A smart grid is a transactive grid.
- Lynne Kiesling
California’s Groundwater Rule Could Mean Opportunities, Water Trading

Via Water Deeply, a look at how the Rosedale-Rio Bravo Water Storage District plans to set up procedures for land retirement and water trading with the goal of putting property owners in the driver’s seat on groundwater management:

COMMUNITIES ACROSS CALIFORNIA are struggling to comply with the Sustainable Groundwater Management Act (SGMA), the state’s first comprehensive attempt to rein in wanton groundwater depletion.

Through the formation of so-called groundwater sustainability agencies, some areas plan to set quotas on water extraction and fine property owners who pump too much (in most areas, farms are the biggest groundwater users). Although the law does not require these agencies to actually achieve groundwater sustainability until 2040 at the earliest, the focus in some groundwater basins is clearly a punitive one.

One agency taking a slightly different approach is the Rosedale-Rio Bravo Water Storage District, located near Bakersfield in the southern San Joaquin Valley. The district’s groundwater was ranked by the state as critically overdrafted, like much of the San Joaquin Valley. But rather than imposing fines to limit groundwater use, the district is creating a system to buy out willing sellers of farmland. The goal is to free up water for others who are willing to pay more for it, creating a net reduction in district-wide water use in the process.

To explain its approach further, Water Deeply spoke with Eric Averett, the district’s general manager.

Water Deeply: Are you working on programs to reduce water demand?

Eric Averett: We’re doing our best to avoid it, if at all possible. If demand reduction is required, we’re handling it through a willing-seller, willing-buyer transaction. So as opposed to telling a landowner they have to reduce demand, what we’re saying is, if you use more than the district can supply, then there will be a supplemental fee we will collect. That fee will then be used to acquire lands from willing sellers that have an equivalent water demand. And then the district will retire that land from farming.

So it is, in effect, a demand-reduction strategy. But it does not put that responsibility on the landowners. The landowner has a choice. If we say there’s 3 acre-feet available and they choose to manage within that allotment, then there’s no fee or requirement to reduce demand. The first option is, they can voluntarily reduce their demand on their own. But if they say, “I want to triple crop and use 4 acre-feet,” they can pay a supplemental fee to the district and the district will then go out and find willing sellers who maybe are just done farming, or maybe find there’s more value in selling their land. We would then retire that land and make that water supply available to the first landowner.

Water Deeply: You’ve said your goal is not to be a groundwater regulator. Can you explain?

Averett: Our goal is to provide a service, or act as a resource, not to be a regulatory agency. So to the extent farmers can manage the resource, they are best able to put it to the highest and most beneficial use. We don’t want to create rules and regulations that limit those opportunities. The goal of the district is to maximize the value of the resource, and give landowners as many opportunities to manage that resource as possible. At the end of the day, it is their resource. We are just the administrators of it. So we really should get out of the way. We’ll make sure there is a set of fair and equitable rules. But after we’ve done that, I think our job is to get out of the way and let them manage that asset.

Water Deeply: How long have these policies been in place?

Averett: We are still developing [them]. Because SGMA requirements have not come into play yet, this is just part of the philosophy that we will apply to meet the requirements. As of today, there are no requirements for SGMA. They will kick in once the groundwater sustainability plans are in place. So no fees are being collected or land bought yet.

Water Deeply: You’re also talking about creating a water trading system within your district. How will that work?

Averett: That is still in the developmental stage. But the idea behind it is that landowners can make decisions and have access to transfer or trade their water supply, be it pumping groundwater or surface water. We want to create a system that allows for the movement of water between users within the district to maximize its beneficial use.

Let’s say there’s a landowner who typically grows alfalfa, and the price for alfalfa drops, and that landowner looks at the economics of planting alfalfa versus selling his water to somebody who perhaps is planting a higher-value crop. We want to create a system that allows for that. If the alfalfa farmer doesn’t have the ability to manage or move his water to a higher or better use that year, then in essence he has stranded that asset. He’s paid for it but he can’t use it. That is creating a disadvantage to our landowner.

So we’re looking at ways to monitor, track and account for those types of water transfers. We’re not at a point where we’re creating a market, if you will, like eBay or anything like that. But we are trying to set up a system of rules that are common, rules that people would understand, so that when those transactions are proposed, the district has the ability to approve or accommodate them and not prevent or preclude them.

Water Deeply: You also have a lot of residential users of groundwater in your district. How are you accommodating them?

Averett: What we’ve done for our residential areas is, we have exempted them from the fees on supplemental water use. The reason is, it’s very difficult to track and monitor how much water a residential area is using in the absence of individual well monitoring.

So for parcels under a certain size – I believe 10 acres is the cutoff – the district will provide whatever water supply is necessary. They don’t have to worry about the management of water, if you will. So if you’re a homeowner or a residential customer, and you’re using above 3.5 acre-feet, you will not be subject to that additional supplemental fee.

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About This Blog And Its Authors
Grid Unlocked is powered by two eco-preneurs who analyze and reference articles, reports, and interviews that can help unlock the nascent, complex and expanding linkages between smart meters, smart grids, and above all: smart markets.

Based on decades of experience and interest in conservation, Monty Simus and Jamie Workman believe that a truly “smart” grid must be a “transactive” grid, unshackled from its current status as a so-called “natural monopoly.”

In short, an unlocked grid must adopt and harness the power of markets to incentivize individual users, linked to each other on a large scale, who change consumptive behavior in creative ways that drive efficiency and bring equity to use of the planet's finite and increasingly scarce resources.