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2020 Strategic Directions: Water Report

Utilities Increasingly Rely on Planning, Forecasting to Mitigate Climate Change Impacts

Based on a survey of water and wastewater stakeholders, our report examines the issues and trends impacting today’s industry.

Utilities Increasingly Rely on Planning, Forecasting to Mitigate Climate Change Impacts

limate change and the resulting fluctuations in weather events are changing the game for utilities as increasing numbers of devastating floods, droughts, snowpack changes and ferocious wildfires alter our assumptions about water security and supply.

The climate change picture is bleak. According to the Center for Disaster Philanthropy, there were 14 billion-dollar weather and climate change disasters in 2019. The Atlantic hurricane season continued its four-year streak of above-average storms, with a record 18 named storms. Flooding impacted 14 million people, with 200 million deemed “at risk.” And 2018 was the most devastating wildfire season ever in the United States, with six states breaking wildfire records.

In 2018, the United Nations’ Intergovernmental Panel on Climate Change (IPCC) issued a special report that estimates human activities have caused approximately 1.0°C of global warming above pre-industrial levels, and it projects that at the current rate we will see global warming increase temperatures by 1.5°C between 2030 and 2052. The U.S. Environmental Protection Agency (EPA) warns that these impacts are likely to affect the hydrologic cycle, impacting everything from the flow of water in watersheds to the quality of aquatic and marine environments, not to mention the programs designed to protect water quality and public health and safety.

The U.S. Department of Defense (DoD) considers global warming to be an existential threat to security, insisting to Congress in a 2015 memorandum that “climate change is an urgent and growing threat to our national security, contributing to increased natural disasters, refugee flows and conflicts over basic resources such as food and water. These impacts are already occurring, and the scope, scale and intensity of these impacts are projected to increase over time.”

The current COVID-19 situation also is demonstrating firsthand the critical need for water utilities to continue to evaluate and plan for vulnerabilities and potential system failures to mitigate against a changing and uncertain future. Whether it’s a global pandemic, catastrophic droughts, raging wildfires or destructive floods, utilities must make their systems reliable and resilient to meet the needs of the 21st century.

Black & Veatch’s 2020 Strategic Directions: Water Report survey of qualified utility, municipal, commercial and community stakeholders looks at how today’s water industry is addressing and adapting to climate change.

2020 Strategic Directions: Water Report

With its survey of nearly 300 water industry stakeholders as its backbone, Black & Veatch’s 2020 Strategic Directions: Water Report comprehensively analyzes the sector’s complex landscape of challenges and opportunities. The leveraging of data in driving decision-making and optimizing efficiencies in water and wastewater systems is widening even as infrastructure continues to age, climate change strains assets, and the COVID-19 pandemic’s financial havoc pressures the bottom lines of many utilities through lost revenues. We look at all of that and more.

Addressing Resiliency Concerns

Addressing Resiliency Concerns

Survey data shows that climate change and its impacts are driving significant concerns around resilience. Natural and/or man-made disasters rank as the No. 1 threat to resilience efforts — not surprising, given the increase in the number and intensity of severe weather events over the past decade.

Catastrophic infrastructure failure ranks second, indicating a concern that likely correlates to why more and more utilities are turning to robust asset management programs to mitigate these risks. Extended drought and/or supply restrictions — also tied to climate change — ranked third, followed by cyberattack, impacts from climate change and terrorist attack.

Utilities recognize the critical need to invest in infrastructure improvement projects. Still, their limited resources require striking the right balance between addressing emerging needs and executing repair and rehabilitation of existing assets. Having a well-defined asset management and assessment program in place allows utilities to analyze systems for vulnerabilities and catastrophic failures and mitigate those risks in a balanced and proactive way.

Most respondents (60 percent) said asset health is the key driver of capital project prioritization. This is particularly true for smaller utilities: Of those that serve fewer than 500,000 people, 70 percent are working to stay ahead of breakage and failure, compared to 47 percent of larger utilities. This suggests that larger, more equipped utilities — armed with robust asset management programs and targeted teams focused on condition assessments often facilitated by stronger financials — have these situations under control, allowing them to look farther down the road. Smaller utilities often are at a disadvantage here and remain focused on meeting basic level of service goals.

Addressing Resiliency Concerns

If utilities have an asset considered vulnerable, they will work to fix it immediately and not wait for regulators to step in. When it comes to addressing emerging issues, the industry largely is driven by regulators, with two-thirds of respondents waiting to execute infrastructure improvement projects until instructed by regulators. It is admittedly a nuanced situation, and utilities often are reticent to spend money unless instructed. The data does indicate that when there are resilience projects to be studied and built, the industry doesn’t appear to be building projects they aren’t “told” to build. For the industry to get better at resilience, more leaders are needed who are willing to invest when times are good and independent of regulatory demands, to help offset impacts when times are hard.

Paying for Resilience

When it comes to funding these resilience and hardening measures, three-quarters of respondents look to the tried-and-true method of using rate increases to generate revenue, 55 percent consider federal grants, 53 percent look to state revolving funds (SRFs), 40 percent plan to pursue loans, and one-quarter are interested in public-private partnerships (PPPs).

