WSJ.com has an article on how water sourcing issues are affecting electric power plants.

The one fact that was wow.  is half of water withdrawals in the US are for electric-power industry.

The electric-power industry accounts for nearly half of all water withdrawals in the U.S., with agricultural irrigation coming in a distant second at about 35%. Even though most of the water used by the power sector eventually is returned to waterways or the ground, 2% to 3% is lost through evaporation, amounting to 1.6 trillion to 1.7 trillion gallons a year that might otherwise enhance fisheries or recharge aquifers, according to a Department of Energy study.

The study concluded that a megawatt hour of electricity produced by a wind turbine can save 200 to 600 gallons of water compared with the amount required by a modern gas-fired power plant to make that same amount.

The article continues on to discuss how energy and water are connected.

Earlier this month, Jeff Bingaman (D., N.M.), chairman of the Senate Energy and Natural Resources Committee, noted during a hearing that the "nexus" of water and energy is becoming an issue "in [power plant] permitting decisions across the country."

Landowners in the far northeast corner of California were riled recently by Sempra Energy's proposal to build a coal-fired power plant just across the state line in Nevada.

One reason residents objected was that the plant would have required vast amounts of water for cooling. "Use of groundwater is always a sensitive issue up here because we don't have much," said Jack Hanson, a member of the Lassen County Board of Supervisors.

Sempra pulled the plug on the project in late 2006, citing, among other things, water use. Since then, another big energy proposal has surfaced, but it hasn't kicked up much opposition: A dozen companies are considering building hundreds of wind turbines along Lassen County ridgelines. So far, 17 meteorological towers have been erected to verify wind speeds.

Power plants can reduce their water use.

In turn, conventional power plants are turning to technology that aggressively cuts water use as they weigh the costs of installing more complicated cooling systems versus leaning on scarce resources.

A power plant recently put into service by Pacific Gas & Electric Co., a unit of PG&E Corp., in the Northern California town of Antioch has a cooling system to cut its water intake from 40,000 gallons a minute to 1.6 gallons. In the past, power plants commonly were built with "once-through cooling," in which water was drawn from waterways, used once, and then put back. But the Antioch plant uses a "dry" cooling technique that recirculates water in a closed system, reducing evaporation.

Coal and nuclear plants are being questioned for their water use.

Environmental groups that oppose coal and nuclear power plants are discovering that water can be a powerful tool to challenge power companies.

In 2004, Riverkeeper Inc., an environmental organization in Tarrytown, N.Y., along with six states, sued the Environmental Protection Agency over the use of once-through cooling by as many as 500 older power plants in the U.S. The suit charges that the practice violates the Clean Water Act because it harms aquatic life and fails to utilize the best technology available, a requirement of the federal act.

The case, now before the U.S. Supreme Court, stands to test how water-use issues will determine which power plants continue to operate as well as what kind of plants are built.

Nuclear plants face particular scrutiny, since they require more water than any other form of steam generation. Virginia Power, a unit of Dominion Resources, is facing a legal challenge over its right to draw one million gallons of water a minute per reactor from a man-made lake it uses to cool its North Anna nuclear power plant and into which it discharges heated water. The utility built the lake in 1978 exclusively for the plant's cooling purposes.

A group called the Blue Ridge Environmental Defense League Inc. argued that heat is a form of pollution and said the state water board shouldn't have renewed the plant's water permit. Last month, a state court upheld much of the environmental group's case; the utility plans an appeal. Dominion says the man-made lake is a private body of water and therefore shouldn't fall under the federal Clean Water Act.

As you think of a green data center, don’t forget about water.

Water is also emerging as an important point for analysts in the investment community. "We definitely have noticed more companies having water issues," said Swaminathan Venkataraman, an analyst at Standard & Poor's credit-rating agency. "If it continues, it will give renewables another important advantage."