG’s customers had been cut from the grid. Mayor Bloomberg proposed a $20 billion system of barriers to help mitigate the next run in with the raging sea.

In June of last year, Mr. Bloomberg and Henry Paulson, the former Treasury Secretary (and Goldman CEO), issued a report entitled: Risky Business: The Risks of Climate Change in the United States.

Damages from storms, flooding, and heat waves are already costing economies billions of dollars – we saw that firsthand in New York City with Hurricane Sandy. With the oceans rising and the climate changing, the Risky Business report details the costs of inaction in ways that are easy to understand in dollars and cents – and impossible to ignore. (Michael Bloomberg.)

“I know a lot about financial risks—in fact, I spent nearly my whole career managing risks and dealing with financial crisis,” says Henry Paulson. “Today I see another type of crisis looming: A climate crisis. And while not financial in nature, it threatens our economy just the same.” The report stresses that “If we continue on our current path, by 2050 between $66 billion and $106 billion worth of existing coastal property will likely be below sea level nationwide, with $238 billion to $507 billion worth of property below sea level by 2100.







(Click to enlarge)

Department of Energy Quadrennial Energy Review

East of Eden



Water problems are not restricted to the east coast of the U.S., nor do they all stem from rising seas. Throughout the world, droughts are deepening and fresh water is running out. California’s Governor Jerry Brown has ordered cutbacks of 25 percent for urban water use, half of which goes to landscaping. However, by far the biggest consumer in that state is agriculture, which accounts for 80 percent of the total. Related: Could This Renewable Fuel Kill The EV Market In One Fell Swoop?

Groundwater accounts for nearly 60 percent of the state’s supply in dry years, according to the Department of Water Resources. Tulare County (200 miles north of Los Angeles) is now home to more than 1,000 dry wells, “half of those that have failed in the state since January 2014.” The manager at the Office of Emergency Services in that County says “the conditions are like a third-world country.” This is certainly grim news coming from the heart of the state’s Central Valley.

“As California enters the fourth year of a record drought, its residents and $43 billion agriculture industry have drawn groundwater so low that it’s beyond the reach of existing wells. That’s left thousands with dry taps and pushed farmers to dig deeper.” And that does not come cheap, at around $15,000 per well, to find what is left of the table, if you are lucky. “That’s the starting price for residential wells, which range from 30 to 150 feet and can cost as much as $45,000,” according to Tricia Blattler, executive director of the Tulare County Farm Bureau. “Agricultural wells, which are about 1,000 to 1,800 feet, run $250,000 to $750,000.”

The U.S. Geological Survey used this pole in 1977 to show where farmers stood in 1925 and 1955

before groundwater pumping caused the San Joaquin Valley to subside.

Nine U.S. states are already running low. Severe drought has touched 93 percent of California with 44 percent of the state suffering from ‘exceptional’ drought. When Oklahomans, and others, living in the Midwest and plains watched their fragile topsoil blow away in the 1930s, they headed west to California (The Grapes of Wrath). Where will Californians go if the water does not come back? Western Washington and British Columbia had better get ready. Related: Oil Demand Weaker Than Many Expect

There are substitutes for oil, gas and coal, as many investors and power plant operators are discovering; there is no such thing for water. For much of the 20th century, the biggest problem in the oil patch was that too much production made it cheaper than water. It probably will be again. How is water priced? What ‘should’ the price be?

If groundwater sources are drained, rivers and lakes run dry, and the mountains are no longer covered with snow, what are residents to do? A region without water is uninhabitable. Every building, road and fixed asset becomes stranded. The Aral Sea is probably the best example on earth of how quickly it can happen and how devastating it can be. The world ran out of ‘free’ oil over 40 years ago (1973 embargo). We are running out of ‘free’ water right now.

Protecting people and shoreline assets, using irrigation more efficiently, and turning salt water into fresh water are all wrapped up in a bundle of needs that cannot be ignored any longer, whatever the cost may be. It is hard to imagine what could be a more important priority for any commonwealth. An estimated 8.6 trillion gallons of water are lost worldwide every year from leakage. That is enough to fill Lake Mead, the largest reservoir in the U.S. and the source of water for 7 states.

Lake Mead, Nevada

Every dollar spent stopping leaks saves $5 worth of water. More efficient water technologies will locate and stop leaks, filter gray water for re-use in agriculture and generally get water from where it is to where it needs to be without wasting any. Meters provide a basic starting point – knowing how much water is being used – if you read them, that is. If it’s free, who cares? Since it is not, the market is beginning to sort out how much is available and at what price. Related: The Dark Side Of The Shale Bust

Bloomberg New Energy Finance expects “U.S. water utilities to spend $2 billion on smart water meters through 2020 as more cities replace their infrastructure and water prices rise.” After all the conservation and efficiency measures have been attended to, sources of fresh water are still limited to lakes and rivers, and water stored either in the form of dams, groundwater or snowpack in the mountains. However, in places where the snow and rain stop falling, the rivers are oversubscribed, the groundwater is exhausted, and prayers go unanswered, the last resort is or soon will be the only one left, which means we are about to find out what it costs to make seawater drinkable. A few April headlines from Bloomberg indicate that that time has come:

Desperate from Drought, California Turns to Desalination

China Turns to the Sea for Fresh Water

Ras al-Khair – Saudi Arabia – World’s Largest Desalination Plant

Read Part 1 by clicking here, part 2 by clicking here, and the introduction to the series by clicking here.

By Henry Hewitt for Oilprice.com

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