These results reinforce the idea that respondents see value in diversifying their funding, but funding still remains a substantial challenge. To address this growing client need, InfraManagement Group, LLC (iMG), a wholly-owned subsidiary of Black & Veatch, works to identify innovative financing structures for the water industry. This includes looking to new and innovative funding opportunities from the Water Infrastructure Finance and Innovation Act (WIFIA), SRF, the Federal Emergency Management Agency (FEMA), the U.S. Army Corp of Engineers and the U.S. Economic Development Administration.

When looking at the results parsed by population served, larger utilities are more likely to seek assistance from the federal government than smaller utilities — 66 percent versus 48 percent. Larger utilities also are more interested in public-private partnerships (37 percent compared to 17 percent). This is because larger utilities, which often execute large, community disruptive infrastructure projects, have more resources to investigate these opportunities and have significant public pressure to reduce the rate impacts, and must build stakeholder buy-in through creative partnerships to successfully execute these efforts successfully.

Planning for the Future

Climate change is playing a larger role in water supply planning, with 55 percent of respondents including it in their future forecasting. This shows a shift in thinking over years past. Water conservation and/or drought management — which can also be a byproduct of climate change — ranked No. 1, followed by scenario planning and climate change variability, with new surface water supplies and new reservoir storage tied for fourth.

In terms of timing, 43 percent of respondents are looking 11 to 20 years out, 24 percent are looking at the next six to 10 years, and 38 percent the next five years (Figure 15). Longer-term planning horizons play a significant role in utilities’ planning efforts, particularly for stressed regions or those with rapidly expanding populations. For example, in large urban water-stressed areas such as Denver, Colorado — where water rights limitations and water system limitations are the norm — utilities are looking 50 years out; otherwise their growth could be restricted by supply or inability to secure adequate water rights. In arid areas in the West and Southwest, longer-term planning horizons will be critical to maintaining development and community growth.

Planning for the Future

Data also shows that the industry has been busy scenario planning for the future. Confidence in recent water planning and forecasting efforts is growing, with 60 percent of respondents more confident today than in recent years that their water supply plan is robust enough to meet upcoming challenges. These responses indicate that investments in planning technology are paying off. Survey data also shows utilities are beginning to favor the sensitivity/vulnerability (S/V) analysis approach, which lets utilities play out scenarios to identify vulnerabilities and possible points of failure that can then be mitigated to reduce risk and increase reliability.

For example, Colorado Springs, Colorado, recently completed such an analysis as part of its Integrated Water Resources Plan (IWRP). The city relies on multiple reservoirs along the Continental Divide and a complex network of pipelines, tunnels and pumping stations to deliver water to the population hub of the Front Range. An S/V analysis examines the “what if” scenarios. If a catastrophic wildfire destroyed a watershed and the water quality of a reservoir, could the utility still supply to the necessary levels of service? If a major pump station failed, could the utility reroute water through its system to continue to meet demand even as it works to repair the asset? A combined 40 percent of respondents are “definitely” or “probably” pursuing the S/V analysis approach, while 26 percent are considering it.

A supplemental approach also could be a ”digital twin,” an integrated digital representation of physical assets that provides historical, current and predictive analysis in near real-time. By combining information technology (IT) and operations technology (OT), users can simulate scenario options before actioning them in the real world, helping enhance customer experience by optimizing performance of existing assets.

Integrated water resources planning methodologies can guide utilities in the development of resilient water supplies and realize multiple benefits to ratepayers, citizens and stakeholders. Winter Haven, Florida, for example, is developing a “One Water Master Plan” for a 50-year planning horizon. For its medium-sized utility serving approximately 80,000 customers, Winter Haven’s planning is watershed scale and considers all water, regardless of form, to be a valuable resource to be managed sustainably, allowing planners to think holistically and work to optimize management of water resources to satisfy multiple objectives, some of which may conflict.

The topic of climate change may be highly politicized, but the effects are being felt today, and without action, we expect to feel them even more tomorrow. The world is also now grappling with the impact of COVID-19, which may affect how water utilities prioritize their infrastructure improvement projects going forward. A sudden shift in environmental and climate change regulations would have a long-term impact on how utilities approach projects.

Black & Veatch survey data shows that climate change is driving significant concern around resilience, and it is playing an increasingly important role when it comes to water supply planning. Innovative new planning and resilience approaches such as integrated water resources planning methodologies can offer a path forward for utilities, helping them to develop new water supplies while benefiting rate payers, citizens and stakeholders.

No matter which route they choose, utilities must act now to embrace and address climate change as they work to mitigate an increasingly uncertain future.

About the Authors

Jim Schlaman is the director of planning and water resources for Black & Veatch’s water business and serves on the One Water Council for the U.S. Water Alliance. Over the past 19 years, he has worked across the country on all types of planning and water resources projects. including water supply and reuse/alternative water supply evaluations, integrated planning and water quality studies, and stormwater/flood control planning and design projects.

Jon Dinges is senior water resources planning leader for Black & Veatch’s water business. With 25 years of experience in civil and environmental engineering, Dinges focuses on water resource management. He is skilled in water supply assessment and integrated planning, watershed assessment and restoration, and resource management planning, among other critical areas.

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