Got Water? Wait Until 2025...

We know that water is a requirement for life, but despite this fact we don’t treat it with the reverence one would expect. The reason lies in economics and even Adam Smith was confused. Smith, of course, is known as the father of modern economics but he puzzled over the “Diamond-Water Paradox.” Why was it, that diamonds with limited practical use (and no survival value) command much higher prices than water, a prerequisite for life? He suggested that the value was derived from labor. Finding, mining and processing a diamond was hard, time-consuming work and obtaining a drink of water was a relative cinch. While this was literally correct, the true answer can be explained using an economic concept called marginal utility. In essence, it’s not the total inputs or usefulness of a good that determine its value. Rather, it is the satisfaction (“utility”) obtained by each additional quantity. Said differently, you may love pizza or beer but if you consume too much they can make you sick. The graph below illustrates this. Early on, each additional slice of pizza makes you much more satisfied (the steep part of the curve on the left side of the graph).

The degree of “diminishing marginal utility” for water is quite high because water is perceived to be always available so we assign an artificially low price to it. Once you quench your thirst with a glass or two of water it becomes less desirable. Thus, water’s marginal utility can be illustrated by the following curve.

Most wouldn’t realize that water is the 3rd largest business in the world behind oil & gas production and electricity generation – we just take it for granted because we assume clean, freshwater is abundant – it’s not. Planet Water: Investing in the World's Most Valuable Resource cites the following statistics:

• 1.1  billion people have no improved water
• 2.6 billion have no proper means of sanitation
• Half of all hospital beds are occupied by sufferers of waterborne and water-related diseases
• 10 million person years are annually spent by women and children carrying water from a distance

Finally, freshwater accounts for only 2.5% of the world’s water resources. Of that amount, 79% is locked in icecaps/glaciers, 20% is underground and only 1% is accessible surface water. We have a limited and fixed supply of freshwater, yet demand is surging (sixfold in the past century) and per capita increases at the current rate would result in 90% utilization all freshwater globally by 2025...

Per capita consumption of water and the temporal and spatial constraints on water resources mean overutilization of freshwater supplies is virtually inevitable, particularly in developing countries. For instance, China is home to 22% of the world’s population but only 8% of its freshwater. Already, rapid industrialization has rendered 90% of China’s urban surface water too polluted for productive use. Similar water quality and quantity issues are manifesting themselves all over the world as we speak. India has only 1,600 m3 of freshwater vs. USA with 10,000 m3. Poor quality and insufficient quantities of water result in poverty, food shortages and disease while restricting economic development and ultimately leading to geopolitical conflict.

Unfortunately, water has no substitutes. Its use is imperative for many industrial processes and safe drinking water is a bare necessity for life. Yet, given its finite supply, water must be used in an environmentally sustainable fashion. As an increasingly scarce commodity, its price must go up because every additional quantity will cost more to obtain. Already, price increases are guaranteed by the nature of water provision – it is a highly regulated activity with high infrastructure costs. Water rates have been held artificially low for a time but something has got to give. According to reports by the OECD and WHO, almost $16 TRILLION of water infrastructure investment is needed globally from 2008 to 2025. As a result, some are using a new term for water: “Liquid Gold.”

Suppose the nickname Liquid Gold was literal in meaning. Those 64 ounces of water you’re supposed to drink every day would cost $60,000 at the current gold price of $955 an ounce. That’s $22.3 million per year or almost $1.8 billion during an 80 year lifespan. Only Warren Buffet, Bill Gates and some others on the annual Forbe’s rich list could afford that prospect. As a result, this is a virtually impossible outcome without rampant hyperinflation. Gold of course, is incredibly scarce – the World Gold Council estimated that just 158,000 tons had ever been mined by the end of 2006. According to Wikipedia, this volume would fit inside a 20 m3 box.

A better comparison can be made to oil, another scarce resource. So maybe “Clear Oil” is an appropriate nickname. Generally speaking oil is not used in its found state; it must be refined into useful fuels such as gasoline. By the same token, the overwhelming majority of water in the world is not potable. Freshwater must be treated or filtered artificially or naturally to remove impurities such as trace metals and harmful bacteria and saltwater must be desalinated. Ironically, oil refineries use enormous amounts of water and desalination plants use enormous amounts of energy. It’s no wonder that Middle Eastern nations ship most of their crude oil to be refined elsewhere and also operate a majority of the world’s desalination capacity.

