Policy and governance responses to the water-energy nexus
challenge
Kathleen Dominique, Environmental Economist, OECD
Water and energy scenarios
Water demand to increase by 55% by 2050
Global water demand, baseline 2000 and 2050

Source: OECD (2012), OECD Environment...
Human and economic costs of a changing climate:
uncertain future for freshwater
Change in annual temperature from 1990-205...
Outlook for water requirements for energy production
Global water use for energy production by scenario

Source: IEA (2012...
Outlook for water requirements for energy production
Global water use for energy production in the New Policies Scenario b...
Projected shifts in water-intensity of energy production

Source: IEA (2012), IEA World Energy Outlook, Chapter 17 “Water ...
Regional stress points: the example of China
Renewable water resources per capita and distribution of water-intensive ener...
Policy and governance responses
Improving coherence between water and energy policies
Strong water-energy linkages, yet often incoherent policies settings...
Improving coherence between water and energy
Various technological options impact water and energy policy objectives in
di...
Approaches to enhancing policy coherence
Exploiting win-wins
•
•

Pursuing multiple policy objectives at the same time
Exa...
Policy options to improve incentives and information
Robust water resource allocation
• To promote efficient, flexible, eq...
Governance challenges for water-energy coherence
Multiple institutional gaps
• Lack of institutional incentives
• Lack of ...
Improving governance and partnerships
Efforts to better co-ordinate water and energy policies,
examples of good practice:
...
Thank you. Questions?
References
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OECD (2012) Environmental Outlook to 2050: The consequences of inaction.
IEA (...
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Policy and governance responses to the water-energy nexus challenge by Kathleen Dominique, Environmental Economist, OECD

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Presentation on 'Policy and governance responses to the water-energy nexus challenge' by Kathleen Dominique, Environmental Economist, OECD, at 2014 UN-Water Annual International Zaragoza Conference. Preparing for World Water Day 2014: Partnerships for improving water and energy access, efficiency and sustainability. 13-16 January 2014

