A new World Economic Forum report on the Water-Energy Nexus explores the link between water quantity and electricity production and specifically looks into strategic considerations for energy policy-makers on how best to plan energy and water infrastructures for the future. In short, sensible planning is a prerequisite for responsible management. As demand for electricity grows steadily due to growing populations across the planet and water supplies, at the same time, continue to dwindle away in certain regions, the water-energy nexus is poised to take more and more center stage in forward-looking policy descision-making throughout the world.

UNEP – Global Water Withdrawal Projections

Source: United Nations Environment Program (UNEP)

The graphic above illustrates that countries in North Africa and the Middle East are particularly afflicted with water scarcity. Arid conditions and low rainfall totals are expected to add to this region’s vulnerability to climate change, leading to further desertification.

“Smart energy policy must take into account the realities of the water industry and the world’s need for affordable, clean and abundant energy, as well as the shared responsibilities and opportunities influencing these two resources. (…) If nothing changes, an increase in energy production will continue to involve an increase in water consumption, and an increase in water collection and distribution will involve an increase in energy use,” the report emphasizes.

Given that the nexus is integral to both energy security and climate change policy a patchwork of factors in those realms will inevitably influence decision-making. However, as the World Economic Forum highlights, “to date, energy and water infrastructure and policy decisions have been made independently of one another, often with outdated assumptions regarding rising demand and resource scarcity.” The reason for that is that while energy is regarded as a global issue, water remains “very much a local issue” with individual countries basing their long-term policy decisions on their own water supplies.

Therefore, the World Economic Forum report calls for assigning an economic value to water as well as factoring water scarcity into the electricity generation equation itself:

“Water must be seen as having its own economic value, and become a visible part of the equation to determine the most cost-effective energy options. No longer can power plants be evaluated just on fuel costs or capital costs. Smart planning must take into account a richer model that includes life-cycle costs such as fuel collection, refinement and distribution as well as carbon and water costs. For when the available supply of water is depleted, energy production becomes irrelevant.”

In this respect, it is crucial to understand that low water rates create a plethora of perverted incentives, which are compounded in a “water scarcity” scenario. First, they not only encourage the unsustainable use of water but, at the same time, discourage water conservation. Low rates also do not account for the real cost of water, which should include an adequate percentage in order to maintain or replace both aging water and wastewater infrastructure.

Therefore, to devise smart policies addressing the challenges ahead in both water and energy realms, the World Economic Forum’s Global Agenda Council of Energy Security makes the following interesting recommendations:

1. Long-term energy planning and policy needs to include water costs – water’s true economic value – in life-cycle cost/benefit analyses for new energy projects. While GHG emissions and the potential costs of climate change are often already included in those calculations, not accounting therein for water consumption and its associated costs may lead to “unintended consequences and costs brought on by water stress, water scarcity and energy-water conflicts resulting in disruptions that diminish energy security.”

2. Greater level of flexibility in regulation is advisable to adapt to the changing reality of water scarcity and climate change while respecting environmental requirements.

3. Thorough planning of new infrastructure – with careful consideration to siting of power plants and scenario planning for water-related influence on power plants – must take into account climate-related issues such as droughts, increasing water temperatures and rising sea levels.

4. Decoupling the growth of energy demand from water demand requires the application of innovative methods – via technological advances – to increase water efficiency in energy production, to increase energy efficiency in water production, to promote water-conscious energy infrastructure development and to encourage best practices in water-smart energy development.

In sum, what is basically advocated above is a strategy of enhancing energy security through sensible infrastructure development choices that primarily reduce stress on water supplies by a combination of market-based tools, water quantity controls and water efficiency gains through the application of innovative technology.