WATER GUIDANCE NOTE Mainstreaming Energy Efficiency Investments in Urban Water and Wastewater Utilities Dilip Limaye and Kristoffer Welsien • June 2019 This guidance note presents an overview of the benefits of improving energy efficiency in urban water and wastewater utilities (WWUs). It defines the typical energy efficiency and load management measures and the process to identify and assess these measures. The note addresses some of the major considerations related to implementation and financing of investments in energy efficiency, and highlights past activities and lessons learned. Included are suggested actions by national and local governments, international financial institutions, and senior management of WWUs for promoting energy efficiency in WWUs, and a road map for mainstreaming energy efficiency in water sector infrastructure projects. © Chris “Maven” Austin; Victor Zablotskyi / World Bank. Why Energy Efficiency Matters Benefits of Improved Energy Efficiency For most WWUs, investments in energy efficiency will generate Improving energy efficiency in WWUs leads to lower energy the highest return on investment. With rapid urbanization costs and reduced vulnerability to future tariff increases. throughout the developing world, WWUs are facing increasing The resulting operating cost reductions help WWUs pressures to provide reliable safe drinking water and wastewater improve cost recovery, which leads to better operational treatment services. These are highly energy-intensive activities. performance. See case studies in box 1. Other financial and A recent report by the International Energy Agency (IEA environmental benefits include the following: 2016) estimates that in 2014 the electricity consumption of the water sector worldwide was 4 percent of total global • Better financial performance. Reduced operating electricity consumption. Based on projections of urban costs lead to higher net margins. population growth, the demand for municipal water supply • Better creditworthiness. Improved financial and wastewater treatment services is expected to increase by performance provides WWUs with better credit and 40 percent in the next 20 years. Electricity costs for water may allow them to have better access to commercial production, distribution, and treatment contribute significantly financing for infrastructure improvements. to operating costs, ranging in many countries from 33 percent • Reduced water losses. Some energy efficiency to 82 percent of nonlabor operating costs of WWUs. technologies contribute to reduced water losses Table 1 provides illustrative data, extracted from the World (e.g., through optimized pipe pressure). Bank International Benchmarking Network for Water and • Reduced needs for new investment in power supply. Sanitation Utilities database (Limaye and Jaywant 2019). By reducing the electricity demands, the electric utility Increasing electricity costs will lead to increasing pressures can reduce its capital investment needs for new power on high and unsustainable operating costs that are likely to generation. directly impact the levels of service. • Improved electricity supply efficiency and reduced costs. Measures to shift pumping Electricity costs are the largest operations to off-peak periods help reduce peak “controllable” operating costs for most demand for electric utilities and can reduce WWUs’ electricity tariffs. WWUs, and international experience • Reduced local and global environmental impacts. indicates cost reductions of as much as Reduced energy use leads to lower greenhouse gas 20 percent to 40 percent are feasible (GHG) emissions, thereby contributing to mitigation through improved efficiency of energy of climate change impacts, and to meeting the use (Barry 2007; Liu et al. 2012). objectives of the Paris Agreement. TABLE 1. Electricity Costs for Water and Wastewater Utilities in Selected Countries Electricity costs Country No. of utilities Per m produced 3 Per m sold 3 As % of total As % of nonlabor (US$) (US$) operating costs operating costs Albania 39 0.12 0.28 41 75 Bangladesh 26 0.04 0.04 40 75 Bulgaria 30 0.07 0.20 19 33 Honduras 7 0.07 0.10 39 50 Iraq 10 0.49 0.65 55 82 Kazakhstan 14 0.09 0.11 24 38 Moldova 16 0.22 0.40 28 64 Nigeria 8 0.12 0.21 32 56 Ukraine 12 0.07 0.09 22 39 Vietnam 38 0.04 0.06 34 49 Source: Limaye and Jaywant 2019. WATER GLOBAL PRACTICE | MAINSTREAMING ENERGY EFFICIENCY INVESTMENTS IN URBAN WATER AND WASTEWATER UTILITIES 2 BOX 1. Energy Efficiency Case Studies Mexico. The city of Monclova installed variable speed drives, improved pumping efficiency, replaced old pumping equipment with more energy efficient pumps, and optimized pumping operational schedules. Results include reducing the energy intensity by 23 percent, improved operational efficiency, and increased revenues with a simple payback of 1.9 years. Bosnia and Herzegovina. The town of Mostar implemented pump upgrades and replacements, greater use of gravity-fed water, and water leakage detection and repairs to reduce energy use by 40 percent, declining from 9.4 megawatt-hours in 2001 to 5.6 megawatt-hours in 2004. These energy savings have