EUEC Power Sector water risk & opportunity feb 2013

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Integrated Water Management: Power Sector Advisory Services


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The Power of Water

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Contents


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The power water connection

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“Many nuclear plants have struggled this

summer [2012] with cooling water sources that

approached being too warm to generate power at

full levels”, said David McIntyre, US NRC.2

One utility reported a $200 million loss caused by

the 2008 drought that resulted in hydroelectric

power generation dropping by 50%.1

75% of utilities suffered water-related business impacts

in the past five years, 100% were exposed to risks in

direct operations or supply chain. 1

1. The Carbon Disclosure Report ,2012; 2. National Geographic, August 2012

MISO had power plants shut down in the

summer of 2012 – one after its cooling

water source fell below the plant's intake

pipe, another ramped back generation

when its cooling pond became too hot.

Water demand will outstrip

supply by 40% by 2030.1


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Vested Interest: Who Cares?

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Internal Stakeholders

• Operations

• Development

• Environmental compliance

• Legal

• Communications

• Business (P&L)

• Trade floor

• Board

• Shareholders

External Stakeholders

• Customers/Offtakers

• ISO

• PUC

• Regulators

• Downstream users

• Conservation groups

• Media

• Wall Street

• Financiers


Water related risk for power production

• Flooding

• Water stress/scarcity

• Restricted operational permits

• Declining water quality

• Rising discharge compliance costs

• Tightening withdrawal limits

• Water efficiency requirements

• Higher water prices

• Regulatory uncertainty

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Regulatory Drivers

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Urgent

316 (b)

Effluent guidelines

Important and ongoing

Spill contingency (SPCC, PPC/SPR, DPCC)

NPDES permits (storm, process, nonprocess), negotiation,

and sampling

Water withdrawal docket permits

Project siting evaluations (environmental, regulatory, and

socioeconomic factors)

Thermal discharge requirements

Water sourcing


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Example: The Evolution of 316(b)

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Clean Water Act

Initial 316(b) and 316 (a) Rule

(1972)

Cooling water intakes regulated at state level with wide range or

requirements, complexity and technical rigor

Consent Decree

EPA to develop 316(b) Rule

(1995)

Phase I

Rule (2001)

Draft Phase

II Rule

(2011)

316(b) Rule withdrawn

Regulations by State

(1979)

Industry activity to evaluate gaps,

technology, alternatives and

regulatory implications

Phase II Rule >50

mgd

(2004)

Phase III

Rule

>2mgd

(2006)

Phase II /III

Rules

remanded

(2007)

Final Phase II

Rule delayed

(2012)

Industry activity to evaluate gaps,

technology, alternatives and

regulatory implications

1970s

1980s

1990s

2000s

2010s


Safety

Compliance

Reliability

Excellence

Profitability

Operations

Development

Financing

Flood

Drought

Heat Waves

Freezing

Lawsuits

Water Matters

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Important activities lead to the achievement of our goals.

Urgent activities demand immediate attention, can be associated with the

achievement of someone else’s goals, or with an uncomfortable problem that needs

to be resolved.

Important

Goals

Critical

Activities

Interruptions Distractions

Imp

ort

an

ce

Urgency Low

High

Low

High


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■ The core of ERM’s approach is our 4+1 key steps to developing

organizational IWM strategies:

Implementation Phase

Strategic Phase Awareness

Building

Assess Risks

and Opportunities

in Water Footprint

Align with

Broader

Strategies

Apply Solutions to

Resolve Key Issues

Measure

Footprint Across

Organization

Water Management: Urgent & Important


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■ We have successfully implemented the framework globally

across a range of sectors, including:

■ The key to this success stems from recognizing the unique

sector and regional contexts of our Clients, as well as the

complexity of water issues, and using these aspects to

tailor our overarching 4+1 step framework.

• Manufacturing • Oil and Gas • Mining

• Pharmaceuticals • Electronics • Power

• Food and Beverage

Core Framework is Universal

http://www.riotinto.com/index.asp


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emphasise topics Understanding of water challenges can vary across departments:

development, operations, trading, all see water issues through a

different lens

■ Business risks:

■ Ability to develop

■ Access to water supply

■ Quality of water supply

■ Financier perception of risk

■ Ability to operate and meet delivery obligations:

■ Under drought conditions

■ During heat waves

■ With grey water

■ Trade risks go hand in hand with operational risks

Water Risk Assessment


Considerations

■ Lack of availability / quality

■ Too much water (floods)

■ Public opposition to real or

perceived competition with

community needs for water

■ Litigation/ court settlements to

scale back operations

Expected state water shortages over the next decade under average water conditions

Water Risk is a Business Challenge

If you don’t have water,

will you still

have a business?


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■ Key benefits come from identifying risks and

opportunities

■ Various levels of water footprint can be

calculated, depending on business needs

• Water risk mapping: identify which

operational/pipeline sites are most exposed

to water stress issues into the future

• Water footprint quantification: take a

purely volumetric approach

• Water footprint impacts assessment:

incorporate quantification and the impacts

of the water used

Water Footprinting


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■ Map water for a

plant, current

operating assets

fleetwide, proposed

developments

■ Prioritize actions for

improvement

Source: National Renewable Energy Laboratory. Illustration by Andy Warner.

Footprint Quantification / Water Balance


Incorporate water into business strategy at all

levels based on costs and benefits:

Plant level

Fleet level

Development

approach

Asset acquisition

due diligence

Trade risk assessment

Shareholder/Stakeholder involvement

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Integrating Strategies; Establishing Priorities


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emphasise topics Confidential Client:

■ Strategic Water Principles:

• Principle 1: Base management of water impacts of our operations on a robust

understanding of the key water risks and emerging trends

• Principle 2: Identify innovative tools and technologies to address water risks

• Principle 3: Optimize water use at each site to minimize the impact on local

catchment water resources

• Principle 4: Engage openly with stakeholders, to address local water issues,

contribute to regional water policy and international approaches to sustaining global

water resources

• Principle 5: Manage the impacts of operations at a catchment level; be a steward of

these water resources

• Principle 6: Plan for changing climate and the additional water risks that may result.

Integrating Strategies: Example


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The End Goal

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Develop an operational and development

strategy that minimizes risk, leverages

opportunities

■ Understand water availability for development

pipeline and plan accordingly

■ Be prepared to seize opportunities when they

arise

■ Prepare for potential water challenges with

existing fleet

■ Communicate water risk throughout company:

operation, development, traders, legal, etc.

■ Leverage water opportunities: resilience,

predictability, brand value, cost savings

■ Broader business risk reduction


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Discussion & Questions

Peter Flaherty, PE

Senior Engineer

Water Management

615.373.3350

[email protected]

Skelly Holmbeck

Energy, Oil & Gas

Performance Assurance

610.524.3578

[email protected]

Technology

EUEC Power Sector water risk & opportunity feb 2013