06/17/2014 05:30 pm ET Updated Aug 17, 2014

The Conflict Between Demands for Two Resources

Competition for water resources is on the rise in many regions on earth, as supplies become more variable in the wake of climate change and increased demand across diminished quality and quantity.

In the Western United States, for example, there is a debate about water allocation and in California lesser water rights holders are being ordered to shut down their pumps in order to ensure cities and power plants have sufficient water supplies. Yet, sometimes water supplies fall short for all. Just last year, water shortages shut down thermal power plants in India and decreased energy production in power plants in the United States. France was forced to reduce or halt production in nuclear power plants in the past, due to high water temperatures threatening cooling processes during heat waves. Droughts are threatening hydropower capacity in many countries, such as Sri Lanka, China and Brazil.

Producing energy requires a lot of water and as water resources become less reliable, energy production is adversely impacted. In general, most thermal power plants require large quantities of water, primarily for cooling purposes. Water drives energy production in hydropower generation and is also critical in energy development, such as coal, oil, and gas extraction and refining.

The energy sector faces a variety of risks related to water: increased water temperatures, sea level rise and diminished water quality, among others. These changes and increases in demand will be particularly felt in developing countries where lack of infrastructure and institutional capacity often hinders governments' ability to meet these needs. In Africa, electricity generation will grow by 700 percent by 2050, increasing demand for water by 500 percent according to the World Energy Council. As demand for water increases for energy, all sectors will require more water, due to population growth.

Tackling energy and water challenges will only be exacerbated by climate change, due to increased water variability and intensified weather events, such as severe floods and droughts. Already, some 780 million people lack access to improved water and 2.5 billion, more than one-third of global population, does not have access to basic sanitation. And while water is critical for producing power, the treatment and transport of water requires energy too.

Approaches to Tackling the Water-Energy Challenge
There are an array of opportunities and technical solutions to reduce water use in power plants and to exploit the benefits of possible synergies in water and energy: Thermal power plants may decrease freshwater needs by using cooling systems that require limited amounts of water, by decreasing the waste heat of the plant and, as a result, decreasing the cooling needs, or using alternative water sources, therefore displacing freshwater needs.

For example, Power Plant Villa de Reyes in San Luis Potosi, Mexico has been using treated wastewater from the Tenorio wastewater treatment plant (WWTP) in its cooling towers instead of freshwater for the last six years. This integrated approach, in this case known as Project Tenorio, is the first of its kind in Mexico. Nearly all of the WWTP's operational costs are covered from this revenue stream, and the power plant has a secure water source that is 33% cheaper than groundwater in the area. The power plant's use of reclaimed water has the additional environmental benefit of increasing aquifer sustainability, as it has reduced groundwater extractions by at least 48 million cubic metres over the lifetime of its operations.

While technical solutions play a critical role in addressing these challenges, institutional reform and guidance from policy is critical too. Currently, laws and regulations governing water use are varied around the globe, with some that are quite complex, and others that are vague and inconsistent. Determining what laws govern water can be expensive and time consuming, and consequently prevent certain stakeholders from acquiring all the information they need.

In addition, laws determining water rights may further complicate matters as some may govern an entire region, while others are basin specific. Certain groups hold special privileges of prior appropriation and have a "first right" to water withdrawals. Thus, in basins where water rights are fully allocated, transferring water rights between stakeholders may be difficult or costly.

Sustainable resource management is a question of many factors, including governance, status of infrastructure, and legal frameworks. Projects such as the Bertelsmann Stiftung's Transformation Index (BTI) seek to measure indicators like sustainability, social integration and welfare, in order to determine which transforming countries are implementing reforms to ensure future growth and viability. Such measurements are useful in gauging political will and highlighting areas where management may be improved to ensure continued sustainable development and integrated resource management.

Except for arid regions or hydropower nations, where energy and water's interdependence has been clear since the beginning and Ministries of Energy and Water were created, such as in Afghanistan, Kuwait, or Saudi Arabia, sectoral planning often remains separate and tends to be narrowly focused. Successful planning requires government agencies and stakeholders to participate in coordinated decision-making. Additionally, it is critical that development and expansion plans consider the water needs of competing sectors, and that energy managers ensure their processes and water use reflect the cost of water. Therefore, the World Bank's energy-water planning approach encourages the development of new institutional roles and processes, in addition to strengthening existing planning and analytical tools.

Making energy modelling "water smart"
Policy and technical solutions will be made more robust if they are supported by modeling. Projections derived from models can ensure power plants are more strategically located and that they implement technologies to increase energy efficiency.

In South Africa, for instance, a country with important water issues and large energy expansion plans, the World Bank's Thirsty Energy initiative aims to incorporate water allocation quantities by catchment area and marginal costs in energy optimization tools and plans. This enables planners to assess, using economic tools, whether or not, or to what extent, cross-sectoral competition will impact the technology mix in energy generation.

In South Africa, Thirsty Energy will build on the country's existing TIMES (SATIM) model, including its economic costs and emissions. The model is capable of solving for a variety of constraints, though it does not include the cost of water. Thirsty Energy is working with the University of Cape Town to develop the "water smart" SATIM, which will run different scenarios to assess how energy sector development strategies change relative to the reference scenario depending if water is constraint, if water has a price, etc. Additionally, Thirsty Energy will look at how expansion of coal and fracking and imposed greenhouse gas limits will impact water resources.

There are many existing approaches that can help countries and companies prepare for a future of increased competition and ensure that projects are resilient in the face of uncertainty. The question is one of action.

A version was first published on BTI blog