translated into an estimated annual electricity cost savings of US$128,400 for the town. Armenia. The city of Yerevan engaged a competitively selected management contractor to undertake a performance-based contract that includes rehabilitating pumping stations, increasing gravity-fed water supply, trimming pump impellors, and upgrading pumps. The US$16.8 million investments have provided an annual cost savings of US$4.8 million, yielding a payback of 3.5 years. Brazil. The city of Campinas established an energy management program, including specific energy efficiency improvements, as part of operational management to improve the overall operational efficiency and enhance financial performance. In the Capivari water treatment plant, energy efficiency measures have resulted in annual energy savings of US$200,000 (1.8 gigawatt-hours) with an investment of US$1.3 million, for a simple payback of about 6.5 years. Source: ESMAP database, www.esmap.org/node/231. Typical Energy Efficiency and Load • Wastewater treatment: (a) improve efficiency of Management Measures anaerobic digestion and aeration equipment; (b) use efficient activated sludge processes; and (c) reduce There are many measures available for WWUs to reduce wastewater with reuse and recycling. energy consumption and costs (EPA 2013; Liu et al. 2012; • Demand-side efficiency measures: implement to WRF 2017). reduce water consumption. • New technologies: (a) implement supervisory Energy Efficiency Measures control and data acquisition (SCADA) software; and • Pumps and pumping systems operations: (a) replace (b) install smart pumps. inefficient pumps; (b) install variable frequency drives; (c) utilize gravity-fed systems instead of pumping; Table 2 shows the results from the energy audit for the (d) optimize pumping system operation; and Shimla, India, water utility (DESL 2017b). Another (e) improve maintenance. example is the energy efficiency measures identified in • Water loss management technologies: (a) leak the detailed energy audit of the Namangan Suvokova in reduction and (b) pressure management. Uzbekistan (TERI 2019), presented in table 3. TABLE 2. Energy Efficiency Opportunities in the Shimla Water Utility, India Annual savings Investment Simple payback Energy efficiency measures Energy Costs needed (years) (kWh, millions) (US$, millions) (US$, millions) Pumps and pumping systems 8.91 1.32 6.60 5.0 Load management 17.55 1.51 0.63 0.4 O&M measures 0.54 0.07 0.40 5.7 Totals 27.00 2.90 7.63 2.6 Source: DESL 2017b. Note: O&M: operations and maintenance. WATER GLOBAL PRACTICE | MAINSTREAMING ENERGY EFFICIENCY INVESTMENTS IN URBAN WATER AND WASTEWATER UTILITIES 3 TABLE 3. Energy Efficiency Options, Namangan Suvokova, Uzbekistan Annual savings Investment Simple Energy efficiency measures needed payback Energy (kWh, Costs (US$, (US$, (years) millions) thousands) thousands) Short-term Optimize distribution-side voltage 2.7 100.5 23.8 0.2 Optimize pump operation Operate pumps in off-peak hours Avoid throttling of pumps Replace delivery pipe Operate lower capacity pump Medium-term Pump replacement 6.4 183.1 269.2 1.5 Energy-efficient lighting Install lower head pump Shift pumping operations Long-term Reduce transformer losses 1.4 7.9 32.8 4.1 Install capacitor banks Install variable speed drives Motor replacement Totals 10.5 291.5 325.8 1.1 Source: TERI 2019. Load Management Measures FIGURE 1. Typical Time-of-Use Electricity Tariff 5 In many countries, the electricity tariff varies during the (US cents/kWh) day based on the costs of power generation during peak and 4 off-peak operations. Load management involves shifting of 3 pumping hours from peak to off-peak periods. Pumps and pumping systems consume a large proportion (generally 70 2 to 80 percent) of the total electricity use by WWUs. If these 1 Tari operations can be shifted or limited to off-peak operations, substantial cost savings can be achieved. Figure 1 shows a 0 1 3 5 7 9 11 13 15 17 19 21 23 typical time-of-use electricity tariff, in which the peak tariff is Hours 225 percent of the off-peak tariff. Source: TERI 2019. Savings can be achieved by improving the power factor such as by installing capacitors and by optimizing contract • Solar photovoltaic (PV) generation. The costs demand. The  Shimla (India) energy audit estimated that of solar PV have decreased substantially (to an annual savings of US$670,000 can be achieved through US$1 to US$2 per watt), and solar generation power factor correction, contract demand management, and is becoming competitive in many areas. shifting pumping loads from peak to off-peak periods by WWUs could install solar PV to reduce their pumping water to storage reservoirs during off-peak periods purchased electricity needs. (DESL 2017b). • Generation of electricity from small hydropower. To the extent that WWUs are discharging water to Renewable Energy and Other Technology a lower level, small hydro turbines could be used to Measures generate electricity. • Use of combined heat and power (cogeneration) WWUs may also reduce energy costs by deploying renewable when both heat and electricity are required. energy resources (DESL 2017a; EPA 2018; Lisk, Greenberg, • Generation of electricity from biogas in wastewater and Bloetscher 2012); suggestions include the following: treatment facilities. WATER GLOBAL PRACTICE | MAINSTREAMING ENERGY EFFICIENCY INVESTMENTS IN URBAN WATER AND WASTEWATER UTILITIES 4 Barriers to Energy Efficiency Limited Implementation Capacity Despite the recognition of the potential benefits of • Limited capacity of WWU management and staff, improving energy efficiency, many barriers have limited the energy service providers, and financial lenders. implementation of energy efficiency projects in WWUs. • Lack of standard templates for energy audits and service contracts, which limits implementation. Barriers Faced by Water and Wastewater • Limited experience and capacity with measurement Utility Management and Staff and verification of energy and cost savings. • Limited knowledge of management and staff of energy efficiency project opportunities and benefits. • Limited budgets for capital investment. Overcoming the Barriers • Poor creditworthiness, which limits access to Addressing and overcoming the barriers may require concerted commercial financing. and coordinated efforts among national governments, local or • Limited experience with new technologies and service municipal governments, international financial institutions providers. (IFIs), and WWU management. Governments can address • Greater emphasis on new connections rather than cost the legal and regulatory barriers by establishing appropriate reduction. legislation and regulations to allow WWUs to retain energy • Limited data on equipment characteristics. cost savings; removing any barriers to debt financing; and • General lack of high incentives to save electricity costs. modifying public procurement rules and regulations to facilitate the procurement of energy efficient equipment. Electricity Legal, Regulatory, and Institutional Barriers regulators can develop cost-based tariffs and incentives • Restrictions on the amount of debt financing by WWUs. for peak load reduction that will make energy efficiency • Budgetary rules and procedures that may not allow investments financially attractive. National governments may WWUs to retain the cost savings from investments in also enact legislation facilitating public-private partnerships energy efficiency. (PPPs) that can be effective in leveraging private financing for • Public procurement rules and procedures, particularly implementation of energy efficiency options. those requiring the selection of low bids, that discourage the procurement of the most efficient equipment. IFIs could include a component for energy efficiency • Low regulated electricity tariffs that provide little implementation in water sector infrastructure projects incentive for efficiency improvement. and specify results indicators related to energy efficiency improvement. IFIs can cooperate with governments to Challenges Faced by Equipment and Energy develop sustainable financing mechanisms and provide seed Service Providers capital for such mechanisms. IFIs can provide expert technical assistance for capacity building of stakeholders, developing • Weak and fragmented markets for providing energy the energy services markets, and facilitating the formation services to WWUs due to lack of demand for such services. of energy service companies (ESCOs) and performance • High costs faced by energy service providers for contracting (Limaye, Singh, and Hofer 2014a). Another developing energy efficiency projects for WWUs. important aspect is the capacity building of commercial • Limited access to equity and debt financing for such lenders by informing them of the benefits of energy efficiency projects. projects and the potential business opportunities in debt financing of such projects for WWUs. Financing Barriers WWU management needs to recognize the importance of • Terms and conditions of commercial lenders are energy efficiency, commit to energy efficiency improvement, generally not very attractive to WWUs. and develop an internal culture that promotes operational • Difficulty in providing required collateral for efficiency. Part of this is to encourage facility managers and commercial loans. engineers to increase their knowledge of energy efficiency • Perception of commercial lenders that energy efficiency options, and if possible, provide incentives to staff members projects for WWUs are associated with high risk. who achieve cost reductions through increased efficiency. WATER GLOBAL PRACTICE | MAINSTREAMING ENERGY EFFICIENCY INVESTMENTS IN URBAN WATER AND WASTEWATER UTILITIES 5 Three Key Steps to Improved Energy Step 2: Implementation Strategy Efficiency Once the audit and prefeasibility study have identified Step 1: Identifying Energy Efficiency the energy efficiency and load management options, the Opportunities next steps (for options that are not purely operational changes) are to develop the detailed engineering design, The first step is to: (a) determine how much electricity equipment procurement, installation and commissioning, the WWU consumes and how much it costs; (b) identify and measurement