The Water Wars are Here

September 2020

As we write in mid-September, Hurricane Sally has stretches of the US Gulf Coast well under water, and Japan is still recovering from the flooding of Typhoon Haishen.  Yet while way too much water is the problem in some places, not enough water is the big problem elsewhere.  A Washington Post headline on September 15 captures the latest example: “Mexican famers occupy dam to stop water payments to the United States.”  Infrastructure Ideas believes we’ll see many more of these types of headlines, and in this issue we’ll explore some of the implications for infrastructure.

The ongoing conflict in the Mexican state of Chihuahua featured in the news is tied to a long-standing, complex arrangement.  Under a water-sharing treaty signed in 1944, Mexico and the United States annually send water for irrigation across the border in both directions – three-quarters flowing south to Mexico.  The issue which has flared up now is the different geography of water flows: Mexico’s share is sent north from the Rio Grande and Conchas rivers, mostly from Chihuahua, while the US share is sent south from the Colorado River elsewhere along the border.  Local farmers in Chihuahua have occupied the Boquilla dam, on the Conchas River, to protest the central government’s sending water across the border.  Mexico’s national guard was sent to clear out the protesters, killed one protester and failed to dislodge the farmers.  A leader of the protest said “We tried to have a dialogue, but nobody listened to us.  We are prepared to stay here and defend our rights to this water.”  A second protest broke out this past weekend at the Cuidad Juárez border bridge, demanding justice for the death at Boquilla and the cessation of water flows.

Mexican Riot Police Guard Dam in Chihuahua (Washington Post)

Leaving aside the specifics of the Chihuahua situation, one does not need to go far to observe similar protests.  Driving last week in record-breaking heat along California’s Central Valley, we could see every twenty miles or so, interspersed among the unending line of fruit orchards, signs calling for more dam-building to provide water to the Valley’s farmers. 

Published in the New York Times

In the American West, conflicts over insufficient water supplies have raged for over a century, though not coming (at least recently) to the armed conflict appearing in Chihuahua.  As Climate Change creates more drought conditions in more places, these conflicts will only grow.  While some of the coverage of the issue tends to melodramatic and/or dystopian, the science behind what will happen and where is getting much more precise.  Over 500 past and present water-related conflicts are catalogued by worldwater.org, and earlier this year a new analytical tool was launched to help predict where such conflicts might arise, and it is not too early to focus on the practical infrastructure consequences.

We see five principal implications from these growing water shortages for infrastructure:

  1. more demand for long-distance water transport
  2. lower reliability of the same, and need for investors to focus not only on support from political leaders, but also broader support from local population,
  3. more demand for local/smaller dams
  4. greater focus on efficiency of water infrastructure
  5. a push for more widespread pricing of water

Let’s look at each of these implications in turn.

More demand for long-distance water transport.  Three inter-related drivers will create growing demand for water pipelines and canals: increased Climate-Change related water-stress in many places, population growth, and continued growing urbanization.  These drivers will mean that at the same time cities demand more water for taps and showerheads while farmlands demand more water to grow the food that increased numbers of city-dwellers consume.  Local water sources, whether from rivers or underground water tables, in many areas either are failing to keep up with demand growth or diminishing altogether.  Cities have historically found it more politically expedient to address such problems first by buying needed water from elsewhere, before asking their citizens to change their ways.  In some cases that elsewhere can be a very long ways away: the longest water pipeline today is the “Great Man-Made River,” which stretches over 1,000 miles and provides water to the main cities of Libya.  It will soon have a rival for this distinction, as the “North-South Water Transfer Project” in China, under construction since 2015, aims to deliver water to China’s southern cities over close to 2,000 miles of pipelines.  The Trans-Africa Pipeline (TAP), now on the drawing board, seeks to pump water across the Sahel over an even longer 5,000 miles.  Most future pipeline projects won’t be this long, but they will still be long enough to very expensive, both in construction and operation – as moving water across long distances is highly energy-intensive (when water is not being pumped up hills, dampers have to slow the water on downhills).  Both the politics and the economics of these projects will be immensely challenging, but nonetheless we can expect to see their numbers rise.

