Elaborating on the Nexus Between Energy and Water

Like energy, water is used in different forms and cuts across most development functions in society. With growing populations and economies, the demand for water for food production and energy production (bio-energy and hydropower), and water for industry and domestic use is steeply increasing at the local, national and regional levels. During the past hundred years the world’s population has tripled and the use of water has increased six fold during the same time. Recent data indicates that a global 40% water supply gap of accessible and reliable water supply for economic development is expected by 2030. This at a time when there are still tremendous challenges in providing access to safe drinking water for nearly 1.1 billion people, proper sanitation for over 2 billion people and providing food to market for over 1 billion people that are suffering from under-nourishment. Broad-based water service interventions in water supply and energy utilities, water and sanitation and irrigation services benefit everyone and play a major role in improving sustainable and dignified livelihoods. Long term climate change, on top of existing rainfall variability, will provide additional water management challenges. Droughts and floods will increase and cause shocks to both developing and developed economies. 

Against this background, it comes as no surprise that the political economy behind the allocation of scarce water resources for different purposes, including for vital ecosystem functions, is beginning to shape public policy. For example, successful countries in regions with limited water resources are diversifying their economies away from over reliance on agriculture and are putting in place water demand management systems to save water for higher value use. Such higher value use would include water for industry, services and modernizing agriculture by moving production from grains to other crops such as vegetables fetching higher market prices.

Image courtesy of IBM Smarter Planet

Energy is required in all the steps along the water value chain, from providing water services such as pumping water for water supply and sanitation systems, to the delivery of irrigation water for food and bioenergy production, to the construction of large scale water storage for flood protection. As water resources become scarce, water will be pumped long distances, or be produced through alternative means, such as energy intensive desalination processes. Modern water management, including establishing monitoring networks and data centers, is dependent on reliable access to electricity. To achieve water security, which means the provision of an acceptable quantity and quality of water for health, livelihoods, ecosystems and production, energy must be available. The links between these two key assets for building societies, water and energy, need to be further explored and strengthened.

Water does not conform to borders. There are an estimated 261 river basins globally that cross international borders, not to mention boundaries within countries. These trans-boundary river basins cover about 45% of the earth’s surface. Some of the most contested river basin systems in the world are found in dry regions such as the Middle East and Africa where international cooperation is weak and civil strife and tensions prevent cooperation on these shared assets. Competition for water resources between states, within states and between different sectors is increasing. This is partly because of the upstream and downstream dimension where water flows from high to low lying areas which provides opportunities for upstream countries or users to have some control over both the quantity and quality of downstream water flow.

The cooperative management of trans-boundary river basins and the sharing of benefits from development therefore pose serious challenges, since all states in a trans-boundary river basin depend on each other. But if the aggregate benefits from common use of water are larger than those of systems in which water allocations and management take place at the unilateral level, then there will be incentives for cooperation, driving regional integration. Research has shown that regions which have removed barriers to trade and increased interactions between states have experienced a relative increase in prosperity and stability when compared to regions with more limited cooperation. The development of hydropower, including irrigation and flood control, in multipurpose schemes provides tangible benefits that can be distributed at the regional level. Other benefits include industry, food and health outputs, as well as environmental services for biodiversity conservation and tourism that all can be generated at the local or regional level. Benefit sharing schemes based on water and energy bring opportunities for small and isolated economies and stimulate growth in larger economies.

While industrialized countries have invested significantly in building water management capacity and water infrastructure, many developing countries have not. In hydropower development, for example, industrialized countries use most available hydroelectric potential as a source of renewable energy. At a global level hydropower contributes about 20% of the world’s electricity generating capacity. The most significant hydropower capacity is in developing countries, which in many cases harness only a small fraction of their available hydropower potential. In Africa, only 7% of the technical and economic hydropower potential is exploited compared to 22% in Asia, 69% in North America and 75% in Europe. In existing hydropower facilities, opportunities to increase electricity outputs may exist by using up-to-date technology. Hydropower provides future price security, and for countries with indigenous supply, it reduces foreign exchange requirements for fuel purchases. The environmental appeal of hydropower generation gained from the reduction of pollution and greenhouse gas emissions is well established. Most growth scenarios still depend on fossil fuels as the dominant source of energy worldwide, regardless of the emissions impact. With demand for for electricity expected to grow over 70% between now and 2030 and with a projected 1.3 billion people still lacking access to electricity by that date, the role of hydropower as a renewable source of energy will be important in providing energy security.

