Yeah, there are alfalfa fields in central Arizona. Alfalfa basically turns water and sunlight into cellulose about as quickly as plants can.
Worse, the owners of those fields are often foreign companies. That means they use tremendous amounts of water in one of the driest regions on earth, in the middle of a multiple decade drought, and the wealth these farms generate disappears overseas.
How is it legal? Shouldn’t water be the most regulated (as in protected) substance of all?
But at least that alfalfa gobbles up CO2 from the air.
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Part of the issue is not systematically using a pricing structure that charges disproportionately more for usage above high thresholds.
The 101-level "solution" is to just raise the price to account for demand. The problem with that is that it treats all usage the same, whether it's a residence's first gallon or an alfalfa field's last gallon. But the former is something we need to protect.
It makes sense to price water, and electricity, in a fashion where the first X costs a certain amount, and the next X has a higher rate, and above some percentile of usage it has a much higher rate, and at some percentile of usage, customers should be very nearly paying for new required utility infrastructure themselves. That allows using pricing to solve supply problems, without penalizing normal levels of usage.
Some utilities already do this. But if there are actual issues with having enough supply for both datacenters/farms/smelters/etc and residential usage, then they're not doing this well enough, or don't have the pricing correct.