Center on Financial Risk in Environmental Systems (CoFiRES)

Center on Financial Risk in Environmental Systems: California

California

Title:
The Sustainability-Productivity Tradeoff: Water supply vulnerabilities and adaptation opportunities in California’s coupled agricultural and energy sectors


Summary:
Systems dynamics modeling of connected surface water, groundwater, electric power and agriculture systems is used to explore vulnerabilities and develop novel solutions for balancing short term productivity with long term system sustainability.

Organizing conceptual framework for the interconnected themes of the CALFEWS project.

Organizing conceptual framework for the interconnected themes of the CALFEWS project.

Description:
The interdependence of water resources, agricultural production, and electric power generation is well established— but humans don’t know nearly enough about how decisions and resource disruptions in these individual sectors impact system sustainability as a whole. The overarching contribution of this project will be the design and integration of an open source computational tool for the California water-power-agriculture system (CalFEW), to be developed and maintained as an open source Python library to maximize knowledge transfer and assist planning efforts by decision-makers and analyses by researchers around the world. CalFEW will combine new as well as improved versions of existing models under a unifying, modular system dynamics simulation, along with interactive visualization, sensitivity analysis, and multi-objective optimization tools to discover key vulnerabilities and tradeoffs across sectors. A key focus for the Center on Financial Risk in Environmental Systems is an investigation of how water scarcity risks cascade through the coupled water-power agriculture system in California. We will quantify the relationships linking the frequency and severity of drought with fluctuations in costs and revenues for farmers, irrigation districts, and electric utilities, with attention to uncertainties related to climate, water/electricity demand, commodity prices and regulatory action. The focus will then shift to developing novel financial instruments and innovative risk management strategies for each of these groups.


Collaborators:
Cornell University: Dr. Pat Reed

University of California, Davis: Dr. Jon Herman, Dr. Jay Lund

University of California, Merced: Dr. Josué Medellin-Azuara

UNC Geological Sciences: Dr. Tamlin Pavelsky


Related Publications:

Zeff, H. B., Hamilton, A. L., Malek, K., Herman, J. D., Cohen, J. S., MedellÍn-Azuara, J., Reed, P. M., & Characklis, G. W. California’s Food-Energy-Water System: An open source simulation model of adaptive surface and groundwater management in the Central Valley. (In review, pre-print available).

Malek, K., Reed, P., Zeff, H., Hamilton, A., Wrzesien, M., Holtzman, N. Steinschneider, S. Herman, J., & Pavelsky, T. Bias correction of hydrologic projections can strongly shape inferred climate vulnerabilities in institutionally complex water systems. (In review).

Su, Y., Kern, J. D., Reed, P. M. and G. W. Characklis (2020). “Compound Hydrometeorological Extremes Acting Across Multiple Timescales Drive Volatility in California Electricity Market Prices and Emissions,” Applied Energy, 276. https://doi.org/10.1016/j.apenergy.2020.115541

Kern, J.D., Su, Y. and Hill, J., (2020). A retrospective study of the 2012–2016 California drought and its impacts on the power sector. Environmental Research Letters15(9), p.094008.

Su, Y., Kern, J. D., Denaro, S.  Hill, J., Reed, P. M. Sun., Cohen, J. and G. W. Characklis (2020). “An open source model for quantifying risks in bulk electric power systems from spatially and temporally correlated hydrometeorological processes,” Environmental Modelling and Software, 126, doi.org/10.1016/j.envsoft.2020.104667

Hamilton, A. L., Characklis, G. W., & Reed, P. M. (2020). Managing financial risk tradeoffs for hydropower generation using snowpack-based index contracts. Water Resources Research, 56(10), e2020WR027212. DOI:10.1029/2020WR027212.

Gupta, R. S., Hamilton, A. L., Reed, P. M., & Characklis, G. W. (2020). Can modern multi-objective evolutionary algorithms discover high-dimensional financial risk portfolio tradeoffs for snow-dominated water-energy systems? Advances in Water Resources, 145, 103718. DOI:10.1016/j.advwatres.2020.103718.


Funding Support:
National Science Foundation: Innovations at the Nexus of Food, Energy, Water Systems (INFEWS) program, award no. CNS-1639268

National Science Foundation logo