Water Risk Themes in the West: Demand Hardening
Welcome to our series on Water Risk Themes in the West. In this post, we explore how demand hardening affects agriculture in the western United States.
In much of the irrigated western United States, the demand for irrigation water is both increasing and hardening due to the types and values of the crops grown and the technologies used to apply irrigation water. Demand hardening means that the amount of water use is less responsive to water costs (or other incentives), and therefore has less flexibility to withstand supply shortages. Demand hardening increases the value of irrigation water.
Three main factors drive hardened demand. The first is the gradual shift from annual irrigated field crops to permanent crops. Given a typical productive life of 20 to 35 years, a grower must consider the asset value of the established orchard (or vineyard) when facing water supply cuts. Clearly, the cost of idling a permanent crop that is partway through its productive life is extremely high. Only those permanent crops nearing the end of their productive life will be removed to save water in drought situations. The second factor is the increasing real value of permanent crops and the water used to grow them (e.g., nuts, vines, or tree fruits). An increasing share of high value permanent crops all drive up the local value of drought water supplies. The third factor is the shift in irrigation technologies that accompanies a shift to high value permanent crops. These crops typically use either drip or micro sprinkler irrigation systems. These systems are highly efficient so that more efficient water use during drought is not practical.
Where available, demand hardening and some irrigation technologies favor groundwater. Drip and micro sprinkler systems supplied by surface water may require substantial filtration systems. In many cases growers will shift to groundwater based on its cleanliness despite its increased cost. Demand hardening further favors groundwater because it is available on demand, which may not be not possible from open surface canals. This “on demand” nature of groundwater suits high value crops and drip and mini sprinkler irrigation systems and simplifies their operation.
Groundwater often plays an essential role as a buffer supply to balance out the variability in surface water supplies. With demand hardening, this buffer supply becomes increasingly valuable. Water markets may provide some mitigation for hardened demand. As climate change increases the variability of surface water supplies, groundwater and water markets will become increasingly important.
Recent crop shifts and demand hardening have increased production risks in some regions. In California, the key crop is nuts; in Oregon, high value vineyards; in Washington, specialty apples, vineyards, and hops.
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