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  • Start with a brief introduction to water and energy scenarios, drawn from recent OECD and IEA Outlooks.
  • A world economy four times larger in 2050, and with over 2 billion additional people, will need more water. Under the Baseline scenario, global water demand is expected to increase by some 55%. This is primarily due to growing demand from manufacturing (+400%), thermal power plants (+140%) and domestic use (+130%). These competing demands will put water use by farmers at risk. There is little scope for increased use of irrigation water use in most regions. Allocation for natural water flows in rivers and lakes will also be competing with these demands, putting ecosystems under pressure.A more water-constrained future will impact reliability and costs in the energy sector.
  • MitigationWater is critical aspects of meeting climate goals. Carbon capture and storage requires, in addition to extra energy from the power plant itself, water-cooling. Biofuel and bioenergy production, relies to a large extent on agriculture feedstocks.AdaptationChanges in the water cycle are one of the main ways in which the impacts of climate change will be felt – this includes increasing variability, increasing extremes (droughts, floods), higher ambient temperatures (including warmer water temperatures).Water shortages and heat waves have already had detrimental impacts on electricity reliability, especially in drought-prone and water-scarce regions. Examples include:France (2003) An extended heat wave forced EdF to curtail nuclear power output equivalent to the loss of 4-5 reactors, costing an estimated €300 million to import electricity.India (2012) A delayed monsoon raised electricity demand (for pumping groundwater for irrigation) and reduced hydro generation, contributing to blackouts lasting two days and affecting over 600 million people.China (2011) Drought limited hydro generation along the Yangtze river, contributing to higher coal demand (and prices) and forcing some provinces to implement strict energy efficiency measures and electricity rationing.
  • The IEA World Energy Outlook in 2012 took a close look at the water-energy nexus. Method: They took water factors for withdrawal and consumption were taken from published literature and databases and applied to various forms of energy supply (power generation and fuels production) by region in our energy scenarios. Regional stress points were qualitatively assessed for key regions.The energy sector accounts for around 15% of the world’s freshwater withdrawal today.Power (cooling) is the largest user of water in the energy sector – primarily coal-fired and nuclear power plants.In the “New Policies” scenario, in the period 2010-2035, water withdrawal for energy increases by 20%; water consumption for energy increases by 85%. Driving these trends are:Use of more efficient power plants.An ongoing shift towards closed-loop (rather than open-loop) cooling systems in the power sector.Expanding biofuels production.
  • In the New Policies Scenario, water use for power generation – principally for cooling at thermal power plants – accounts for the bulk of water requirements for energy production worldwide, although the needs for biofuels also become much more significant as theirproduction accelerates – as seen in this figure.Increasing shares of gas-fired and renewable generation play a significant role in constraining additional water use in many regions, as global electricity generation grows by some 70% over 2010-2035, much more than water withdrawal or consumption by the sector.Details: Withdrawals for power generation in 2010 were some 540 bcm, over 90% of the total for energy production. These slowly rising requirements level off around 2015, before falling to 560 bcm at the end of the Outlook period. There are two counteracting forces at work: a reduction of generation by subcritical coal plants that use once-through cooling, particularly in the United States, China and European Union, cutting global withdrawals by coal-fired plants by almost 10%; and growth in generation from newly built nuclear power plants that use once-through cooling (for instance, some that are constructed inland in China), which expands water withdrawals for nuclear generators by a third.
  • The water-intensity of global withdrawals and consumption for energy production – that is, water withdrawals and consumption per unit of energy produced – head in opposite directions during the Outlook period. Withdrawal-intensity of global energy production falls by 23%, whereas consumption-intensity increases by almost 18%.This is primarily the result of an expected shift in the power sector away from traditional once-through cooling systems towards wet towers (that reduce withdrawals but raise consumption).Aside from ‘quantity’ risk, the energy sector poses a ‘quality’ risk to water resources. This is especially true in the production of unconventional oil and gas, whose future viability depends on our ability to responsibly manage several water-related environmental and social concerns.
  • China’s water resources are set to become more strained with the country’s ongoing urbanisation and economic development. This example illustrates the important spatial dimension of the water-energy nexus. China’s water challenges are exacerbated by geographical disparity between supply and demand: water is much more abundant in the south than in the north and west, where the country’s water-intensive agriculture and industry sectors are concentrated. Limited water supplies and widespread pollution of river systems in parts of China haveput increasing pressure on groundwater resources (IBRD, 2009).Notes: On a national basis China’s renewable water resources per capita were 2 070 cubic metres in 2010, just above the level regarded in this analysis as indicating “water stress”; Water withdrawals per capita amounted to about 460 cubic metres. Around 65% of China’swater withdrawals are for irrigation, 23% for industry and 12% for municipal use (UN FAO, 2012).On this map: Although water resources in the Xinjiang Uygher Autonomous Region, as a whole are above the national average, they are unevenly distributed. The Tarim Basin, which has high potential for shale gas production, is particularly arid.Sources: water data from China National Bureau of Statistics; IEA analysis.
