Following the United Nations projection that there could be a 40 per cent shortfall of water availability globally by 2030, the World Energy Council has released a report making recommendations to address global water-energy vulnerabilities.

Energy is the second largest freshwater user after agriculture. And while the report notes that the energy sector has made significant advancements in technologies to aid in recirculating and re-using water, and has increased the adoption of dry cooling, desalination, and reusing water from oil extraction, the analysis shows that it will be necessary to further reduce the amount of water needed for energy production in order to meet growing future demands.

Water is used all along the energy value chain in primary energy production (coal, oil, gas, biofuels) and in power generation (hydro, cooling), and 98 per cent of the power currently produced needs water.

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The report focuses on understanding how the energy sector can better manage impacts on land and water whilst still aiming to balance the food-water-energy dilemma. It recommends that the energy industry to work together with the financial community, investors, and policymakers to share and promote measures that must be incorporated into energy infrastructure design and investment decisions.

Among the recommendations, the report states that:

  1. Energy project developers need to be able to better understand the water footprint of energy technology choices being considered in order to mitigate the risks of potential stranded assets.
  2. Risk assessments should reflect a comprehensive understanding of long-term systemic risks by incorporating different climate and hydrological scenarios in financial analyses. This shows investors that environmental and social considerations have been accounted for in the design of energy infrastructure.
  3. Water scarcity has to be taken into account and, where possible, priced appropriately to establish an accurate risk profile that reflects the local context. If no market price can be used, companies can use a shadow water price. Water management and pricing policies must be defined locally to ensure that other policy objectives, such as equity considerations, are also met.
  4. Transparent and predictable regulatory and legal frameworks are needed to promote efficient solutions that balance the interests of competing users and provide certainty to investors.
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The report also makes the case for improved cross border coordination, noting that 261 international trans-boundary basins cover 45 per cent of the earth’s land surface, serve 40 per cent of the world’s population, and provide 60 per cent of the earth’s entire freshwater volume. This affects the operation of planned and proposed energy infrastructures, and there is a need to ensure that adequate cross-border water management frameworks are in place.

The full report is available online.

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