"The World Bank and the Water-Energy Linkages"
GIZ
Nexus Interviews

NEXUS Interview // "The World Bank and the Water-Energy Linkages"

An interview with Diego Rodriguez, Senior Economist and Task Team Leader TWIWA, World Bank on the World Bank Initiative "Quantifying Tradeoffs of the Water-Energy Nexus".

"Water is the common denominator across all aspects of green growth and poverty reduction and it is essential to food and energy security. The increased demand for energy will put additional pressure on already constrained water resources. The capacity of water and energy systems to provide reliable and affordable service is crucial for economy-wide growth and poverty reduction," says Diego Rodriguez.

NEXUS Platform: Population and economic growth are expected to increase the demand for energy, water and food in the next decades in the context of rapid urbanization and climate change. According to the World Energy Outlook 2012, water consumption for energy generation will increase by 85% over 2010-2035. Which main challenges does the World Bank see specifically in the global water and energy sectors?

Dr. Diego Rodriguez is currently a Senior Economist at the Water Unit of the Department of Transport, Water and Information and Communication Technology of the Sustainable Development Vice-Presidency of the World Bank. He is the task team leader of the new World Bank initiative on the quantification of the tradeoffs of the energy-water nexus and the Program Manager of the Water Partnership Program. He is also the provided technical support to operational teams on the use of economic analysis in large water infrastructure investments under deep uncertainty. Prior to joining the World Bank he worked at the Danish Hydraulic Institute and the Inter American Development Bank. He has more than 20 years of experience in sectoral, operational, policy and strategy development in water supply, sanitation, and water resources management. // World Bank Website

Diego Rodriguez: Global economic growth is being driven largely by emerging markets. Over the medium term, the World Bank estimates economic growth of 6% in developing countries compared to 2.7% in higher-income countries. As economies grow and diversify, they experience competing demands for water for more municipal and industrial uses, as well as agriculture. Yet, 783 million and 2.5 billion people remain without water and sanitation, respectively. Cities will need to meet the increasing demand for food, energy, and water services of 70 million more people each year over the next 20 years. Over 1.3 billion people are still without access to electricity worldwide and closing the energy gap has implications on water, such as for fuel extraction, cooling water, and hydropower. This includes the expansion of renewable energy such as solar thermal and biofuels. Water-intensive thermal and hydropower already account for 90% of power generation, while global energy consumption will increase by nearly 50% by 2035. Recent estimates from the World Energy Council show that emerging economies like China, India, and Brazil will double their energy consumption in the next 40 years; by 2050, Africa's electricity generation will be seven times as high as nowadays; in Asia, by 2050, primary energy production will almost double, and electricity generation will more than triple; in Latin America, increased production will come from non-conventional oil, thermal, and gas sources. The amount of electricity generated is expected to increase fivefold in the next 40 years and the amount of water needed will triple.

From our perspective, it will be crucial to find the right balance among resources to sustain growth. Water is the common denominator across all aspects of green growth and poverty reduction and it is essential to food and energy security. The increased demand for energy will put additional pressure on already constrained water resources. The capacity of water and energy systems to provide reliable and affordable service is crucial for economy-wide growth and poverty reduction. But making decisions on water allocations among sectors has not been an easy process. Even if the linkages are evident, we still see energy models that do not properly address water constraints. For example, investigation of solar thermal plant siting may include consideration of cooling water availability, but the systemic implications of solar thermal versus other technology choices receives less attention. Energy planning is often made without taking into account possible changes in water availability due to climate change or other water competing uses. Water resources planning today rarely takes into account the energy used to pump, treat, desalinate, etc. the water, which in turn has an impact on the water used by the power sector.

The good news is that the global development community is already debating the interconnectedness of these resources. The word "nexus" has gained traction internationally. But now we must substantiate this word. We must produce the evidence for a better understanding of the implications and potential magnitude of water and energy stresses for the energy sector. The World Bank started analytical work on this topic and is identifying the countries in which support will be provided.

Could you tell us more about this on-going analytical work in the water and energy sectors. One of the main objectives seems to be to increase capacity for identifying and evaluating trade-offs and synergies between water and energy planning. Could you tell our readers more details and explain the main activities envisaged?

Our on-going work is a first step in substantiating the "nexus" with solid evidence. Essentially, our initiative was in the making when the German Government hosted the Bonn Conference on the Nexus between water, energy and food, which has paved the way for action by the global community. The goal of our activity is to generate innovative approaches and evidence-based operational tools to assist developing countries in assessing the economic, environmental, and social tradeoffs of water constraints in energy security and power expansion plans. In addition, we want to demonstrate the importance of integrated planning of energy, food and water investments in achieving green growth. By assessing existing tools, we are defining a methodological approach and we will push for operational application and capacity building in developing countries. In this context, we are working closely with energy specialists to incorporate water constraints in energy models and planning scenarios and we will be applying economic methods and tools to quantify the potential tradeoffs. We will bring those results into policy frameworks at the national and basin levels and we will provide evidence-based policy recommendations to our client countries.