Lower reliability of long-distance water transport arrangements.  More demand is not the same as more reliability.  The current conflict in Chihuahua perfectly illustrates the dynamics that are likely to accompany a number of water pipelines or canals.  Recipients insist on receiving their contracted allotments, climate change creates unforeseen water stresses in the area sending water out, and local populations protest decisions made by central authorities elsewhere.  For those relying on the pipelines, or in the case of private financing those investing in the projects, the lesson is to not rely solely on agreements made by central political leaders, but to understand the degree of support from the local population in the area from which the water is coming.  This political risk will layer on top of good old-fashioned construction risk, with high chances of major delays and cost overruns in these types of projects, while Global Warming will increase evaporation in many canal-based systems (between 2000 and 2014, the inflow to the Colorado River went down by nearly 20%, with 1/3 of that reduction from global warming).  Infrastructure Ideas has also written previously about the growing cyber-risks associated with some infrastructure systems, and long-distance water transport control systems could be a prime area of vulnerability.

More demand for local/smaller dams.  Where bringing water from far away is too difficult, too expensive, and/or risky, we will see demand for local authorities to create insurance in the form of more close-by reservoirs.  The current advocacy by large-scale agro-industry in California Central Valley is one of many examples.  In many cases, such projects will be politically appealing, but not always likely to solve the underlying problem – dams not receiving enough supply of water will themselves become dry, which is part of the problem at the moment in Chihuahua.  Dam-building also suffers from a high degree of construction delay and cost overrun risk, and potential co-benefits from dams which may be argued by producing clean energy are likely to bump into the increasingly unattractive cost of new hydropower generation.  Nonetheless, we expect that political appeal will see an increase in this type of infrastructure projects.

A greater focus on efficiency of water infrastructure.  Efficiency has historically been the poor stepchild of the water sector.  Up to 30-50% of water supplies are lost in pipelines, whether long-distance or simply in consumer distribution systems, due to a combination of poor management and other priorities.  Among other things, shiny new pipelines or treatment stations have always looked politically more appealing than the nitty-gritty of reducing leaks.  As more places feel the pinch on water supplies, and the difficulties of executing large construction projects such as pipelines and dams become more apparent, we can expect efficiency to climb up in priority.  There is no shortage of examples of better technology and practices from which city authorities or water management companies can choose.  Among others, miniaturized, submersible drones are likely to become in high demand as a tool for reducing the costs and improving the speed of finding and fixing leaks (see Infrastructure Ideas’ “The Drones are Here” for previous coverage).

More widespread pricing of water.  “Free water” is an idea which is politically and ethically appealing.  In low income areas, the argument for free water will remain strong.  Yet at the same time, the absence of economic incentives for avoiding the waste of water – especially for large users – has long been an impediment to water conservation and efficiency.  For the same reasons as discussed immediately above, one can expect that a greater focus on efficiency of water infrastructure will be accompanied by a push for more widespread pricing of water.  This in turn will enable more cities and regions to tap into private capital for financing a part of their growing bills for water infrastructure – if they can overcome political resistance.  As has been seen in many places, that resistance is often the fiercest coming from large users, and not from poorer segments of the population.

It would be nice to be able to give a sixth likely infrastructure implication from the growing incidence of water conflicts: greater policy coordination.  The non-existence of such coordination or cooperation in many places is a large factor the spreading geography of water shortage, the American West being one of the most prominent examples.  Unwillingness of political actors to speak with each other, or the inability to maintain such dialogue consistently, bedevils water use from the Nile to the Himalayas to Indochina.  Regrettably, with populism on the rise in so many places, trailing unilateralist tendencies in its wake, it seems hard to imagine greater policy coordination on the horizon anytime soon.  One can always hope.

The Desal Boom

February 2020

Thirsty world must wake up to water crisis,” runs one of an increasing number of headlines in recent years. According to the New York Times, 17 countries around the world are currently under extremely high water stress, while according to the Rockefeller Foundation, 1/3 of humanity and is water-stressed every year or season. Whether countries and/or regions are arid to begin with, whether aquifers are being overdrawn due to growing populations or economies, whether fresh water sources are being polluted, or whether climate change is making extreme weather patterns – drought or excess rainfall – more common, it is clear that the issue of water availability is affecting more people and more areas than ever before. The problem is getting worse, and the consequences are getting worse: the World Bank has written that climate change will be the biggest factor increasing the pressure on water supplies in the future, while former Nigerian Finance Minister Ngozi Okonjo-Iweala states that in 2017 water played a major role in conflict in at least 45 countries, particularly in North Africa and the Middle East.

