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Products: Sustainability

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Sustainable Agriculture Irrigation Management: The Water-Energy-Food Nexus in Pajaro Valley, California

The water-energy-food (WEF) nexus is quickly becoming one of the most critical global environmental challenges of the twenty first century. However, WEF systems are inherently complex; they typically are dynamic and span multiple land or agro-ecosystems at a regional or global scale. Addressing this challenge requires a systems approach to optimal and sustainable resource management across multiple dimensions. To that end, using Pajaro Valley (California) as a case study, our research aims to (1) highlight synergies and tradeoffs in food and water production, (2) build a dynamic framework capable of examining intertemporal resource relationships, and (3) detail the steps required to develop incentive-compatible financing of the resulting management plans when benefits are not distributed uniformly across users. Using a stylized model, we find that in the long run, inland growers benefit from the halting of seawater intrusion (SWI) due to overpumping of groundwater. We also calculate that the water provided by the proposed College Lake Multi-Objective Management Program—a plan designed to halt SWI and support sustainable water and agricultural development in the region—will generate net revenue of $40-58 million per year, compared to an annualized cost of less than $3 million. An equal cost-sharing plan would be desirable if the benefit of the project exceeded $1,268 per year for each well owner. Since this may not necessarily be the case for smaller well owners, one possible alternative is to allocate costs in proportion to expected benefits for each user.

WORKING PAPER


Efficient Design of Net Metering Agreements in Hawaii and Beyond

In Hawaii, like most U.S. states, households installing rooftop solar photovoltaic (PV) systems receive special pricing under net-metering agreements. These agreements allow households with rooftop solar to buy and sell electricity at the retail rate, effectively using the larger grid to store surplus generation from their panels during sunny times and return it when the sun isn’t shining. If a household generates more electricity than it consumes over the course of a month, it obtains a credit that rolls over for use in future months. Net generation supplied to the grid in excess of that consumed over the course of a full year is forfeited to the utility. 

Project Report


Economic Impact of the Natural Energy Laboratory Hawaii Authority Tenants on the State of Hawaii

The Natural Energy Laboratory Hawaii Authority (NELHA) contracted UHERO to estimate its economic impact on the State of Hawaii. NELHA currently accommodates 37 tenants ranging from companies bottling deep sea water to solar and biofuel companies. These tenants pay close to $2 million in rent, royalties and pass through expense directly to NELHA. In addition, they employ hundreds of people, purchase goods and services from local businesses, and invest in capital improvements at NELHA.

This research determines NELHA’s contribution to local business sales, employee earnings, tax revenues, and number of jobs in Hawaii from the expenditures of its tenants in 2013. NELHA provides additional benefits to the state of Hawaii that this study does not capture but are important to consider when evaluating NELHA’s overall footprint on the economy.

PROJECT REPORT


Benefits and Costs of Implementing the IAPMO Green Plumbing and Mechanical Code Supplement in Hawaii

We calculate the benefits and costs of implementing the International Association of Plumbing and Mechanical Officials (IAPMO) 2012 Green Plumbing and Mechanical Code Supplement (GPMC) for various building types in Hawaii, with particular emphasis on water-use efficiency provisions in the code. Benefits of the GPMC are measured as water savings, where baseline usage is estimated in accordance with the 2012 Uniform Plumbing Code (UPC), which has been recently adopted by the state and will soon be adopted by the counties. We also monetize those benefits at the household level (water bill savings) and at the state level (cost savings to the water supply boards and departments throughout the state). Based on discussions with plumbers, building contractors, developers, architects, mechanical engineers, planners, and other water specialists, as well as an assessment of prices at major home improvement stores and other online retailers, we estimate the costs of GPMC compliance for new structures planned for Hawaii over the next decade. If the GPMC is implemented, the payback period is two years and the net present value assuming a discount rate of zero is $15.13 million. For a discount rate of 5%, the NPV is $11.29 million.

PROJECT REPORT
 


UHERO Brief: An Economic and GHG Analysis of LNG in Hawaii

Hawaii currently meets the majority of its electricity needs through oil-fired generation – causing rates to be nearly four times the national average. In response to rising oil prices and in line with State-led action combating climate change, Hawaii is aggressively pursuing alternative sources of energy for its electric sector. Hawaii’s Renewable Portfolio Standard (RPS) states that utilities must meet 40% of electricity sales with renewable sources of energy by the year 2030; however, the remaining 60% can come from fossil fuels. Lower natural gas prices as a result of the “shale gas revolution” is in part why the State and key stakeholders are deliberating importing large amounts of natural gas in liquefied form (liquefied natural gas or LNG) for use in the electric sector.

This study builds upon past Hawaii-based LNG studies and extends the analysis by assessing both the macroeconomic and electricity sector impacts of using natural gas for power generation. We draw upon two recent studies, by Facts Global Energy (2012) and Galway Energy Advisors (2013) for price estimates. In addition to economic outcomes, this study estimates GHG emissions impacts as well as qualitatively discusses other environmental impacts related to the extraction of natural gas.