and verification of the energy and cost equipment and processes that consume the most savings. Most WWUs have limited capacity to undertake energy; (c) document the equipment characteristics; and these tasks internally and are likely to engage external service (d)  identify cost-effective energy efficiency options. This providers. Procurement of equipment and services can be a step can be accomplished internally (if capacity exists) challenge, particularly if existing public procurement rules or through an energy audit of the facility conducted by and procedures require the low bidder to be selected, which external technical experts. While the term energy audit is may limit the selection of the most efficient equipment or somewhat subjective, with many variations and several service provider. levels of energy audits for WWUs in different countries, energy audits can generally be classified into two major One option for WWUs is to engage energy service types: providers (ESPs), such as ESCOs, to undertake some or all of the implementation activities. An ESP can provide • A “walk-through survey” or preliminary energy services spanning the entire energy services value chain, audit, which entails a reconnaissance of the facility including auditing, design and engineering, equipment and an initial assessment to identify potential procurement, installation and commissioning, financing, energy efficiency opportunities. This defines O&M, and facility management (Limaye, Singh, and whether there is a need for the more detailed audit. Hofer 2014a). ESPs offer a number of advantages to WWUs, such as the following: • An investment grade audit, which includes a detailed definition of the baseline, a technical • Mobilizing private sector innovation, and economic analysis, a prefeasibility study of entrepreneurship, and financing. individual energy efficiency and load management • Providing access to the latest energy efficient options, and identification of preferred investments products, technologies, and equipment. options for WWU management. • Providing high-quality installation and O&M. • Implementing projects more efficiently and The energy audits explore options to unlock the energy generally at a higher benefit-cost ratio. efficiency and load management potential of the WWU • Providing training to facility engineers and by analyzing its energy performance indicators and managers on O&M, thereby improving staff skills. identifying energy savings and load shifting options. • Providing performance guarantees, thereby The  energy audit and prefeasibility assessments reducing the project risk to the WWUs. should: (a)  document in detail the characteristics of ESPs offer a wide range of business models. Figure 2 the equipment and facilities and identify cost-effective illustrates four main business models to offer the services operations and maintenance (O&M) adjustments, low- and products identified previously (Limaye, Singh, and cost, short-term, as well as medium- and long-term, Hofer  2014a). Energy saving performance contracts energy efficiency recommendations; (b) develop estimates (ESPCs) can be quite attractive to WWUs. The major of needed investments to improve energy efficiency; and characteristics of ESPCs are: (a) the ESP provides a full range (c) provide recommendations to enhance the capacity of energy services related to financing and implementation of the WWU for data collection, analysis, and O&M. of energy efficiency projects designed to reduce energy use The energy audit may also include specifications for and costs; (b) payments for ESP services are made by the equipment and implementation services that could be WWU from the cost savings resulting from the projects; used for development of bidding documents. A summary (c)  payments are  generally contingent upon satisfying of the requirements of the terms of reference (TOR) certain performance guarantees; and (d) the ESP assumes for the energy audit and prefeasibility study for the most of the technical, financial, and performance risks Namangan Suvokova is provided in box 2. (Limaye 2005). Figure 3 illustrates the basic ESPC model. WATER GLOBAL PRACTICE | MAINSTREAMING ENERGY EFFICIENCY INVESTMENTS IN URBAN WATER AND WASTEWATER UTILITIES 6 BOX 2. Terms of Reference for Energy Audit and Prefeasibility Study of Namangan Suvokova, Uzbekistan Task 1: Energy Eficiency Audit. To carry out the energy efficiency audit, the Consultant shall collect and analyze both technical and financial data such as historical energy consumption and equipment inventory (including technical characteristics of pumps used, energy use by each facility (kilowatt-hours), electrical, mechanical and process systems, electricity costs, electricity bills, and O&M costs). The analysis will identify the most energy intensive equipment/processes and their impact on total costs, and highlight potential areas of energy savings. A breakdown of energy consumption and costs shall be determined, based on a thorough assessment of the existing systems. This assessment is intended to inform the identification and prioritization of interventions (both