water-desalination

In some places, desalination looks like the answer to this crisis. Desal is definitely booming: the number of plants around the world has quadrupled in the last three decades to over 20,000, and global desalination capacity in operation is up 500% since 2000. More than 300 million people around the world now get their water from desalination plants. As a recent review in Wired notes, for decades, the vague promise – since the first large-scale desal plants were built in the 1960s — that one day oceans of salt water would turn into fresh and quench the world’s thirst has not been matched by much reality. But now several factors have started to change the picture: on the supply side, the costs of desalination have been declining, dropping by more than 50% since 1990; on the demand side, with population booming in many water-stressed places, including big economies such as China, India, South Africa, and the American West, and droughts occurring more frequently, many more places need new solutions. Dry Saudi Arabia produces the most desalinated fresh water of anyone, a fifth of the world’s total, and desal makes up an estimated one-half of total water consumption in the Kingdom. Australia and Israel are also large producers. The industry has now seen somewhere over $300 billion in investments, with an estimated $15-20 billion in annual new capacity investment (author’s estimates).

Desalination demandJONES ET AL/ SCIENCE OF THE TOTAL ENVIRONMENT, 2019

Desalination plants have also become a favorite of many institutional investors. The large capital costs (California’s current wave of plants under construction run to around $750 million each, while Melbourne’s flagship plant was recently completed at a cost of over $3 billion). That level of capital plants makes water utilities more interested in finding private capital to help build projects, and in turn provides the large ticket size institutional investors look for in infrastructure assets – in this case along with stable revenues. In one example the Carlsbad, California, plant changed hands in 2019 from its private equity investors (Brookfield and Stonepeak) to Aberdeen Standard for over $1 billion.

What does the future look like?

In the near-term, current growth trends look likely to continue. California plans to double its capacity in the coming few years, and most of the places that are building new plants today will not see any improvement in their other sources of fresh water. For the industry, that’s good news. The longer term outlook is less clear. The market today is limited to where people are rich, and the cost of building desal plants, while it has come gradually down as producers move down the experience curve and plants get larger, remains prohibitive for low income countries – with no imminent technological breakthroughs on the horizon to produce the kind of plunging capital costs which telecommunications and renewable energy have experienced in the past few decades. Externalities are also significant – in terms of the high energy-intensity of the process and the toxicity of the brine produced, as noted in last October’s New York Times article on the topic — The World can make more water from desalination, but at what cost? And water, unlike electricity and data, remains difficult and expensive to transport over significant distances, limiting almost all consumption to relatively nearby to plants, and in turn sources of sea water. So while this has become a much larger and more attractive market than what is was at the end of last century, and water stresses will increase, we wouldn’t expect either a significant broadening of geographies turning to desalination, or double-digit annual growth rates in desalination going forward – maybe even a plateau in the level of new installations before long. Desalination infrastructure, while new to the party, will also face the same problem as much coastal infrastructure is beginning to face – sea level rise from climate change. As covered previously by Infrastructure Ideas, coastal cities are looking at big bills in the not-very-distant future for either protecting, or moving, infrastructure assets away from rising seas and increased flooding – and it is on these vulnerable coastlines that practically 100% of the world’s desalination plants sit.

The water crisis will continue to loom – and indeed to be present – for many parts of the globe in the coming decades. Desalination will help – expensively – in some places. The answers to the problem for many other places remain unclear, though there are examples of approaches worth following. An instructive example is Cape Town, which two years ago faced its widely-publicized “Day Zero” water crisis [infra ideas], but evaded disaster and got itself in a better position. Cape Town used a mix of water conservation and data management a(diverting some water from intensive agricultural users, a 30% reduction in municipal government use, and restricting car washing and the refilling of swimming pools), and some basic technology (a new water pressure system) – a set of tools in reach of many more water-stressed cities than desalination plants. Better water use and conservation – recycling wastewater, reservoirs, wetlands conservation – ultimately look like more economic and accessible solutions than desalination for much of the world. Inland desert cities – like Tucson and Pheonix in Arizona, pioneers in water conservation and management approaches – may be better models for the developing world than coastal California and Saudi Arabia. And one new technology may help more than desalination: a handful of utilities have begun to experiment with miniature submersible drones. Small underwater machines that are today mostly used as toys may not sound like a big deal – but equipped with GPS and cameras, these drones can help utilities locate water leaks at a tiny fraction of the cost, and in a tiny fraction of the time, of traditional methods – meaning less digging, faster repairs, and dramatically reduced water losses. That could be a very big deal.