  • How to address these challenges?
  • To address the water-energy nexus challenge, governments would benefit from implementing policies that enable coherence between these two commodities. By contrast, incoherent policies might find themselves with severe scarcity of one resource of the other – or both.Options to increase water security often energy-intensive. This includes vastly increased energy requirements of water supply augmentation strategies – like long haul transfers and desalination. In addition, water efficiency improvements are in some cases made at the expense of energy efficiency. For example, efforts to reduce water consumption at power plants are accompanied by the tradeoff of increase costs and lower power efficiency, also resulting in higher GHG emissions.In the same vein, as highlighted in the previous slides, water is a critical aspect of meeting future energy demands – and meeting climate goals.“Water-blind” energy policies, could include re electricity and fuel standards that favor water-intensive options (steam based Concentrating solar power, biofuels from irrigated crops)“Energy-blind” water policies – for instance using energy-intensive options to augment supply (rather than reduce demand). For instance California uses 6% of all its electrictiry consumption just for domestic and irrigation water pumping (Klein, et al 2005). Much of its is to pump water nearly 1000 m over the Tehachapi Mountains from the San Joaquin Valley to Southern Cal, and the pumnps that move this water are the single largest power load in the state.
  • (IEA message) Water-energy challenges can be managed with existing technology (advanced cooling, non-freshwater sources, recycling and reuse); matter of trade offs in cost, facility siting and energy output. Yet, various technological options impact water and energy policy objectives in different ways.Some technologies that are win-win options for both water and energy include: low-flow fixtures, energy efficient appliances, solar water heating, etcSome that require tradeoffs, include biofuels, groundwater pumping
  • Exploiting win-winsPursuing multiple policy objectives at the same time Examples: increasing water and energy efficiency; lowering water consumption through conservation, labelling of water-efficient appliances, etc. (Singapore)Avoiding conflictsPursuing one policy objective without undermining othersExamples: Requiring solar hot water systems on new buildings (Israel); us of waste heat form thermoelectric power plants for desalinate seawater to produce reliable drinking water (Middle East)Managing trade-offsMinimising negative impacts on other policiesExamples: Recycling effluent from biorefineries to reduce negative impacts on freshwater ecosystems (Brazil); Co-ordination between policies for water allocation and energy explicitly (Israel’s 2010 Master Plan for national water and wastewater management).Can include details of the examples from pg 47 w-e coherence
  • Robust water resource allocation To promote efficient, flexible, equitable risk sharing among water usersAvoid “disorganised” allocationRemove environmentally-harmful subsidiesFor example, subsidies for energy use that exacerbate groundwater pumpingMake better use of economic instrumentsE.g. water pricing, abstraction charges, pollution charges(From IEA) Generate better data:Data on available water resources.Data on water withdrawal and consumption by operating energy facilities (most is theoretical).Data on water withdrawal and consumption by other users (including agriculture!).These policy responses require effective governance mechanisms to fill in information gaps and engage with relevant stakeholders to ensure that reforms proposed can actually be implemented. This requires, for example in reforming subsidies that encourage unsustainable water use (cf. example in Mexico Report).
  • OECD work on water governance (2011) shed light on many obstacles to effective coordination between water and energy policies, such as the lack of institutional incentives and platforms to manage trade-offs, interference of lobbies, absence of strategic planning and sequencing decisions, and intensive competition between the different ministries and public agencies. We are currently starting a project on stakeholder engagement for effective water governance (to be released in 1 year) to review trends, drivers and practices in engaging stakeholder across OECD countries’ water sector and provide policy guidance.
  • Many OECD and BRIICS countries have engaged in efforts to co-ordinate water and energy policies. These good practices, from joint decision-making and planning to data production on the water-energy nexus, need to be shared and scaled-up at regional and national level. To name a few:  In Brazil, in order to limit the impact of water extraction for energy production on freshwater ecosystems, the legal framework requires a previous authorization from the National Water Agency for concessions to exploit hydropower potential. In England and Wales, 89% of the energy used in abstracting, treating, distributing, using and returning water to the environment is used on hot water in the home. The Environment Agency is now working with the Energy Saving Trust to develop policy in this area to target hot water use as a way of mitigating climate change.   In Spain, the National Water Council includes representation of the energy sector by the head of the Directorate General for Energy Policy and Mines, Ministry of Industry, Tourism and Commerce as well as a representative from the Spanish Association of Electrical Industry. In Australia, researchers at the Australian National University and the University of Technology Sydney have formed the Climate-Energy-Water Links project to build upon existing water resource planning by adding the energy dimension to the policies.
  • Policy and governance responses to the water-energy nexus challenge by Kathleen Dominique, Environmental Economist, OECD

