American Water Tackles Climate Variability

There is widespread agreement in the scientific community that climate change is changing weather patterns and the world’s ecosystem and, in particular, posing serious challenges to the world’s water supply. One of the likely consequences of this phenomenon is heightened competition for water resources in the US and the rest of the world, given increased projected population growth. In the US, according to the EPA, this impact will be more prevalent in states that also have higher per capita water use (see chart below). While water demand is increasing, it is generally understood that the water cycle results in constant or lower supply [1].

 

As large users of energy and victims of the negative effects of climate change, water utility companies are uniquely positioned to have a positive impact in the fight against the potential negative effects of this social issue. Water companies contribute to greenhouse gas (GHG) emissions mainly through the electricity used to treat and pump water. To mitigate the risk of a dire water crisis, water utility companies must take proactive steps to find solutions for sustainable water production that will meet future consumer demand and maintain high water quality standards while making this vital resource affordable [2].

American Water is one example of a water utility company that is leading its industry to mitigate the potential risks of climate change. Founded in 1886, American Water is the largest publicly traded United States water and wastewater utility company, with regulated and market based business operations. The company provides drinking water, wastewater and other related services to approximately 15 million people in 47 states, the District of Columbia and Ontario, Canada [3].

 

In its 2015 annual report, American Water noted climate change as a significant business risk factor [4]. However, weather variability is business as usual for water utility companies. Climate change has simply augmented the disruptive threat of weather changes to the company’s operations and its ability to fulfill its customers’ needs.

American Water has taken several steps to address climate variability effectively. In fact, the company reached its goal of 16% percent reduction in greenhouse gases in 2012 from a 2007 baseline, ahead of its target date of 2017 [5]. At a high level, American Water’s success in this endeavor was due to emphasis on hardened infrastructure, enhanced backup power supplies, efficient water use promotions, and coordination with government on disaster response [6]. Moreover, in 2008, American Water joined the EPA’s WaterSense Program, an initiative designed to promote increased water efficiency among consumers [7].

The overarching framework American Water uses to manage water and climate risk, American Water leverages a two-pronged approach: 1) risk assessment, and 2) risk management [8]. Under “risk assessment”, the company undertakes engineering planning studies that typically involves examining facility and regional water availability to develop a capital investment plan, to meet future infrastructure needs, or an optional operational plan against extreme weather events. The desired outcome from this stage is business continuity. Example of planning studies include:

• Historic water variability records;
• Regional urbanization trends;
• Expectations about population growth;
• Local and regional per capita use of water;
• Regional availability of water supply; and
• Current and future regulations impacting the quantity and quality of water supplies [9].

As for “risk management” activities, integrated resource management is key. The objective in this stage is to make decisions related to operations such as hardening systems and/or moving plant locations. Between 2007 and 2010, American Water invested $800 million to $1 billion annually in system improvements [10]. More recently, the company initiated replacement of older water treatment plant pumps to be completed in 2017.

American Water explores new technologies related to water reuse and desalination [11]. The company served as an early-adopter of new technologies for industry use as a result of its Innovation Development Process (IDP), which seeks innovative, cost effective, and sustainable solutions that can benefit all water utilities [12] One of the resulting products of the company’s development efforts is an energy and cost efficient, wastewater treatment technology, called NPXpress. NPXpress has lower levels of nitrous oxide compared to traditional wastewater treatment methods and allows American Water to reduce energy costs by up to 50 percent [13].

Looking forward, given that over 80% of its total revenue is derived from its regulated operations [14], the company should continue to engage and strengthen partnerships with state and federal regulators to help drive further discussion around this social issue. Moreover, additional investment in alternative energy options [15], could provide high return on investments given that nearly 93% of the companies GHG emissions result from electricity consumption [16]. In sum, American Water seems well positioned and engaged in initiatives to manage the potential threats of water supply issues due to climate change.

(Word Count: 797)

 

Sources:

[1] https://www3.epa.gov/watersense/our_water/tomorrow_beyond.html, accessed November 3, 2016.

[2] http://www.amwater.com/files/ClimateChange012609.pdf, accessed November 3, 2016.

[3] https://www.sec.gov/Archives/edgar/data/1410636/000156459016013247/awk-10k_20151231.htm#BUSINESS, accessed November 3, 2016.

[4] https://www.sec.gov/Archives/edgar/data/1410636/000156459016013247/awk-10k_20151231.htm#BUSINESS, accessed November 3, 2016.

[5] http://www.environmentalleader.com/2013/09/17/american-water-sustainability-report-meets-2017-ghg-goal-early/?graph=full&id=1, accessed November 3, 2016.

[6] http://www.usatoday.com/story/opinion/2013/07/23/tom-king-and-jeff-sterba-on-extreme-climate-change/2574849/, accessed November 3, 2016.

[7] http://pr.amwater.com/PressReleases/releasedetail.cfm?ReleaseID=335631, accessed November 3, 2016.

[8] http://files.shareholder.com/downloads/AMERPR/0x0x673338/387ABD61-183B-47B2-8814-556F59B13FDB/WP_Sustainability_and_Resiliency_Planning_White_Paper_6-27-13_Final.pdf, accessed November 3, 2016.

[9] http://files.shareholder.com/downloads/AMERPR/0x0x673338/387ABD61-183B-47B2-8814-556F59B13FDB/WP_Sustainability_and_Resiliency_Planning_White_Paper_6-27-13_Final.pdf, accessed November 3, 2016.

[10] http://files.shareholder.com/downloads/AMERPR/0x0x673338/387ABD61-183B-47B2-8814-556F59B13FDB/WP_Sustainability_and_Resiliency_Planning_White_Paper_6-27-13_Final.pdf, accessed November 3, 2016.

[11] http://files.shareholder.com/downloads/AMERPR/0x0x673338/387ABD61-183B-47B2-8814-556F59B13FDB/WP_Sustainability_and_Resiliency_Planning_White_Paper_6-27-13_Final.pdf, accessed November 3, 2016.

[12] http://files.shareholder.com/downloads/AMERPR/1789227155x0x632707/D27C0942-FC35-4A3E-9D09-0A3DC259601B/IDP_White_Paper_Final_020413.pdf, accessed November 3, 2016.

[13] http://www.amwater.com/corporate-responsibility/report-2011-12/environment/feature-partnering-through-our-innovation-development-process.html, accessed November 3, 2016.

[14] https://www.sec.gov/Archives/edgar/data/1410636/000156459016013247/awk-10k_20151231.htm#BUSINESS, accessed November 3, 2016.

[15] http://ir.amwater.com/Cache/1500059146.PDF?Y=&O=PDF&D=&FID=1500059146&T=&IID=4004387, accessed November 3, 2016.

[16] http://www.amwater.com/corporate-responsibility/report-2011-12/environment/energy-efficiency.html, accessed November 3, 2016.