UHERO BRIEF

 

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An Economic and GHG Analysis of LNG in Hawaii

Hawaii currently meets the majority of its electricity needs through costly oil-fired generation causing rates to be nearly four times the national average (EIA, 2013a). The "shale gas revolution" has led to rapidly declining natural gas prices within the continental U.S. The emergence of a natural gas market that is de-linked from oil prices has renewed Hawaii's interest in natural gas imports. Potentially lower natural gas prices as well as the view that it will help to reduce green house gas (GHG) emissions and increase energy supply security through domestic sourcing are major reasons why the State and key stakeholders are deliberating over importing large amounts of natural gas in liquefied form (liquefied natural gas or LNG). This study uses detailed models of Hawaii's electric sector and overall economy to estimate the impacts of Hawaii importing LNG for use in the electric sector.

WORKING PAPER


Why Does Real-Time Information Reduce Energy Consumption?

A number of studies have estimated how much energy conservation is achieved by providing households with real-time information on energy use via in-home displays. However, none of these studies tell us why real-time information changes energy-use behavior. We explore the causal mechanisms through which real-time information affects energy consumption by conducting a randomized-control trial with residential households. The experiment disentangles two competing mechanisms: (i) learning about the energy consumption of various activities, the “learning effect”, versus (ii) having a constant reminder of energy use, the “saliency effect”. We have two main results. First, we find a statistically significant treatment effect from receiving real-time information. Second, we find that learning plays a more prominent role than saliency in driving energy conservation. This finding supports the use of energy conservation programs that target consumer knowledge regarding energy use.

Published version: Lynham, J., Nitta, K., Saijo, T., & Tarui, N. (n.d.). Why does real-time information reduce energy consumption? Energy Economics. http://doi.org/http://dx.doi.org/10.1016/j.eneco.2015.11.007

Working Paper

 

 


Incentivizing interdependent resource management: watersheds, groundwater, and coastal ecology

Managing water resources independently may result in substantial economic losses when those resources are interdependent with each other and with other environmental resources. We first develop general principles for using resources with spillovers, including corrective taxes (subsidies) for incentivizing private resource users. We then analyze specific cases of managing water resources, in particular the interaction of groundwater with upstream or downstream resource systems.

Published version: Burnett, Kimberly, Sittidaj Pongkijvorasin, James Roumasset, and Christopher A. Wada. "Incentivizing interdependent resource management: watersheds, groundwater and coastal ecology". Handbook of Water Economics. Cheltenham, UK: Edward Elgar Publishing, 2015. Print.

WORKING PAPER


Groundwater Economics without Equations

In many parts of the world, irrigation and groundwater consumption are largely dependent on groundwater. Minimizing the adverse effects of water scarcity requires optimal as well as sustainable groundwater management. A common recommendation is to limit groundwater extraction to maximum sustainable yield (MSY). Although the optimal welfare-maximizing path of groundwater extraction converges to MSY in some cases, MSY generates waste in the short and medium term due to ambiguity regarding the transition to the desired long-run stock level and failure to account for the full costs of the resource. However, the price that incentivizes optimal consumption often exceeds the physical costs of extracting and distributing groundwater, which poses a problem for public utilities facing zero excess-revenue constraints. We discuss how the optimal price can be implemented in a revenue-neutral fashion using an increasing block pricing structure. The exposition is non-technical. More advanced references on groundwater resource management are also provided.

WORKING PAPER


The Good, Bad, and Ugly of Watershed Management

Efficient management of groundwater resource systems requires careful consideration of relationships — both positive and negative — with the surrounding environment. The removal of and protection against “bad” and "ugly" natural capital such as invasive plants and feral animals and the enhancement of “good” capital (e.g. protective fencing) are often viewed as distinct management problems. Yet environmental linkages to a common groundwater resource suggest that watershed management decisions should be informed by an integrated framework. We develop such a framework and derive principles that govern optimal investment in the management of two types of natural capital — those that increase recharge and those that decrease recharge — as well as groundwater extraction itself. Depending on the initial conditions of the system and the characteristics of each type of natural capital, it may make sense to remove bad capital exclusively, enhance good capital exclusively, or invest in both activities simultaneously until their marginal benefits are equal.

WORKING PAPER


Optimal Joint Management of Interdependent Resources: Groundwater vs. Kiawe (Prosopis pallida)

Local and global changes continue to influence interactions between groundwater and terrestrial ecosystems. Changes in precipitation, surface water, and land cover can affect the water balance of a given watershed, and thus affect both the quantity and quality of freshwater entering the ground. Groundwater management frameworks often abstract from such interactions. However, in some cases, management instruments can be designed to target simultaneously both groundwater and an interdependent resource such as the invasive kiawe tree (Prosopis pallid), which has been shown to reduce groundwater levels. Results from a groundwater-kiawe management model suggest that at the optimum, the resource manager should be indifferent between conserving a unit of groundwater via tree removal or via reduced consumption. The model’s application to the Kona Coast (Hawai‘i) showed that kiawe management can generate a large net present value for groundwater users. Additional data will be needed to implement full optimization in the resource system.

