Top issues in the global ‘water sector’

In January this year Deloitte published a short but seemingly comprehensive overview of the key upcoming issues in the global water sector.

Although 70 per cent of the Earth’s surface is covered with water, the report is focused on the “less than 0.5 per cent of the world’s water [that] is available for human and animal use as fresh [water] and ground water.”

The snapshot view is that a vital element which many of us (at least in the developed world) have taken for granted as being abundant and cheap is about to become both scarce and expensive. Navigating the way forward to better management and usage of that scarce key resource will require change from the way we do things today, and that in turn will require cooperation between several agencies.

A more detailed summary is included below, together with links to the full report.

“The future is not bright”

  • Water quality and water supply are already reducing
  • Human beings already “withdraw about 50 per cent of the globally accessible and renewable water on an annual basis”.
  • Population growth and ageing infrastructure are exacerbating the situation
  • Climate change is expected to increase demand for water, but also increase volatility of supply, and reduce quality

“The era of cheap water is over”

  • The report calls for increased prices or ‘a better pricing system’ to address rising costs of chemicals, energy and labour costs.
  • While more efficient usage must be part of the solution, the expectation that this would lead to reduced pressure on over-exploited water resources seems less than clearcut to this reader, given that water companies would then make higher profits at higher prices.
  • Tiered pricing might be a solution. And it should not be forgotten that in England and Wales, for example, 20 per cent of water supply is lost through burst pipes.
  • Water prices are already rising significantly in “a number of countries”, in response to drought and increased operating costs.

Energy uses water, requires energy, …

  • Energy generation is a large consumer of water. (45 per cent of fresh water withdrawals in the USA.) As energy use is expected to grow (for example in emerging economies), so will water consumption — unless efficiencies are found.
  • But while oil extraction (conventional and unconventional), thermoelectric power generation (including coal, gas, and nuclear), and even biofuels all require large amounts of fresh water, wind, solar and wave power do not. This
  • Fracking technologies also degrade water quality, passing costs on to water utility companies.
  • Current technological approaches to providing fresh water are themselves highly energy-intensive, creating a vicious cycle.
  • Sewage waste can also provide a source of energy.

Increasing supply: “Technology in the driving seat”

  • The water industry is described as not being innovative, due to being in public ownership, low customer prices and the long life of its key assets.
  • The report argues that new technology is the way to use water more efficiently (for example in agriculture), monitor/reduce usage and spot leaks, increase supply (for example through new technologies for desalination and waste water recycling)
  • Other, low tech, solutions such as local rainwater capture, and purification to different standards for different purposes are not mentioned.

Sources of Funding:

  • The report expects that private companies will play an increasing role in financing, owning and managing the water industry.

Water as the next ‘hot commodity’

  • Although water is a “highly political and emotional issue”, and transport of water is difficult, the report expects increased price-driven trading of water and rights to extract water, probably based on local conditions.
  • “With demand for clean water potentially outstripping supply by as much as 40 per cent by 2030” in some parts of the world, and given our cultural assumptions, this seems likely.

Water stewardship — the way forward

  • “For many companies water is emerging as the next critical risk”, threatening business operations, supply chains, business continuity and even brand and withdrawal of licence to operate (if a company is seen to have poor water stewardship).
  • “Water quality regulations … will directly lead to increased costs” — while likely this is not strictly true, since savings from alternative process approaches could outweigh increased costs of regulation.
  • Water reporting is expected to increase, and there are already signs that it is doing so (in the same way that carbon reporting has increased).
  • And finally, solving these water issues will require co-operation between different organisations, and so “More efficient water usage not only results in cost savings, it also forges stronger relationships with investors, regulators, local communities and employees… [and] can have a positive impact on a company’s reputation.”

The full report can be downloaded from several Deloitte web pages around the world, including this one.

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