Optimizing Flexibility and Value in California’s Water System

1. Optimizing Flexibility and Value in California’s Water System Jay R. Lund Richard E. Howitt Marion W. Jenkins Stacy K. Tanaka Civil and Environmental Engineering Agricultural and Resource Economics University of California, Davis http://cee.engr.ucdavis.edu/faculty/lund/CALVIN/

2. Dr. Andrew J. Draper Dr. Kenneth W. Kirby Matthew D. Davis Kristen B. Ward Brad D. Newlin Stacy Tanaka Brian J. Van Lienden Randy Ritzema Siwa M. Msangi Guilherme Marques Pia M. Grimes Dr. Arnaud Reynaud Jennifer L. Cordua Mark Leu Matthew Ellis Tingju Zhu Inês Ferreira Sarah Null Real work done by

3. CALFED Bay Delta Program State of California Resources Agency National Science Foundation US Environmental Protection Agency California Energy Commission US Bureau of Reclamation Lawrence Livermore National Laboratory Funded by

4. We had a lot of help. Advisory Committee of ten, Chaired by Anthony Saracino Diverse staff of DWR, USBR, MWDSC, SKS Inc., USACE HEC, EBMUD, CCWD, USACE, SDCWA, SCWA, SWC, and others. Varied providers of ideas, data, and support. Thanks for many things

5. Part I – Assembling the Water Puzzle Motivation What is the CALVIN model? Approach and Data Part II - CALVIN Results Policy Alternatives Results Conclusions, Implications and Future Overview

6. Motivation for Project • California’s water system is huge and complex • Supplies, demands, return flows, and reuse • Surface water and groundwater • Controversial and economically important • Major changes are being considered

7. Motivation for Project • Can we better understand this system? • How could system management be improved? • How much would changes benefit users? • How much would users be willing to pay for: • more water • changes in facilities & policies? These are not “back of the envelope” calculations.

8. Themes • Economic “scarcity” is a useful indicator of good water management performance. • Integrated management of water resources, facilities, and demands can improve performance, esp. at regional scales. • The entire range of hydrologic events is important, not just “average” and “drought” years. • Optimization, databases, and newer methods, data, and software support more transparent and efficient management.

9. What is Scarcity?

10. What is CALVIN? • Economic-engineering optimization model • Economic Values for Agricultural & Urban Uses • Flow Constraints for Environmental Uses • Prescribes monthly system operation over the historical hydrology • Entire inter-tied California water system

11. What is Optimization? Finding the “best” decisions within constraints. • “Best” based on estimated performance. • Decision options are limited by physical and policy constraints. • Software searches available decisions for the “best” ones. Optimization can identify promising solutions.

12. CALVIN Optimization – In Words Decisions: Water operations and allocations Find “best” performance: Maximize net benefits over historic hydrology (Minimize economic losses & costs) Limited by: (1) Water balance (2) Flow and storage capacities (3) Minimum flows

13. Approach a) Develop schematic of sources, facilities, & demands. b) Develop economic values for agricultural & urban water use for 2020 land use and population. c) Identify minimum environmental flows. d) Reconcile estimates of 1922-1993 historical inflows. e) Develop documentation and databases for more transparent and flexible statewide analysis. f) Combine this information in an optimization model.

14. Approach (continued) g) Three policy alternatives: 1) Base Case – current operation and allocation policies 2) Five Regional Optimizations/Water Markets – current import and export levels – economically driven decisions 3) Statewide Optimization/Water Market h) Interpret results.

15. Model Schematic - North

16. Model Schematic - South

17. CALVIN’s Demand Coverage Reservoirs Not in CALVIN Upper Sacramento Valley Lower Sacramento Valley & Delta San Joaquin and Bay Area Tulare Basin Southern California

18. Economic Values for Water • Agricultural: Production model SWAP • Urban: Based on price elasticities of demand • Operating Costs • Environmental: Use constraints instead of economic values

19. SWAP Model Regions

20. Agricultural Crop Descriptions

21. Tomato Production-Yolo County Water Land

22. Efficiency-Cost Trade-offs: Orchards Sacramento Valley

23. July 70,000 June August 60,000 50,000 March Benefits ($ 000) 40,000 May 3,000 30,000 October April 2,000 February 20,000 January 1,000 10,000 September 0 5 10 15 October 0 0 50 100 150 200 250 300 350 400 Deliveries (taf) Agricultural Water Use Values