WORKING PAPER


Cost Implications of GHG Regulation in Hawai‘i

The State of Hawai‘i and the U.S. are developing greenhouse gas (GHG) emissions reduction regulations in parallel. The State requires that economy-wide GHG emissions be reduced to 1990 levels by the year 2020 and the U.S. Environmental Protection Agency is developing new source performance standards (NSPS) for new electricity generation units. The State Department of Health has proposed rules that would reduce existing large emitting electricity generating units by 16% from 2010 levels. The NSPS proposes GHG concentration limits for new electricity units.

We use a comprehensive model of Hawai‘i’s electricity sector to study the potential cost and GHG impacts of State and Federal GHG regulations. Given uncertainty about the final form and implementation of these regulations, we adopt a series of scenarios that bracket the range of possible outcomes. First we consider the State’s GHG cap (for existing units) and NSPS (for new units) being implemented at the facility level. Next, we consider the implications of allowing for partnering to meet the State GHG cap and the NSPS at a system-wide level. We also consider the case where the State GHG cap is extended to apply to both existing and new units. The current proposed State GHG rules exclude biogenic sources of emissions. We address the impacts of this decision through sensitivity analysis and explore the impact of GHG policy on new coal-fired units.

We find that regulating GHGs at the facility level leads to greater reductions in GHG emissions but at higher cost. Over the 30-year period that we study, when biogenic sources of emissions are ignored, facility level implementation of policy will add $3 billion to the cost of electricity generation at an average cost of $180/ton of GHG abatement. If biogenic sources of emissions are included within the accounting framework, abatement costs rise to $340/ton.

Overall, we find that the high cost of Hawai‘i’s current electricity generation provides a strong incentive to move towards less costly alternatives – in this consideration, primarily wind and rooftop PV. This leads to a reduction in GHG emissions. However, this finding would not hold if fuel prices were substantively lower than current levels, either from falling prices or fuel-switching to lower cost products. Regardless, the qualitative implications about the optimal structure of GHG policy are robust to changing assumptions about fuel prices. Implementing GHG policy at the facility level leads to relatively higher levels of GHG emissions reductions, though at substantially higher cost. If a greater level of GHG emissions reduction is desired, the least cost policy is to lower the level of the GHG cap while still allowing for the greatest flexibility in achieving targets.

WORKING PAPER


PURPA and the Impact of Existing Avoided Cost Contracts on Hawai'i’s Electricity Sector

The United States has been trying to reduce its dependence on imported fossil fuel since the 1970s. Domestic fossil fuel supply initially peaked in 1970, and the oil crises of 1973 and 1979 accelerated domestic policy and investments to develop renewable sources of energy (Joskow, 1997). One such policy—passed in 1978 by the U.S. Congress—was the Public Utility Regulatory Policies Act (PURPA).

In this policy brief, we identify the existing PURPA-based contracts in Hawai'i and use a Hawai'i-specific electric sector generation planning model, The Hawai'i Electricity Model (HELM), to estimate the impact that PURPA contracts have on both total system cost and the mix of generation technologies. We study a variety of scenarios under the maintained assumption that the state will achieve the Hawai'i Renewable Portfolio Standard, which requires that 40% of electricity sales are generated using renewable sources by the year 2030.

UHERO PROJECT REPORT


Optimal groundwater management when recharge is declining: a method for valuing the recharge benefits of watershed conservation

Demand for water will continue to increase as per capita income rises and the population grows, and climate change can exacerbate the problem through changes in precipitation patterns and quantities, evapotranspiration, and land cover—all of which directly or indirectly affect the amount of water that ultimately infiltrates back into groundwater aquifers. We develop a dynamic management framework that incorporates alternative climate-change (and hence, recharge) scenarios and apply it to the Pearl Harbor aquifer system on O‘ahu, Hawai‘i. By calculating the net present value of water for a variety of plausible climate scenarios, we are able to estimate the indirect value of groundwater recharge that would be generated by watershed conservation activities. Enhancing recharge increases welfare by lowering the scarcity value of water in both the near term and the future, as well as delaying the need for costly alternatives such as desalination. For a reasonable range of parameter values, we find that the present value gain of maintaining recharge ranges from 31.1million to over1.5 billion.

Published version: Burnett, K. and Wada, C.A., 2014. Optimal groundwater management when recharge is declining: a method for valuing the recharge benefits of watershed conservation. Environmental Economics and Policy Studies. In Press.

WORKING PAPER


Integrating Demand-Management with Development of Supply-Side Substitutes

Sustaining water availability at current prices in the face of growing demand and declining resources is not possible, and scarcity is further exacerbated by falling recharge levels due to climate change, urbanization, and watershed depreciation. We discuss an integrated approach to water-resource development based on principles of sustainability science. In addition to demand management such as pricing, we consider supply-side substitutes such as desalination and wastewater recycling. The importance of integrating demand- and supply-side approaches is especially evident in the case of watershed conservation as climate adaptation. Watershed conservation reduces scarcity by improving groundwater recharge. Yet, incorrect pricing can waste those potential gains. We discuss a joint management strategy, wherein block prices for groundwater consumption and co-determined prices for watershed conservation incentivize and finance efficient profiles of both.

WORKING PAPER


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