Resilient California Water Portfolios Require Infrastructure Investment Partnerships That Are Viable for All Partners

Abstract

Water scarcity is a growing problem around the world, and regions such as California are working to develop diversified, interconnected, flexible, and resilient water supply portfolios. To meet these goals, water utilities, irrigation districts, and other organizations will need to cooperate across scales to finance, build, and operate shared water supply infrastructure. However, planning studies to date have generally focused on partnership‐level outcomes (i.e., highly aggregated cost‐benefit analyses), while ignoring the heterogeneity of benefits, costs, and risks across the individual partners. This study contributes an exploratory modeling analysis that tests thousands of alternative infrastructure partnerships in the Central Valley of California, using a daily scale simulation model (CALFEWS) to evaluate the effects of new infrastructure on individual water providers. The viability of conveyance and groundwater banking investments are as strongly shaped by partnership design choices (i.e., which water providers are participating, and how is the project's debt distributed?) as by extreme hydrologic conditions (i.e., floods and droughts). Importantly, most of the analyzed partnerships yield highly unequal distributions of water supply and financial risks across the partners, so that only 8% of the partnerships explored are capable of providing water to each partner for under $200/ML. Partnership viability is especially rare in the absence of groundwater banking facilities (1%), or under dry hydrologic conditions (1%), even under explicitly optimistic assumptions regarding climate change. Given these results, we outline several major policy implications for institutionally complex regions such as California, which are currently investing heavily in cooperative approaches to resilient water portfolio design.

Resilient water infrastructure partnerships in institutionally complex systems face challenging supply and financial risk tradeoffs

“…This risk is not evenly distributed, with some partners experiencing a disproportionate share of extreme costs (e.g., Providers 3 and 4) and others experiencing uniformly low costs across the sampled hydrologic scenarios (e.g., Providers 7 and 12). This is critical because the heterogeneity of water supply bene ts and nancial risks could threaten the cooperative stability of the partnership itself if partners do not perceive the investment to be su ciently fair and locally bene cial 30,33 .…”

“…Most existing water supply planning models employ longer timesteps (e.g., daily or monthly), larger spatial aggregation (e.g., regional), and simpli ed representation of water management institutions and/or infrastructure constraints. CALFEWS' high-delity system representation allows for improved evaluation of infrastructure partnerships compared to lower delity models that cannot resolve the multi-timescale dynamics of managed aquifer recharge or the multi-spatial scale distribution of water supply bene ts and nancial risks for local project partners (see Zeff et al (2021) 23 and Hamilton et al (2022) 33 for detailed discussions).…”

“…We design this partnership to mirror the existing institutional arrangement rather than being designed by our multiobjective intelligent search process. Given that the formal plans for apportioning cost shares across the partnership are not available, for the purpose of this analysis the ownership share for each of the 16 partners is assumed to be proportional to its average historical delivery of Central Valley Project Friant water, following Hamilton et al (2022) 33 . Water providers that do not participate in any optimal tradeoff partnerships are colored white.…”

“…Moreover, water supply systems in many regions are increasingly interconnected, which can lead to complex emergent behaviors within the coupled network because each water providers' future supply reliability depends not only on its own actions and capabilities, but also on the actions and capabilities of other water providers in the network [30][31][32] . Collaboration ampli es this challenge because it requires understanding not only the total aggregate bene ts and costs of an infrastructure investment, but also the uncertain distribution of these bene ts and costs to individual partners over time [33][34][35] .…”

Evaluating Implementation Uncertainties and Defining Safe Operating Spaces for Deeply Uncertain Cooperative Multi‐City Water Supply Investment Pathways

“…Infrastructure investment requires local water utilities to carefully balance supply reliability with financial risks, as under‐investment risks supply failure, while over‐investment may result in costly stranded assets (Haasnoot et al., 2019; Qureshi & Shah, 2014). Therefore, water managers are increasingly exploring regionalization strategies, where utilities within close geographic proximity cooperate to use existing infrastructure more efficiently and leverage economies of scale to reduce the financial burden of new infrastructure investments (Bell et al., 2022; Gorelick et al., 2022; Hamilton et al., 2022; Reedy & Mumm, 2012).…”