    1. 1. Policy and governance responses to the water-energy nexus challenge Kathleen Dominique, Environmental Economist, OECD
    2. 2. Water and energy scenarios
    3. 3. Water demand to increase by 55% by 2050 Global water demand, baseline 2000 and 2050 Source: OECD (2012), OECD Environmental Outlook to 2050; output from IMAGE
    4. 4. Human and economic costs of a changing climate: uncertain future for freshwater Change in annual temperature from 1990-2050 Source: OECD (2012), OECD Environmental Outlook to 2050; output from IMAGE
    5. 5. Outlook for water requirements for energy production Global water use for energy production by scenario Source: IEA (2012), IEA World Energy Outlook, Chapter 17 “Water for Energy”.
    6. 6. Outlook for water requirements for energy production Global water use for energy production in the New Policies Scenario by fuel and power generation type Source: IEA (2012), IEA World Energy Outlook, Chapter 17 “Water for Energy”.
    7. 7. Projected shifts in water-intensity of energy production Source: IEA (2012), IEA World Energy Outlook, Chapter 17 “Water for Energy”.
    8. 8. Regional stress points: the example of China Renewable water resources per capita and distribution of water-intensive energy production by type in China Source: IEA (2012), IEA World Energy Outlook, Chapter 17 “Water for Energy”.
    9. 9. Policy and governance responses
    10. 10. Improving coherence between water and energy policies Strong water-energy linkages, yet often incoherent policies settings Improved coherence requires meeting multiple policy objectives for water and energy • Improving water security (managing risks of “too little”, “too much”, “too polluted” water and ensuring resilience of freshwater ecosystems) • Increasing energy security • Mitigating and adapting to climate change Pursuing policy objectives independently often leads to incoherence (“waterblind” energy policies, “energy-blind” water policies)
    11. 11. Improving coherence between water and energy Various technological options impact water and energy policy objectives in different ways • • • • Help achievement objective(s) Hinder achievement of objective(s) Require trade-offs among objective(s) No appreciable impact on objective(s) “Win-win” technological options for both water and energy • E.g. low-flow fixtures, energy efficient appliances Trade-offs required for water and energy • E.g. irrigated biofuels, groundwater pumping
    12. 12. Approaches to enhancing policy coherence Exploiting win-wins • • Pursuing multiple policy objectives at the same time Examples: increasing water and energy efficiency; lowering water consumption through conservation, labelling of water-efficient appliances, etc. (Singapore) Avoiding conflicts • • Pursuing one policy objective without undermining others Examples: Requiring solar hot water systems on new buildings (Israel); use of waste heat from thermoelectric power plants to desalinate seawater to produce reliable drinking water (Middle East) Managing trade-offs • • Minimising negative impacts on other policies Examples: Recycling effluent from biorefineries to reduce negative impacts on freshwater ecosystems (Brazil); Co-ordination between policies for water allocation and energy explicitly (Israel).
    13. 13. Policy options to improve incentives and information Robust water resource allocation • To promote efficient, flexible, equitable risk sharing among water users Remove environmentally-harmful subsidies • For example, subsidies for energy use that exacerbate groundwater pumping Make better use of economic instruments • E.g. water pricing, abstraction charges, pollution charges Generate better data to inform policy decisions
    14. 14. Governance challenges for water-energy coherence Multiple institutional gaps • Lack of institutional incentives • Lack of platforms/ governance mechanisms to manage trade-offs • Interference of lobbies • Absence of strategic planning and sequencing decisions • Asymmetry of information and resources among institutions • Intense competition between different ministries and public agencies
    15. 15. Improving governance and partnerships Efforts to better co-ordinate water and energy policies, examples of good practice: • Brazil: to limit negative impact on freshwater ecosystems, legal framework requires previous authorisation from ANA for concessions to exploit hydropower potential. • Spain: the National Water Council includes representatives from the energy sector. • England and Wales: Environment Agency working with the Energy Saving Trust to develop policy to reduce hot water use in the home. • Australia: researchers have created the Climate-Energy-Water Links project to add the energy dimension to water resources planning and policies.
    16. 16. Thank you. Questions? References      OECD (2012) Environmental Outlook to 2050: The consequences of inaction. IEA (2012) World Energy Outlook, Chapter 17 “Water for energy”. IEA (2012) Golden Rules for a Golden Age of Gas. OECD (2013) Water Security for Better Lives. OECD (2013) Water and Climate Change Adaptation: Policies to Navigate Uncharted Waters.  OECD (2011) Water Governance in OECD Countries: A Multilevel Approach  OECD work on water: www.oecd.org/water Contacts Kathleen.Dominique@oecd.org (OECD, Water allocation; water and climate change) Matthew.Frank@iea.org (IEA, Water for energy), Aziza.Akhmouch@oecd.org (OECD, Water governance)

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