Mission Resilience & Sustainability Training The True Value of Water: Finding the Non-Market Value of Water to the Army Moderated By: Kate McMordie Stoughton, PNNL Presented By: Dr. Ray Quay, Arizona State University Trey Lewis, OCAR ARIMD Dr. Marc Kodack, Water Program Manager, Office of DASA- E&S UNCLASSIFIED / FOUO 1 Leadership. Energy. Execution. 06 OCT 2017
Speakers Dr. Ray Quay • Research Professional – Decision Center for a Desert City • Arizona State University Trey Lewis • Water Program Coordinator • Army Reserve Installation Management Directorate Dr. Marc Kodack • Water Program Manager • Office of Deputy Assistant Secretary of the Army for Energy and Sustainability (DASA- E&S) UNCLASSIFIED / FOUO 2 Leadership. Energy. Execution. 06 OCT 2017
Learning Objectives • The session will address these questions: • What are the challenges and risks facing water supplies now and in the future? • What causes the cost of water to not match the value of water? • What are some currently available tools for calculating non- market values of water? • What are examples of Army projects that have successfully used non-market valuation? UNCLASSIFIED / FOUO 3 Leadership. Energy. Execution. 06 OCT 2017
Dr. Ray Quay Decision Center for a Desert City Arizona State University UNCLASSIFIED / FOUO 4 Leadership. Energy. Execution. 06 OCT 2017
Trey Lewis Army Reserve Installation Management Directorate UNCLASSIFIED / FOUO 5 Leadership. Energy. Execution. 06 OCT 2017
Economics 101 Supply PRICE Equilibrium Demand QUANTITY UNCLASSIFIED / FOUO 6 Leadership. Energy. Execution. 06 OCT 2017
Economics 101 Supply Supply < Demand = Higher Price Supply PRICE Shortfall Demand QUANTITY UNCLASSIFIED / FOUO 7 Leadership. Energy. Execution. 06 OCT 2017
World Series Tickets Supply $50,000 Higher “Willingness to Pay” PRICE Lower “Willingness to Pay” Demand $50 1 QUANTITY 100,000 UNCLASSIFIED / FOUO 8 Leadership. Energy. Execution. 06 OCT 2017
Economics 101 Marginal Cost PRICE Equilibrium Marginal Benefit QUANTITY UNCLASSIFIED / FOUO 9 Leadership. Energy. Execution. 06 OCT 2017
Economics 101 Assumption : this is the full and Cost1 complete cost for the product Cost2 PRICE Equilibrium Cost Artificially Low = Overproduction/Overuse Marginal Benefit QUANTITY UNCLASSIFIED / FOUO 10 Leadership. Energy. Execution. 06 OCT 2017
Common Pool Goods RIVALROUS – If I use it, you can’t use it (and vice versa) EXCLUDABLE – Can control who uses the resource Excludable Non-excludable Rivalrous Private Goods Common Pool Goods (food, clothes, cars, parking (fish stocks, timber, coal, spaces) water) Non-rivalrous Club Goods Public Goods (movie theater, private (public television, air, park, satellite television) national defense) Source: Wikipedia UNCLASSIFIED / FOUO 11 Leadership. Energy. Execution. 06 OCT 2017
Water as Goods Excludable Non-Excludable Bottled Lake Rivalrous Water Michigan Swimming Treating Pool Water Non- Rivalrous UNCLASSIFIED / FOUO 12 Leadership. Energy. Execution. 06 OCT 2017
Externalities Externalities – “the positive or negative consequences of economic • activities on unrelated third parties” (Quickonomics.com) POSITIVE NEGATIVE http://maxpixel.freegreatpicture.com/Butterfly-Insect-Spring-Flower- https://www.flickr.com/photos/barbourians/8479006257 Garden-1939278 UNCLASSIFIED / FOUO 13 Leadership. Energy. Execution. 06 OCT 2017
Non-Market Valuation REVEALED, DIRECT COSTS : How much do you pay for a gallon of water • from your utility? REVEALED, INDIRECT COSTS : If I gave you $1,000 to prepare for an • emergency, how much would you spend on each item (one of which is “ensuring access to clean water”? STATED, DIRECT COSTS : How much is having clean water worth to you? • STATED, INDIRECT COSTS : Rank the importance of these choices • contingent on this scenario… Revealed Stated Preferences Preferences Competitive Market Prices Contingent valuation Direct Simulated Market Prices - Open-ended response format Costs Household production function models Contingent Valuation Time Allocation - Discrete-choice and interval Random utility and travel cost response formats Indirect Averting behavior Costs Hedonics (i.e. home prices) Production function models Referendum votes UNCLASSIFIED / FOUO 14 Leadership. Energy. Execution. 06 OCT 2017
