Friday, January 4, 2013

The Changing Value of Water

This is a very good paper by authors from CH2M HILL - - The Changing Value of Water to the US Economy: Implications from Five Industrial Sectors.  The five sectors are semiconductor, chemical, mining, oil & gas, and thermal power generation.

Look for water to take on much more of a value context.  Just thinking in terms of water cost is out - - water and a value proposition is in.  This goes beyond just industrial discussions and applications.  For example, my water is priced without the context of value at roughly $3.00 per 1,000 gallons.  On a per gallon basis, this rounds to basically free.  My behavior and the behavior of my neighbors is highly influenced by the basic economics of free water on a per gallon basis.  The other extreme of the value proposition is at the local 7-11 a half mile from my house.  A bottle of Fiji water is priced at roughly $11.00 per gallon.  It is hard to think of any other commodity priced to these two extremes a half mile from each other.

At some point, a key question needs to be ask - - "Who is better at pricing water in the context of value - - my local water utility or 7-11?"  As the U.S. Southwest enters an era of stressed water resources and extreme weather, how we value price water and move away from cost based pricing structures will be critical.

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