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HOUSTON (CNNMoney.com) -- Whisky is for drinkin', water is for fightin'.

It's a saying from the Old West, but one invoked Thursday when talking about electricity at Cambridge Energy Research Associates' annual energy conference in Houston.

Power generation takes water. Pumping water takes power. As the nation struggles to meet electricity demand - expected to surge 50% in the next 30 years - big sections of the country are suffering from drought conditions.

"We're going to have both water and power shortages, maybe in areas where we aren't used to them," said Peter Gleick, President of the Pacific Institute, an environmental research organization. "Atlanta in the last few years is a good example of that."

Most people don't realize how closely power and water are linked.

In California, the water pumps that keep the Los Angeles area hydrated are the single largest users of power in the state, according to Gleick. Running a hot water faucet there for five minutes uses as much energy as keeping a 60-watt light bulb on for 14 hours, he said.

Gleick said that California could achieve 95% of its energy conservation goals 58% more cheaply by targeting water consumption rather than power consumption.

"Water and energy are tightly linked, but these links are poorly understood and rarely used in policy," he said.

Utilities are struggling with this issue as they attempt to build new power plants amid the current water shortage in large parts of the Southeast and Southwest.

Most types of power plants use water for cooling - a lot of water. About 40% of the freshwater used in the U.S. - or 136 billion gallons a day - is used for power generation, nearly as much as is used for crop irrigation, according to the U.S. Geological Survey. A typical nuclear or coal energy plant could use 30-40 million gallons of water a day.

While most of this water is returned to the source, about 3 billion gallons a day are lost to evaporation. In places where water sources are drying up, utilities are scrambling to reduce the amount of water they use.

"Water is becoming one of the most contentious issues when siting a new power plant," said John Maulbetsch of Maulbetsch Consulting, which specializes in electricity and energy issues. "People feel fresh water is too precious."

In the Southwest, where Lake Powell has lost half its water amid a 7-year drought, the New Mexico utility PNM Resources is finding ways to cut its water use or utilize new reserves.

It has started using waste water from sewage treatment plants and oil wells, capturing water lost to evaporation, promoted energy efficiency, and considering installing massive arrays of solar power cells, said Greg Nelson, director of Advanced Generation Development at PNM.

In the Southeast, the Florida and Carolinas utility Progress Energy Carolinas is installing additional pumps, considering drilling additional wells or shipping in water via pipeline to bring scarce water to its power plants.

Utilities could also install systems that cool their equipment with air instead of water, although these systems are expensive, costing $20 million or more on a new, small plant and reduce plant efficiency.

Nonetheless, "I think you'll have more dry systems, more retrofits in your future," said Maulbetsch.