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The Economics of Recycled Water Use in the California Wine Country: Sonoma Valley Recycled Water Project

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Although California is a world leader in water reuse, historic use of recycled water in California Wine Country has been limited. Concerns about water quality and public perception have deterred wine growers from using recycled water for vineyard irrigation. Recently, concerns about the effects of global warming and climate change have spread to viticulture, and winegrowers are looking at alternate sources of water to protect the states' 15 billion wine industry. As part of this initiative, the Sonoma Valley County Sanitation District and the Sonoma County Water Agency initiated a financial and economic analysis of recycled water use for the Sonoma Valley County Sanitation Districts Recycled Water Project.

Growing water demands have forced the District and Agency to evaluate alternate water sources to ensure a diversified future water supply portfolio. The use of recycled water was identified as a feasible alternate source along with stormwater recharge, groundwater recharge of excess winter flows and conservation. Through a recycled water feasibility study, the District and Agency identified potential water reuse markets within the Sonoma Valley area. However, interagency coordination, equitable cost/benefit allocation, and identification of funding sources require determination of cost/benefit of the recycled water project.

Carollo Engineers teamed with Stratus Consulting to determine the economic and financial cost/benefit of the recycled water project to all involved stakeholders to provide the Agency with a roadmap for meeting necessary funding to implement the recycled water project. In general, using a revenue requirements approach for water reuse generally does not show water reuse to be a feasible option. Implementation usually requires large rate hikes for recycled water customers to fund the required capital and operation and maintenance costs. Such a purely financial approach however, does not consider potable water offsets, the associated advantage of guaranteed water supply, impact on risk, environmental benefits of increased stream flows and numerous other related benefits. Thus the team compared the economic benefit of the recycled water project, considering fundamental variables with non-monetary benefits such as community values, environmental impacts, risk and resource scarcity. This paper presents how evaluating the recycled water project using both financial and economic metrics help demonstrate water reuse to be a feasible option for diversification of water resource portfolios.

Keywords: Economic Analysis; Financial Analysis; Implementation; Recycled Water; Triple Bottom Line

Document Type: Research Article


Publication date: 2009-01-01

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