To take the analogy a step further, I’m sure we all remember (but would like to forget) $4 gasoline in 2008. Well, the price of gasoline is derived from the oil market whose participants assign a value based on future expectations and other contributing factors. The recent spike in prices was caused by the near universal belief in and fears of, “peak oil.” This was further exacerbated by the weakening dollar and inflation expectations. Dollar-priced commodities increase in nominal value when the relative value of the dollar decreases and oil is a traditional hedge against inflation.


Peak oil essentially means that the world has reached its maximum level of output – a fixed supply – whereas demand continues to increase. This imbalance requires ever higher prices until a market clearing equilibrium is met. For the time being, we have been saved by falling demand during the global recession. However, we are still racing to a “peak water” scenario. The water cycle on Earth serves to renew water resources, but it is a closed cycle so we have a fixed supply of water suitable to meet our needs.

Suppose “peak water” manifests itself in 2025 and for argument’s sake the foreseeable doomsday scenario results in water costing $4 per gallon (just like gasoline did). What would your water bill be (this analysis excludes sewer? Based on this article, a typical household of 4 people in the U.S. currently has the following scenario:

• Average daily water consumption: 600 gallons
• Average monthly water consumption: 18,000 gallons
• Average rate per hundred cubic feet (HCF): $2.00
• HCF: 18,000 divided by 748 (gallons per HCF) = 24
• Average monthly water bill: $2.00 x 24 = $48

Now, apply $4 per gallon:

• New HCF Rate: $4 x 748 gallons = $2,992
• New Average monthly water bill: $2,992 x 24 = $71,808

Converting that figure into today’s dollars assuming 3% inflation = $44,750. Not exactly pocket change and I’m not predicting this will happen. Sometimes, a seemingly gross exaggeration is needed to prove a point. Much can be done to conserve water now so this nightmare scenario doesn’t come true. Simple behavioral changes and improved technology can make a big difference. Since I live an apartment and can’t replace my inefficient toilet I try to flush only a few times a day. In the U.S., maximum allowed flush volume has been 1.6 gallons since 1995, but older toilets can use much more water. My ‘80s era toilet probably uses around 3.5 gallons per flush and any toilets still in use from the ‘60s or ‘70s could be using 5.5 gallons per flush. Efficient toilets are readily available and produce significant water savings. Low flow shower heads and/or shorter showers help and obviously minimizing outdoor watering can provide major water savings as well. Below, I’ve compiled water usage figures for several common activities:

• Toilet Flush: 1.6 gallons+ per flush
• Shower: 2.5 gallons/minute, try this handy calculator to figure out water and energy usage and cost
• Washing Machine: 18-25 gallons per load for Energy Star appliances (40 gallons for standard machine)
• Dishwashing: 3-4 gallons by machine, 27 gallons by hand according to this study
• Lawn Watering: 62 gallons for every 10 ft2 (30% of water used on East Coast and 60% of water used on West Coast according to the U.S. National Wildlife Federation)

Water usage can add up to many thousand gallons quickly and what this list ignores is all of the virtual water content inherent in the products we consume every day. According to this presentation, 1,500 gallons of water are needed to produce a hamburger, fries and a coke. All that paper we use? 3.4 trillion gallons of water per year! Clearly, there are ecological and financial benefits to be had by conserving water. Also, I want to thank my reader Phillip for sending me the above presentation and alerting me to the energy costs embedded in water usage. About 20% of total energy used in California goes toward pumping and processing water. Meanwhile, he noted, “every gallon of hot water consumes 0.147 KwH of electricity to heat.” Those extra long showers might provide less “utility” if we realized how much they cost.

Sources: Planet Water and Water is not a free good.

 

Masdar City - The Ultimate Green Construction Project

Even a region that has seemingly boundless supplies of oil, the Middle East, has put shovels to the sand for the world’s largest green construction project to date. The Central Government of the United Arab Emirates (UAE) has long recognized that the oil would eventually run out and they began diversifying their economy into real estate, tourism and other sectors over two decades ago. Located in the UAE’s Abu Dhabi emirate, Masdar City is the largest and most ambitious commitment yet to green the economy and the country. But, what is it?