Between growing energy demand and the fact that a large proportion of available water resources are shared between nation states, there is a need to find smarter ways of cooperating around the water and energy nexus. Scenarios indicate that if it is possible to increase water use efficiency, then available water resources would be able to meet the development needs of 9 billion people. These scenarios do not take into consideration the uncertainty of shifting water use away from food production to bio-energy production. In this context we can learn from how electricity markets operate at the regional level through power pooling between several countries, such as in the Nordic Power Exchange (Nord Pool), which is the single power market exchange for Scandinavian countries. The power market allows different sources of fuel, including hydropower, to be balanced in the system and for price efficiency and physical market trading for the following day hour by hour. Today Nord Pool market membership includes energy producers, industries, large consumers, distributors, utility companies and financial institutions. It started off as a bilateral cooperation in the early 1990s and has now developed into a multi-country market mechanism with further integration into the larger European energy market.

Water in the Middle East has always been a scarce resource. The Middle East region hosts 5% of the world’s population, but only 1% of the world’s renewable water resources. About 60% of the available freshwater is in trans-boundary basins. Per capita availability of water is the lowest, rates of withdrawal already the highest, and more water storage has been installed than in any other region of the world. But there are still millions in the region for whom pathways out of poverty will rely on access to, and use of, more water and energy. The agricultural sector is by far the most demanding in terms of water withdrawal. It consumes on average about 80% of the freshwater resources. The Gulf States, dominated by oil industries, still use a considerable amount of water for agricultural purposes despite receiving relatively small contributions to GDP from this sector.

Some countries in the region enjoy extreme wealth while some are among the poorest in the world. The region is expected to double its population in the next 40 years. Poverty reduction and distribution of wealth are of critical importance for regional development. Water is prominent in the national politics of virtually every Middle East nation, while at the same time regional collaboration is weak. The availability of reasonably priced electricity is a major factor in resolving the interconnected issues of population, poverty, and environmental sustainability. The generation of electricity through hydropower provides a direct feedback loop to water management in the region.

The trans-boundary nature of the water resources in the Middle East makes cooperative management of these resources critical. The same is relevant for energy, where co-management of electricity networks will increase the possibilities for individual countries to get access to a larger set of cost effective energy sources. Hydropower contributes more than 12% to the total electricity supply in the region. The countries with the best opportunity to develop and use hydropower in trans-boundary river basins, and reduce fossil fuel dependency in the future, are Iran, Iraq, Syria, and Turkey. 

The current availability and future potential of electricity supply in the Middle East region depends on several factors, including in-country fossils fuels, hydroelectricity, renewable energy sources, and wealth—which allows for imports of fuels or electricity. The overall energy balance will be affected by the extent to which demand-side management can be applied to reduce total energy consumption and the region’s ability to increase supply through renewable energy sources, such as solar and wind power. The region primarily depends on indigenous or imported fossil fuels for power generation. However, the generation of hydroelectricity makes an important contribution in certain countries. This is usually associated with multipurpose applications, such as flood control and irrigation, which are also important to the economies of these countries. In many cases these non-energy benefits provide the primary justification for the construction of hydro projects.

The availability and use of significant hydroelectric resources is directly dependent on the water resources of the region in which the country is located. All countries in the Euphrates and Tigris River Basin (Iran, Iraq, Syria and Turkey) have significant hydroelectric generation supply and potential. However, the countries that are located in the Jordan River Basin (Israel, Jordan, Lebanon, the West Bank), and the Arabian Peninsula (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE, and Yemen) have minimal water supplies, and no hydroelectricity generation potential. Egypt benefits from substantial energy generation on the Nile, which is shared by ten riparian countries and will have access to upstream hydropower from Sudan and Ethiopia, if cooperation on this major river basin system can move forward.

The most cost effective option to meet future electricity demand in the Middle East is therefore to develop and share the energy resources through power pools and to import electricity from regions with surplus. The trans-boundary water resources in the Euphrates and Tigris basin, and beyond the region in Central Asia and the Nile Basin, feature large hydropower development opportunities that can provide cost-effective hydroelectricity for a Middle East regional market. Many countries already share electricity grids and plans to connect them to regional networks, such as the Gulf Cooperation Council (GCC) interconnection project. Larger regional plans still have far to go before reaching the implementation phase, but dialogue is ongoing throughout the region, including on a Mediterranean power pool. The role of hydropower as a source of fuel in these projects will be important.

Innovating new methods to tackle the water and energy nexus in a cooperative manner can provide prosperity and incentives for regional integration and help meet growing demand for both water and energy in many regions in the world, and particularly the Middle East region. To achieve these benefits, better cooperative management and development of trans-boundary water resources in the major basins in the Middle East, including the Euphrates-Tigris basin, the Jordan basin, and the Nile Basin, will be key to achieve water and greater energy security. Water flows across borders and crosses many boundaries, and yet cooperation is limited on this shared natural resource. Cooperation over energy exists and can be found in bilateral trade agreements and transmission interconnection projects, even in areas with civil strife. Tackling trans-boundary water management and development from a practical and outcome-oriented approach, such as in the case of energy cooperation, demonstrate how tangible benefits can be achieved at the regional level to improve livelihoods and strengthen regional integration.

Jakob Granit is a Project Director at the Stockholm International Water Institute