Real World Examples • LEED TRIPLE BOTTOM LINE LCCA • FORT RILEY STUDY UNCLASSIFIED / FOUO 15 Leadership. Energy. Execution. 06 OCT 2017
LEED Triple Bottom CBA UNCLASSIFIED / FOUO 16 Leadership. Energy. Execution. 06 OCT 2017
LEED Triple Bottom Line CBA Combines cost-benefit analysis (CBA), triple bottom line accounting and • life cycle cost assessment (LCCA) Eligible for a LEED Pilot Credit • Must be used in evaluating at least six LEED credits • AutoCase for Buildings and Autocase for Sites • DoD Examples • U.S. Defense Health Agency • USAG Humphreys (S. Korea) • Fort Belvoir Hospital • Fort Bliss Hospital • JB Pearl Harbor-Hickam • UNCLASSIFIED / FOUO 17 Leadership. Energy. Execution. 06 OCT 2017
Autocase for Buildings Utilizes location-based data • Relies on data readily available during a LEED credit submission • Provides the cost and benefit of the • LEED credits pursued over the lifetime of the facility Accuracy unclear when modeling • projects on existing facilities Needs further study • UNCLASSIFIED / FOUO 18 Leadership. Energy. Execution. 06 OCT 2017
Autocase for Sites “ Models the impacts for 25+ storm water design options, including • bioretention, swales, and permeable pavement ” UNCLASSIFIED / FOUO 19 Leadership. Energy. Execution. 06 OCT 2017
Autocase Screenshot UNCLASSIFIED / FOUO 20 Leadership. Energy. Execution. 06 OCT 2017
Autocase Screenshot UNCLASSIFIED / FOUO 21 Leadership. Energy. Execution. 06 OCT 2017
Autocase Screenshot UNCLASSIFIED / FOUO 22 Leadership. Energy. Execution. 06 OCT 2017
Autocase Screenshot UNCLASSIFIED / FOUO 23 Leadership. Energy. Execution. 06 OCT 2017
Autocase Screenshot UNCLASSIFIED / FOUO 24 Leadership. Energy. Execution. 06 OCT 2017
Autocase Screenshot UNCLASSIFIED / FOUO 25 Leadership. Energy. Execution. 06 OCT 2017
Autocase Screenshot UNCLASSIFIED / FOUO 26 Leadership. Energy. Execution. 06 OCT 2017
Autocase Screenshot UNCLASSIFIED / FOUO 27 Leadership. Energy. Execution. 06 OCT 2017
Autocase Screenshot UNCLASSIFIED / FOUO 28 Leadership. Energy. Execution. 06 OCT 2017
Autocase Screenshot UNCLASSIFIED / FOUO 29 Leadership. Energy. Execution. 06 OCT 2017
Fort Riley Study 2014 study funded by ODASA-E&S • PROJECT : Take wastewater from • before WWTP, divert some to a smaller MBR and use it at the Installation Vehicle Wash Facility (IVWF) Would eliminate the need for • potable water use at the IVWF https://www.epa.gov/sites/production/files/styles/medium/public/2015- 09/containment_ft_riley.jpg Fort Riley Water Challenges Provide 4,000 gallons per day • Growing water demand • (GPD) Increased risk of drought • Disputed surface water rights in • Initial SIR: 0.34 • the Lower Republican basin Aging distribution system • Final SIR: 0.52 ( 53% increase ) • Forecasted climate effects • Water recharge shorage • UNCLASSIFIED / FOUO 30 Leadership. Energy. Execution. 06 OCT 2017
Fort Riley Study Methods • Steps: 1. Identified Project Type (Used matrix) 2. Identified Relevant Benefits and Costs 3. Chose Appropriate NMV Methods • Substitute Cost Method • Indicator Method • Benefit Transfer Method 4. Completed NMV Analysis and Incorporate into CBA UNCLASSIFIED / FOUO 31 Leadership. Energy. Execution. 06 OCT 2017
Fort Riley Study Results UNCLASSIFIED / FOUO 32 Leadership. Energy. Execution. 06 OCT 2017
Fort Riley Study Results CONCLUSION 1. NMV Methods have the potential to provide important insight into the full range of benefits from Army infrastructure projects by providing a more comprehensive picture of the value of internal and external project effects. RECOMMENDATION: Further development to: • 1. Understand best application 2. Increase awareness of usefulness 3. Improve process of data identification 4. Reduce complexity CONCLUSION 2. Additional refinement and simplification of NMV methods is needed for practical Army applications. RECOMMENDATION: 1. Further refindment of the proposed framework 2. Complete additional demonstrations to understand data availability and NMV RECOMMENDATION: Army consider a future project to establish an Army-wide water demand curve UNCLASSIFIED / FOUO 33 Leadership. Energy. Execution. 06 OCT 2017
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