physical and institutional) to improve energy efficiency and reduce costs of utility operations. The assignment will include data collection (document and data reviews, field measurements, and other on-site assessments), information analysis, and identification and evaluation of energy saving options. The Consultant shall also assess the power supply system of the water intake facilities and pumping stations and recommend measures on how to improve the reliability of the system operation and maintain optimal pressure at control points. Task 2: Analysis of Electricity Time of Use. This task shall include assessment of electricity bills paid by the water utility, specifically from the point of view of assessing the demand or capacity charges paid and any penalties incurred during the peak-demand timings coincident with high electricity demand on the electricity distribution system. It will include assessment of the potential to shift the pumping hours from on-peak to off-peak periods to understand the benefits the water utilities would be able to harness during the periods when they are able to shift the water pumping timings. The Consultant shall suggest demand management protocols to promote a permanent load shift through simple heuristics or rules drawn out for management of pumping hours, optimized use of holding capacities, etc. Task 3: Energy Efficiency and Load Management Prefeasibility Study. The Consultant shall conduct prefeasibility analysis to translate key findings into prioritized investment plans, considering both institutional and infrastructure or equipment requirements, to improve efficiency of utility operations. During this process the Consultant is expected to further develop the analysis of the current state of infrastructure and utility operations by updating existing data as necessary. This may include development of energy and water balance models, and hydraulic modeling of the water supply system with different scenarios of water consumption and operation of pumping stations. It will also include identification of investment needs, considering key infrastructure and equipment for improved efficiency (e.g., leakage and pressure control, pump replacements, and other modifications), along with utility operational aspects. Based on the technical, economic, and financial analysis, along with other institutional, environmental, and social considerations, the Consultant shall develop a prioritized investment program including development of prefeasibility level designs and specifications and cost estimates for priority investments. Source: TERI 2019. Step 3: Financing sustainable option. Many countries, with the assistance Many of the initial government and IFI programs for and participation of donors, have developed and financing energy efficiency projects in developing implemented financing and delivery mechanisms either countries have involved grant financing. However, to enhance the financial leverage of public funds or to governments and IFI have concluded that while grant gain access to commercial funding for public sector financing can be an important and useful first step for energy efficiency projects. implementing energy efficiency projects, the availability of such financing is limited, and grants may not be a The World Bank has developed the concept of a financing ladder for water sector energy efficiency projects. WATER GLOBAL PRACTICE | MAINSTREAMING ENERGY EFFICIENCY INVESTMENTS IN URBAN WATER AND WASTEWATER UTILITIES 7 FIGURE 2. Energy Services Business Models FIGURE 3. Energy Saving Performance Contract Model Energy Energy e ciency Outsourced retrofit Engineering services energy services business management WWU Savings models Payments to WWU cash flow ESP WWU Savings Financing Baseline payment energy costs Reduced New energy Financial Performance energy bill bill after services contracting during ESA ESA completed Baseline During contract After contract Source: Limaye, Singh, and Hofer, 2014a. Note: ESA = energy services agreement; ESP = energy service provider; WWU = water and wastewater utility. FIGURE 4. Financing Ladder Market Commerical maturity financing Financing mechanism Description Third-party finances and implements ESCOs measures under an energy performance contract Utility issues bonds to access Corporate bonds capital markets Equipment supplier finances equipment Vendor credit/leasing replacement and installation Guarantee to enable commercial financing Credit guarantee of investments to improve operational or Public EE financing ladder energy e ciency Finances a portfolio of energy Credit lines e ciency subprojects A company established by the government Public or super ESCO to implement EE projects in WWUs Third-party manages and invests in Management contract operations, including energy e ciency projects Capitalization of funds to support a portfolio Energy e ciency revolving fund of municipal/energy e ciency subprojects Cost savings resulting from energy Energy savings capture e ciency projects are placed in a special account for financing future projects Disbursement linked indicators based on Results financing