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Colin Chilcoat

Colin Chilcoat

Colin Chilcoat is a specialist in Eurasian energy affairs and political institutions currently living and working in Chicago. A complete collection of his work can…

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Why Water Is More Important To Iran’s Future Than Oil

As Congress prepares to vote on the Iran nuclear deal, the focus remains on what separates the Islamic republic from the United States, which, depending on your worldview is either a lot, or everything.

The truth is that similarities, though perhaps few in number, do exist. Similar though contrasting religious convictions, a penchant for exceptionalism, and pistachios aside, water management stands to be a defining issue for both nations – and, truthfully, the world – as we approach mid-century.

Water management in the United States is a historically dense – and increasingly dry – topic. In the early twentieth century, thousands of ill-conceived and wanton public works projects reclaimed vast swathes of the arid deserts dotting the west. The mega metropolises and industrial-scale agribusinesses that the Corps of Engineers and Bureau of Reclamation wrought are the definition of Manifest Destiny, and at the very least unsustainable. That fact – largely understood, though often ignored, then – is writ large today. Related: Saudis Could Face An Open Revolt At Next OPEC Meeting

According to the U.S. Drought Monitor, every county in California is currently facing severe drought, if not extreme or exceptional. Two of the most stricken areas, California’s San Joaquin Valley and Central Coast District, represent approximately 50 percent of total U.S. fruit and tree nut farm value, and 38 percent of vegetable farm value. Agricultural acreage in the state unsurprisingly fell some 11 percent in 2014 and economic losses of roughly $3 billion are expected this year. It’s not an isolated issue either – more than 43 percent of the U.S. is currently experiencing drought conditions of some kind.

Though understated, the drought’s effects on a national, fossil fuel-heavy and water-cooled energy economy that annually consumes 17 trillion gallons of water are no less damaging. A recent study out of Arizona State University suggests that 46 percent (92 GW) of the electric generating capacity in the Western U.S. is critically vulnerable to climate change.

More specifically, climate change may reduce summertime generating capacity in the Western Electricity Coordinating Council power service region – a 14-state bloc – by up to three percent toward 2060, and up to 8.8 percent under a ten-year drought. Projections of both more intense and lengthier droughts as well as increased water consumption in the energy sector only raise the cause for concern. Related: Why Oil As An Election Issue Is Bad News For Canada

It’s no surprise then that non-hydro renewables growth is soaring – especially in drought-hardened states like California and Texas, which continue to set generation and capacity records nationwide. President Obama’s Clean Power Plan (CPP) also looks to attack the problem nationally, by disincentivizing water-thirsty coal generation and expediting the renewable transition. In Texas, CPP looks to reduce water consumption by up to 20 percent by 2029. However, at least 15 states are prepared to fight the climate legislation and some research suggests a more gradual implementation will lead to greater water savings.

Iran is working from a considerably weaker – and more arid – position than the United States. Though economic promise is on the horizon, the crippling effects of international sanctions still handicap the water-poor nation of 78 million. What’s worse, the current drought, which stretches back more than two decades, shows no signs of letting up. The World Resources Institute projects a 20 percent decrease in water supply across much of Iran toward 2040. Conversely, it sees demand rising by as much as 70 percent in that time. Related: Rosneft Doubling Down To Survive Oil Price Storm

The future demand profile – still mostly agricultural with a controversial sprinkle of nuclear power generation – is of little consequence if the nation can’t source water. With reservoirs at 40 percent and several rivers running dry, Iran will have to get creative. In that regard, and with the pending normalization of international business relations, the water sector represents a prime growth engine for both Iran and outside investors.

Few concrete deals of any kind have emerged as the Joint Comprehensive Plan of Action finds its footing, but wastewater and sewage treatment, pipeline construction, irrigation, desalinization, bottled water, and general efficiency are all spheres to watch as Iran makes its grand reentrance. Because it’s the water that will determine Iran’s future, and not it’s oil and gas (or nuclear).

By Colin Chilcoat of Oilprice.com

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