ENGIE, a global energy company, used a water valuation approach to assess the benefits of a water recycling project in Kwinana, near Perth in Australia. It showed that the overall benefit generated per treated m3 reaches more than 3 AUD for a range of stakeholders including ENGIE, the local communities and the wider society.
Water issues can only be addressed by taking a comprehensive view at watershed level, involving all stakeholders. Understanding the value of water for those stakeholders is at the basis of the design of efficient solutions, whether involving new policies or infrastructure investment, pricing methods or other means.
The private sector in particular has been historically focused on its direct operations only, looking at water use efficiency and waste treatment measures in particular. More recently, it started using the water scarcity index to screen production sites to identify potential values at risk. However, water scarcity is often a rough measure of pressure on water resources, as it is derived from a ratio between the amount of water use and the resources available (although some work is being undertaken to refine those metrics). It does not inform us about the cause of water scarcity, whether it is driven by irrigation water use, demographic increase, climate change, degradation of land, etc., and if this scarcity has an impact on communities and ecosystems. A high level of water scarcity might be well managed and results in low impact.
ENGIE, a global energy company, took the initiative to look beyond water scarcity, more specifically at the value of water for different stakeholders. The case study was undertaken on a cogeneration power plant at Kwinana near Perth in Australia. The water scarcity in this region is so high that two water desalination plants has been built to back up the insufficient water resources and reduce the strain on groundwater supplies. Water scarcity is driven in this location by demographic and industrial expansion, and at the same time by climate change and lack of precipitation. Within this context, a water recycling project has been created to supply an industrial park where ENGIE is located using wastewater from the nearby city. Valuing Nature assessed the benefits of this initiative for a wider selection of stakeholders, and identified the potential value that this analysis could bring to future project identification and planning.
The overall water saving from this water recycling project reaches nearly 4’000 m3/day just for the cogeneration power plant. We identified four main benefits and associated stakeholders, which are:
ENGIE/private sector: the water recycling costs are lower than alternative water sources, also involving a lower consumption of chemicals due to improved water quality. Overall, this results in cost savings and mitigation of the risk of water supply disruption in the future.
Local communities: reducing the pressure on local water resources reduces the need to extend water desalination capacity in the long term future, thus lowering the overall cost of water supply in the region for its communities. Real economic costs estimates of the various water sources were available. The economic valuation of the recycled water was based on the avoided cost technique.
Wider society: different water supply systems have different environmental impact, including greenhouse gas emissions, infrastructure needs, chemical consumption, etc. Desalination water usually has a high carbon footprint, much higher than groundwater or surface water sources. Ensuring that surface and groundwater supply are preserved reduces the need for more environmentally impacting water sources. Overall, this water recycling system reduces the environmental impact linked to more polluting water sources, benefiting the wider society through reduced climate change impact and other environmental damage (the assessment was realized using Life Cycle Assessment (LCA) methodology and a customized economic factors applied to LCA indicators).
Ecosystems services/wetlands: groundwater is the main water source in the Perth region while surface water is vanishing due to climate change lowering precipitation year after year. This groundwater is connected to a variety of wetlands in the region, which are linked to a range of ecosystem services benefiting the local communities and wider society. These benefits have been estimated using benefit transfer technique, based on the publication of de Groot et al. 2012.
When summing up the benefits experienced by the various identified stakeholders, we get an overall benefit above 3 AUD/m3. More than half the total benefit is experienced by ENGIE, as illustrated within the figure below. This demonstrates that a big driver for similar future projects might be the cost reduction for the private sector, in addition to resilient water supply sources and more general reputation benefits.
Looking beyond the benefits for ENGIE, local communities are the second biggest beneficiaries, followed by the wider society and the benefits provided by wetlands ecosystem services.
Those results show that it is possible to estimate the impact of a water management project on a wider range of stakeholders, in monetary units. The benefits are mostly experienced through reduced costs for all stakeholders groups. This information could influence the way such projects are identified, planned, negotiated and financed in the future.
Water valuation is a flexible and powerful tool to analyze a situation in a watershed and to support decision making in order to improve watershed management, involving the different stakeholders present. I hope to see more organizations and communities using this tool to trigger actions to become more sustainable.
This case study was presented at the World Water Week 2015, along with other water valuation case studies. To access the other case studies, please click here.