Masdar City is a wholly green city currently being built from scratch and slated for completion in 2016. It bills itself as the “world’s first carbon-neutral, zero-waste city fully powered by renewable energy.” The Masdar Initiative was envisioned to create a center for R&D that will create technological solutions for globally sustainability problems. The development is a wholly owned subsidiary of Mubadala Development Company (Abu Dhabi’s government investment vehicle) and it is expected to attract over 1,500 companies undertaking clean technology work. The 6 km2 mixed use development designed by renowned green architects, Foster & Partners, will also house 40,000 residents and accommodate 50,000 commuters. In addition to being carbon-neutral, zero-waste and operating on 100% renewable energy, the city intends to have the world’s greenest commercial buildings and become a major global center for sustainable technology research and development. Lastly, to encourage global business partnerships, the city has been designated a “Free Zone Area” with reduced barriers to entry, zero taxes, zero import tariffs and zero restrictions on capital movement.

To guide its construction plans, Masdar City has developed comprehensive sustainability policies covering greenhouse gas emissions, waste, water, energy usage and more. From a green building standpoint they have set truly remarkable performance goals and have big plans to achieve them. Notably, 56% of the carbon reduction versus a traditional city comes from Masdar’s energy efficient buildings alone. The sustainability goals of the project are guided by a belief in One Planet Living and I have included some highlights below:

Greenhouse Gases/Energy Usage

• Carbon neutral by final phase
• 100% renewable energy (8% waste to energy, 15% evacuated tube collectors, 35% concentrated solar power and 42% photovoltaic, a very clean mix)
• Eliminate fossil fueled vehicles
  

Waste and Materials

• Zero waste to landfill within 10 years after final phase completion
• Construction wastes are fully offset through reusing locally derived waste materials
• 30% reduction in waste production per person through behavioral changes policies and regulations

Water

• Reduce consumption through technology, conservation and behavioral changes with targeted guidelines
• Maximize recycled water (ex: use gray water for irrigation)
• Recover and reuse rainwater, condensate and other waste streams

In seeking to achieve its goals, Masdar City combines all the best traditional Arabic building practices with all the advanced infrastructure technologies you’ve read about or maybe haven’t even heard of yet. Plans will utilize traditional passive cooling measures such as shaded walkways, narrow diagonal streets encouraging shade and oriented to benefit from cooling night breezes and lessen hot daytime winds, wind towers, blinds and solar shades. Additionally, all the buildings are designed to reduce the need for artificial lighting and AC and surpass the highest international efficiency standards.

On the modern technology front, city planners will benefit from implementing brand new infrastructure from day one. Plans include advanced “smart grid” management for electricity and water, highly efficient district cooling systems a solar-powered desalination plant for fresh water and the world’s first large-scale Personal Rapid Transit (PRT). You may have seen PRT tests featured on the Discovery Channel and aside from the space-age cool factor, PRTs will provide luxurious, automated taxi service in a incredibly efficient manner. Masdar City’s fleet of 3,000 Personal and Freight vehicles would transport its people and goods, collect solid waste and provide direct connections to the airport and local and regional mass transit, including metro, intercity rail and buses. Eliminating fossil fueled cars contributes to significant carbon savings and the PRT’s magnetic tracks would be powered by the city’s 100% renewable energy sources.

All of these plans are nothing if not ambitious and there will certainly be challenges along the way.  If the building efficiency projections don’t pan out, will the 92% solar derived energy be sufficient? Will the novel infrastructure, some of which has never been built or used on this scale before, function as planned? Finally, the project relies on people to change their standard behavior and adapt to green living, can they be trusted to change so swiftly? The hope is that Masdar becomes an evolutionary model that can be refined and replicated in other regions under different status quos. Building this City is a bold, pioneering and worthy effort to demonstrate sustainability on a grand scale.

Now that green planning of Masdar’s scope has been proved possible and technological barriers continue to fall, the primary remaining ingredient for success is committed leadership. Ahmed Ali Al Sagyeh, Chairman of the project, has stated his plans as follows: “Masdar aims to become a source of energy, knowledge and innovation in order to maintain Abu Dhabi’s position as a global energy leader. It is committed to the optimum use of natural and human resources so that Abu Dhabi can develop into a global centre of excellence for renewable energy research, development and innovation.” Given the thoroughness of their plans and the UAE’s track record of achievement with other previously unimaginable construction projects (ex: the numerous artificial “Palm Islands” and “Countries of the World” islands built in the Persian Gulf or the Burj Dubai – the world’s tallest man-made structure at 2,684 feet/818 meters), they are well on their way to achieving this mission. An even greater level of success could be achieved if others around the world undertake similar projects and the reimagined silicon valley of the Middle East develops major clean technology breakthroughs.

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