Solving the Twin Crises of Energy and Water Scarcity
This post originally appeared in Harvard Business Review. It is co-written with Debora Frodl, global executive director of GE's ecomagination program.
Few people realize the important role water plays in our daily energy use, or the energy required to heat, treat, and supply water. Powering one 60-watt bulb for 12 hours a day over the course of a year can require 3,000 to 6,000 gallons of water — enough to fill a large tanker truck. Meanwhile, the electricity used for water treatment can be as much as one-third of a city’s energy bill.
Most companies’ value chains are heavily dependent on water and energy resources. Automobile manufacturers, for example, create products that rely on metals, chemicals, oil, and gas, which are among the most energy- and water-intensive industries. Others, including technology and telecommunications companies, are major customers of — and suppliers to — those industries. Almost everyone has some skin in this game.
Looking ahead, the global population growing from 7 billion to 9 billion over the next 25 years will make the challenge of meeting demands for both water and energy more acute. Currently, more than 650 million people lack access to clean water, and a billion do not have electricity.
In a joint GE/WRI report, we highlight several countries and industries that are among the first to face the challenges of finding reliable supplies of water for energy production or supplies of energy for meeting water treatment needs. They include electric power producers in China and shale gas developers in the United States, who are looking at alternative options (such as waterless technologies, water reuse, and brackish water) that will allow them to be less dependent on increasingly stressed freshwater sources. The report also highlights efforts in the Middle East and North Africa to increase efficiencies and tap renewable energy sources in desalination plants.
Risks and solutions emerging in these regions suggest that we should be thinking creatively and collaboratively to meet future needs. Industries will have to overcome daunting commercial barriers. Water and energy are not typically priced to reflect their true scarcity, value, or costs. Coordination and investment across energy and water infrastructure is often lacking. Commercial and public-private partnerships will be needed.
The report offers three ideas for catalyzing such partnerships to meet the water-energy challenge:
Focus first on cost-effective solutions that reduce or shift demand. Investing in a supply-side solution such as seawater desalination can be as much as four times as costly as water reuse or other resource productivity options. Rather than trying to increase the supply of limited freshwater or fossil fuel resources, energy and water utilities can work with energy- and water-intensive industries to test and prove partnerships that boost efficiency and scale alternatives. Collaborations among energy producers and users, for example, can help scale technologies such as solar PV and wind power that require only negligible amounts of water. When a large group of commercial energy users gets together and outlines the types of renewable energy products they want to buy, their energy suppliers will listen. Similarly, companies and cities can make better use of otherwise wasted water and energy. The energy content of municipal sewage can be two to four times greater than the energy required to treat it, and GE demonstration projects with Chicago and other cities are turning that waste into electricity — enough to power entire treatment plants. Similar wastewater projects in Chinese cities are showing that sludge can be converted into valuable products such as vehicle fuels and organic composts.
See water and energy through women’s eyes. Involving and empowering women will be essential to meeting the water and energy needs of 9 billion people. In developing countries, women spend 25 percent of their day collecting water and 40 hours per month collecting fuel for their families. They are in charge of water and energy decisions at the household level, and their views must be included at the resource planning level as well. Companies such as Unilever and Coca-Cola are already involved in gender-empowerment initiatives that support economic development and stewardship of local water supplies. Partnerships can help finance women entrepreneurs, create local centers to supply clean water, and inform communities via text messages when clean water is available. These are important steps toward recognizing the role women can play in creating, shaping, and scaling solutions to water and energy challenges.
Find ways to value water and price carbon in all future investments. Managing water and energy risks will benefit from a full view of their costs and value to the business. Factoring the cost of carbon dioxide and other greenhouse gas emissions into future investments is an increasingly common business practice. More than 1,000 companies report that they are pricing carbon internally or they plan to within the next few years. Some, including several major oil and gas companies, are coming together at an industry level to work with governments on carbon pricing approaches. However, oil and gas companies are among those lagging on transparency when it comes to water risk. Assessing water risk and valuing water can be more complex but just as important as anticipating future energy and carbon costs. There is less experience with the practice to date, but a review of 21 water-related valuation studies highlighted many reasons a company should assess the value of water. Among them was managing water risk — something the World Economic Forum now ranks at the top of its list of global risks. There are frameworks emerging and opportunities for companies to work with others to understand the value of water relating to reputation and operational continuity.
Water and energy demand are deeply linked. Business leaders must pay attention to the risks and interdependencies that these twin challenges present. We need to acknowledge that multiple industries and stakeholders have important roles to play. We need them to work together on research, demonstration, and business model innovations at the water-energy nexus. Only then will we create a future in which humanity can thrive.
- LEARN MORE: Download the full report, Water-Energy Nexus: Business Risks and Rewards