24. 50,000 Winter 45,000 40,000 35,000 Spring 30,000 Summer Penalty ($000) 25,000 20,000 15,000 10,000 5,000 0 20 25 30 35 40 45 50 55 60 Deliveries (taf) Urban Water Use Values

25. Operating Costs • Fixed head pumping • Energy costs • Maintenance costs • Groundwater recharge basins • Wastewater reuse treatment • Fixed head hydropower • Urban water quality costs

26. Environmental Constraints • Minimum instream flows • Rivers (e.g., Trinity, Sacramento, American, Feather, San Joaquin, San Joaquin tributaries) • Lakes (Mono Lake, Owens Lake) • Delta outflows • Wildlife refuge deliveries in Central Valley

27. Hydrology Surface & Groundwater • 1921 - 1993 historical inflows • Monthly flows • Represents the wide range of water availability over 72 years.

28. Data Flow for the CALVIN Model

29. Tsunami of data for a controversial system Political need for transparent analysis Practical need for efficient data management Databases central for modeling & management Metadata and documentation Database & study management software Systematic data management is needed for transparency and informed decision-making. Database and Interface

30. CALVIN’s Innovations • 1) Statewide model • 2) Groundwater and Surface Water • 3) Supply and Demand integration • 4) Optimization model • 5) Economic perspective and values • 6) Data - model management • 7) Supply & demand data checking • 8) Integrated management options

31. Part II CALVIN Results & Policy Conclusions

32. Policy Alternatives • 1) Base Case • Current operating and allocation policies • 2) Regional Optimization Case (5 regions) • Current inter-regional flows • Flexible operations within each region • 5 Regional water markets • 3) Statewide Optimization Case • Statewide water market

33. Some Results • Water Scarcity & Economic Performance • Willingness to pay and Import Values • Costs of Environmental Flows • Economic Value of Facility Changes • Conjunctive Use

34. Total Costs by Region

35. Scarcity by Region

36. Agricultural Scarcity Cost Changes by Region - SWM

37. Urban Scarcity Cost Changes - SWM

38. Willingness-to-Pay

39. Value of Additional Imports to Southern California Colorado R. SWP Mono-Owens

40. Marginal Cost of Trinity River Flows

41. Environmental Flow Costs

42. Economic Value of Facility Changes

43. Statewide Groundwater Storage

44. Conjunctive Use

45. Policy Conclusions

46. Markets, Transfers, & Exchanges a) Regional & statewide markets can reduce water scarcity and scarcity costs. Most benefits occur with regional markets. b) Flexibility of markets allow environmental flows to be more easily accommodated. c) Markets never reduced deliveries to any major user more than 15%. d) Exchanges and transfers improve operational efficiency and increase overall deliveries. e) If ~20% of water is allocated by markets, most scarcity disappears statewide.

47. Infrastructure Capacity a) Additional infrastructure is very valuable economically at some locations and times. b) Select inter-ties, recharge, and other conveyance expansions show the greatest benefits – by far. c) Surface storage expansion has much less value, assuming conjunctive use is available. d) Water reuse can have significant water supply value.

48. Conjunctive Use a) Statewide: surface storage ~40 MAF groundwater storage 140+ MAF CALVIN uses ~73 MAF Base Case uses ~58 MAF b) Regional and statewide optimization employs more conjunctive use. c) Conjunctive use of ground and surface waters has large economic and operational benefits for every region. d) Most benefits are within regions, but substantial statewide benefits also exist.

49. Water Demands a) Water use efficiency measures are useful, but do not have unlimited potential. b) Most water demands can be satisfied. Most unsatisfied demands could be well compensated with markets. c) Satisfying all demands is not always economically worthwhile. Some scarcity is optimal.

50. Environmental Flows a) Consumptive environmental flows impose greater costs to agricultural and urban water users than instream flows. b) With flexible operations and markets, most environmental flows impose little cost on other water users. c) A statewide water market greatly reduces environmental costs to other water users.