California’s spot market for single-year surface water transfers on the State Water Project (SWP) and Central Valley Project (CVP) has become a valuable water management tool. The spot market will become even more critical as the state’s current drought continues. In 2013, more than $26.8 million and 197,000 acre-feet (AF) of water were traded. This marks a 180% increase total dollars and a 220% in total volume traded over the previous year. That growth trend is expected to continue in 2014 as California enters its third year of one of the worst drought cycles in recent history.
California’s last major drought extended from 2007 through 2009. During that period, the spot water market played a critical role in efficiently reallocating water to alleviate shortages. That period also marked the highest spot market prices in California’s history of water trading, with average prices rising nearly 90% from 2007 to 2009. Similarly, the current drought that began in 2012 has driven spot market prices to more than double over the past two years, with prices already climbing to new record levels in 2014. Read the full Water Market Insider here.