EUEC Power Sector water risk & opportunity feb 2013


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EUEC Power Sector water risk & opportunity feb 2013

  1. 1. The world’s leading sustainability consultancyIntegrated Water Management: PowerSector Advisory Services
  2. 2. The world’s leading sustainability consultancyThe Power of Water2
  3. 3. The world’s leading sustainability consultancyThe power water connection3“Many nuclear plants have struggled thissummer [2012] with cooling water sources thatapproached being too warm to generate power atfull levels”, said David McIntyre, US NRC.2One utility reported a $200 million loss caused bythe 2008 drought that resulted in hydroelectricpower generation dropping by 50%.175% of utilities suffered water-related business impactsin the past five years, 100% were exposed to risks indirect operations or supply chain. 11. The Carbon Disclosure Report ,2012; 2. National Geographic, August 2012MISO had power plants shut down in thesummer of 2012 – one after its coolingwater source fell below the plants intakepipe, another ramped back generationwhen its cooling pond became too hot.Water demand will outstripsupply by 40% by 2030.1
  4. 4. The world’s leading sustainability consultancyVested Interest: Who Cares?4Internal Stakeholders• Operations• Development• Environmental compliance• Legal• Communications• Business (P&L)• Trade floor• Board• ShareholdersExternal Stakeholders• Customers/Offtakers• ISO• PUC• Regulators• Downstream users• Conservation groups• Media• Wall Street• Financiers
  5. 5. The world’s leading sustainability consultancyWater 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 uncertainty5
  6. 6. The world’s leading sustainability consultancyRegulatory Drivers6Urgent316 (b)Effluent guidelinesImportant 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, andsocioeconomic factors)Thermal discharge requirementsWater sourcing
  7. 7. The world’s leading sustainability consultancyExample: The Evolution of 316(b)7Clean Water ActInitial 316(b) and 316 (a) Rule(1972)Cooling water intakes regulated at state level with wide range orrequirements, complexity and technical rigorConsent DecreeEPA to develop 316(b) Rule(1995)Phase IRule (2001)Draft PhaseII Rule(2011)316(b) Rule withdrawnRegulations by State(1979)Industry activity to evaluate gaps,technology, alternatives andregulatory implicationsPhase II Rule >50mgd(2004)Phase IIIRule>2mgd(2006)Phase II /IIIRulesremanded(2007)Final Phase IIRule delayed(2012)Industry activity to evaluate gaps,technology, alternatives andregulatory implications1970s1980s1990s2000s2010s
  8. 8. The world’s leading sustainability consultancySafetyComplianceReliabilityExcellenceProfitabilityOperationsDevelopmentFinancingFloodDroughtHeat WavesFreezingLawsuitsWater Matters8Important activities lead to the achievement of our goals.Urgent activities demand immediate attention, can be associated with theachievement of someone else’s goals, or with an uncomfortable problem that needsto be resolved.ImportantGoalsCriticalActivitiesInterruptionsDistractionsImportanceUrgencyLowHighLowHigh
  9. 9. The world’s leading sustainability consultancy■ The core of ERM’s approach is our 4+1 key steps to developingorganizational IWM strategies:Implementation PhaseStrategic PhaseAwarenessBuildingAssess Risksand Opportunitiesin Water FootprintAlign withBroaderStrategiesApply Solutions toResolve Key IssuesMeasureFootprint AcrossOrganizationWater Management: Urgent & Important
  10. 10. The world’s leading sustainability consultancy■ We have successfully implemented the framework globallyacross a range of sectors, including:■ The key to this success stems from recognizing the uniquesector and regional contexts of our Clients, as well as thecomplexity of water issues, and using these aspects totailor our overarching 4+1 step framework.• Manufacturing • Oil and Gas • Mining• Pharmaceuticals • Electronics • Power• Food and BeverageCore Framework is Universal
  11. 11. The world’s leading sustainability consultancyUnderstanding of water challenges can vary across departments:development, operations, trading, all see water issues through adifferent 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 risksWater Risk Assessment
  12. 12. The world’s leading sustainability consultancyConsiderations■ Lack of availability / quality■ Too much water (floods)■ Public opposition to real orperceived competition withcommunity needs for water■ Litigation/ court settlements toscale back operationsExpected state water shortages over the next decadeunder average water conditionsWater Risk is a Business ChallengeIf you don’t have water,will you stillhave a business?
  13. 13. The world’s leading sustainability consultancy■ Key benefits come from identifying risks andopportunities■ Various levels of water footprint can becalculated, depending on business needs• Water risk mapping: identify whichoperational/pipeline sites are most exposedto water stress issues into the future• Water footprint quantification: take apurely volumetric approach• Water footprint impacts assessment:incorporate quantification and the impactsof the water usedWater Footprinting
  14. 14. The world’s leading sustainability consultancy■ Map water for aplant, currentoperating assetsfleetwide, proposeddevelopments■ Prioritize actions forimprovementSource: National Renewable Energy Laboratory. Illustration by Andy Warner.Footprint Quantification / Water Balance
  15. 15. The world’s leading sustainability consultancyIncorporate water into business strategy at alllevels based on costs and benefits: Plant level Fleet level Developmentapproach Asset acquisitiondue diligence Trade risk assessment Shareholder/Stakeholder involvement15Integrating Strategies; Establishing Priorities
  16. 16. The world’s leading sustainability consultancyConfidential Client:■ Strategic Water Principles:• Principle 1: Base management of water impacts of our operations on a robustunderstanding 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 localcatchment water resources• Principle 4: Engage openly with stakeholders, to address local water issues,contribute to regional water policy and international approaches to sustaining globalwater resources• Principle 5: Manage the impacts of operations at a catchment level; be a steward ofthese water resources• Principle 6: Plan for changing climate and the additional water risks that may result.Integrating Strategies: Example
  17. 17. The world’s leading sustainability consultancyThe End Goal17Develop an operational and developmentstrategy that minimizes risk, leveragesopportunities■ Understand water availability for developmentpipeline and plan accordingly■ Be prepared to seize opportunities when theyarise■ Prepare for potential water challenges withexisting fleet■ Communicate water risk throughout company:operation, development, traders, legal, etc.■ Leverage water opportunities: resilience,predictability, brand value, cost savings■ Broader business risk reduction
  18. 18. The world’s leading sustainability consultancy18Discussion & QuestionsPeter Flaherty, PESenior EngineerWater Management615.373.3350peter.flaherty@erm.comSkelly HolmbeckEnergy, Oil & GasPerformance