Currently hundreds of millions of people lack access to sufficient food, energy or water supplies and services, while simultaneously economic growth and urbanization create added pressures on these resources. The necessity to understand their linkages and the systems that provide them are therefore ever more evident. SIWI has, for a long time, been involved in developing knowledge and providing platforms to bring together stakeholders concerned with the close linkages between water, food and energy, also constituting one of SIWI's core areas of work. We have seen a consistent growth in interest and a substantive increase in knowledge development addressing this nexus and the systemic approaches this normally entail. WWW 2012 provided a great opportunity to focus on aspects related to food production which automatically also put emphasis on water use, naturally, but also on how energy is utilized in these systems. The themes for coming WWWs provides for continued focus on the issues as 2013 will be about cooperation and 2014 is reserved for water and energy.

If this efforts in concentrating primarily on the energy and water nexus, is it possible to address water constraints for energy production without considering agriculture and food security issues?

The short answer is no. The three are as interconnected as ever and actions in one area have profound impacts on the others. It is estimated that feeding a world of 8 billion by 2030 will require 30 to 45 percent more water than it does today. Agriculture is the largest user of fresh water globally. Yet, cities and industries and environmental services — all heavy users of water - will also require more of it. Meanwhile, water scarcity is increasing. About 2.8 billion people live in areas of high water stress and 1.2 billion live in areas of physical scarcity. The linkages between energy and food have become evident over the past few years as increases in the price of oil led to increases in the price of food. Water and energy are required in the agriculture sector, and some crops are used for the production of biofuels, which compete for water and land with food crops. All decisions in energy planning need to take food security into consideration. For example, an assessment of a large hydro project for electricity generation may not sufficiently consider that the agricultural value-added of using that water for irrigation may be greater than would be obtained from using alternate groundwater sources for food production. A successful nexus approach that yields great economic benefits integrates management and governance across all three sectors.

Your research has already identified three possible approaches for integrating water and energy modelling and better water-energy linkage planning on a national / regional level: 1) to incorporate water resources and uses into existing energy modelling frameworks, 2) to incorporate energy production and uses into existing water resource modelling frameworks, or 3) to build a new integrated framework. Could you explain your current conclusion and pursued approach?

First, we should look at the issue from both sides: energy for water and water for energy. Our assessment of the existing modeling frameworks and current approaches to modeling energy and water indicates that a nested approach focused on incorporating water resources and uses into existing energy modeling frameworks is the most promising one. This conclusion is further supported by the fact that energy system planning models currently exist in many developing and emerging economies. An approach that can build on this existing capability should help organizations like the World Bank gain the support of country decision makers and other stakeholders and provide an incentive for client ownership. Thus, even if many energy models are available in the market, the initiative is focusing on models that are already being used in the client countries, that are open and accessible to developing countries and that can be modified or adapted in a convenient and easy manner. Of course, developing solid case studies that take into consideration risk and uncertainty will be crucial to demonstrate and apply the existing tools but we are sure that we will be able to overcome potential limitations this approach may have.

Although the link between water and energy is now evident and increasingly recognised, the two sectors have historically been regulated and managed separately and decision makers remain ill-informed about their drivers, possible outcomes, and the merits of different technical options. How does your activity address this challenge?

The first positive aspect towards a real implementation is the fact that our activity is being formulated with the energy sector. This is not a water initiative but a joint program of two sectors that have a common interest and a desire to move the agenda forward. Second, the activity has a strong knowledge and outreach aspect to it. It is not enough to do research and preach our technical findings among preachers — in this case, other water experts. In this context, we are planning to reach out to leaders and decision-makers in the energy and other sectors to challenge the conventional thinking with new approaches and show how the nexus is central to the green economy and overall development. We plan on strengthening partnerships at the global level to shape the dialogue and ensure that our messages are present in all major energy forums. We will invest more in knowledge and in developing platforms that make this knowledge useful and accessible among key actors.

Other actors are working on the Water, Energy and Food Security Nexus, in particular on assessing methodologies, as for example WBCSD at global level, FAO with a focus on the agri-food chain, or UNECE in transboundary basins. Do you see a potential for synergies and cooperation with other Nexus initiatives?

Forming stronger alliances is one of the World Bank's priorities in this exercise. This challenge is way too large for any one country or partner to tackle alone. We are working together with partners as needed to leverage the efforts of other nations, the international community, and partners in the nonprofit and private sectors. We have designed our new approach with many of the organizations present here who share the same commitment and excitement for exploring the nexus. These include the World Business Council for Sustainable Development, the Stockholm Environment Institute, and the World Resources Institute, just to mention a few. Stronger partnerships are the key to moving the water agenda forward both at the global policy level and at the country level. We would welcome more partners to join this common goal.

Thank you for the interview!

For further information on the World Bank initiative, please contact {drodriguez1@worldbank.org}

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