improvements in operational and energy e ciency Public lending for water infrastructure and Public Public financing service improvements/expansion, including financing energy e ciency Source: Adapted from Bakalian, Singh, and Jacques 2019. Note: ESCO = energy service company. WATER GLOBAL PRACTICE | MAINSTREAMING ENERGY EFFICIENCY INVESTMENTS IN URBAN WATER AND WASTEWATER UTILITIES 8 TABLE 4. Energy Efficiency Financing Mechanisms in the Public Sector Financing mechanism Countries Sector Results financing China Industry, SME, Public Mexico Water Utilities Energy savings capture Montenegro Public model Uzbekistan Water Utilities EERF Bulgaria Industry, SME, Public Armenia Public Romania Industry, SME, Public Management contract Armenia (Yerevan) Water Utilities India (Shimla) Water Utilities Public or super ESCO India Public Ukraine Public Croatia Public Partial risk guarantees Eastern and Central Europe Industry, SMEs China Industry, SMEs India Industry, SMEs Note: EERF = Energy Efficiency Revolving Fund; ESCO = energy service company; SME = small and medium enterprise. The steps in the ladder show the progression from strictly utilized as the source for financing future energy public financing to commercial financing (see figure 4). efficiency projects. This mechanism is being proposed Moving up the ladder requires increasing participation for financing energy efficiency projects in the of commercial financing and improved maturity of the Suvokovas in Uzbekistan. financial markets. Since public financing may not be • Energy efficiency revolving fund (EERF). An sustainable in the long term, other steps in the financing EERF can scale up energy efficiency financing in ladder need to be considered. the public sector and has been recommended by the World Bank in many countries (Limaye, Singh, and Unfortunately, in most developing countries, commercial Hofer 2014b). Under a typical EERF, created using financing is generally not available for WWUs. Therefore, public funds and IFI loans, financing is provided to options such as credit lines through commercial banks, public agencies to cover the initial investment costs vendor credit or leasing, and corporate bonds are of energy efficiency projects. Some of the resulting unlikely to be feasible in the near term. Financing energy savings are then used to repay the EERF until the efficiency may have to rely on the other financing options original investment is recovered, plus interest and listed below. While there are relatively few examples of service charges. The repayments can then be used such mechanisms in the water sector, table 4 provides to finance additional projects, thereby allowing the examples of financing mechanisms for energy efficiency capital to revolve and creating a sustainable financing in other public sectors. mechanism. Examples in the water sector include Mexico (PRESEM) and India (Tamil Nadu). • Results financing. Financing from an IFI is • Management contract. The management or linked to specific project indicators related to operation of the WWU is contracted out to a private improvements in operational and energy efficiency, sector organization that makes investments in energy and disbursement is made only upon demonstration efficiency projects. Examples of this approach in the that the targets for these indicators have been met. water sector are Armenia (Yerevan) and India (Shimla, An example is the project in Mexico (PROME). proposed). • Energy savings capture model. In this mechanism, • Public or super ESCO. Established by the initial energy efficiency projects are funded using government, a public or super ESCO functions as an government or IFI funds, and the savings from these ESCO for the public sector market (including WWUs) energy efficiency projects are placed in a special while also supporting the capacity development and account for a specified period. This account is then project development activities of existing private sector WATER GLOBAL PRACTICE | MAINSTREAMING ENERGY EFFICIENCY INVESTMENTS IN URBAN WATER AND WASTEWATER UTILITIES 9 ESCOs. The government (possibly with help from IFIs) The World Bank has documented a series of case studies capitalizes the super ESCO with sufficient funds to and information on technologies and tools calculating undertake public sector ESPC projects and to leverage energy efficiency indicators and potential for cost commercial financing. An example is Energy Efficiency savings and GHG reduction. These are available at www​ Services Limited in India. .worldbank.org​/­EEwater. • Partial risk guarantees. A risk guarantee facility addresses the commercial lenders’ perspective of The major lessons learned from the World Bank’s projects high risk by providing partial coverage of the risk are summarized here: involved in extending loans for energy efficiency projects. A partial risk guarantee facility, provided by • Improved energy efficiency can contribute a government, IFI, or other public agency, can assist significantly to better WWU operational WWUs by: (a) providing them access to finance; performance as well as to GHG emission (b) reducing the cost of capital; and (c) expanding reductions. the loan tenor or grace periods to match project • Energy efficiency options use known and cash flows (Mostert 2010). An example is the proven technologies and methodologies that World Bank’s Partial Risk Sharing Facility in India. do not present construction or operational challenges. Related World Bank Projects • Substantial improvements in energy efficiency are achievable with low paybacks as part of water sector The World Bank’s 2025 climate targets include infrastructure projects. strengthening water utility governance, incorporating water • The commitment of senior WWU management into urban land-use planning, and investing in urban water to improving energy efficiency is critical to project infrastructure and policies that reduce water and energy use. success. A specific goal is to help WWUs implement programs for • When energy efficiency is included in water sector energy and water use efficiency. Consistent with this goal, infrastructure projects, specific results indicators the World Bank has financed water sector infrastructure need to be provided to enable measurement of projects in developing countries in which improvement of energy savings and resulting GHG emission energy efficiency is a component (see table 5). reductions. TABLE 5. World Bank Urban Water Sector Projects with Energy Efficiency Components Energy efficiency Country/city Project name Project status component/activity Bosnia (Mostar) Water Sector Rehabilitation Completed Reduce energy use Armenia (Yerevan) Yerevan Water and Sewerage Completed Develop energy management Management plan for 20% cost reduction Ukraine (various Second Urban Infrastructure Project Ongoing Improve energy use per m3 of cities) water produced/treated China Liaoning Safe and Sustainable Urban Ongoing Develop energy management Water Supply plan Jordan Programmatic Energy and Water Completed Increase energy savings in the Sector Reform water sector Uruguay UY OSE Sustainable and Efficient Ongoing Energy savings India Water Supply and Sewerage Service Ongoing Reduction of energy consumption DPL for Shimla in bulk water production Mexico Municipal Energy Effciency Project Ongoing Design of energy management systems for WWUs Tanzania Second Tanzania Water Sector Ongoing Improve energy efficiency Support Project Note: WWU = water and wastewater utility. WATER GLOBAL PRACTICE | MAINSTREAMING ENERGY EFFICIENCY INVESTMENTS IN URBAN WATER AND WASTEWATER UTILITIES 10 Mainstreaming Energy Efficiency in Water • Facilitate retention of energy cost savings. and Wastewater Utilities • Remove barriers to debt financing of WWUs. • Develop cost-based electricity tariffs. Based on the experience of the World Bank and other IFIs, the • Change procurement regulations to following action items are recommended for mainstreaming facilitate selection of efficient equipment energy efficiency projects in WWUs. Figure  5 presents a and services. road map. • Enable PPPs for project implementation. Actions for Water and Wastewater Utility Management Actions for International Financial Institutions • Carry out energy audits. • Include energy efficiency improvement as a • Assign responsibilities and targets for energy efficiency component in water sector infrastructure projects and and provide sufficient resources to achieve these. develop appropriate results indicators. • Develop an internal culture that promotes operational • Develop benchmarks for energy use in water supply efficiency improvement. and sanitation. • Increase staff knowledge and awareness of energy • Develop standard templates for investment grade efficiency options and technologies. energy audits and performance-based service • Incentivize staff who achieve cost reductions through contracts. improved energy efficiency. • Assist in developing and implementing sustainable financing mechanisms and provide Actions for National and Local Governments initial financing. • Prioritize energy efficiency improvement in WWU • Provide technical assistance to build capacity of all operations in national climate and energy efficiency stakeholders. strategies and goals. • Assist in developing energy services markets. FIGURE 5. Mainstreaming Energy Efficiency in Urban Water and Wastewater Utilities Recommend establishing a high national priority for improving energy e ciency in water and wastewater utilities. 1 Suggest modifications to legislation and regulations to facilitate retention of energy cost savings, procurement of 2 e cient equipment and services, debt financing for utilities, and PPPs. Provide technical assistance for capacity building of WWU management and sta , energy service providers, 3 government o cials, project implementation units, and lenders. Develop standardized procedures and templates for preliminary and detailed energy audits and contracts with 4 service providers. Include energy e ciency improvement as a component in water sector infrastructure projects. 5 Develop benchmarks and results indicators for energy e ciency improvement in water supply and wastewater treatment. 6 Develop and document options for implementation of energy e ciency measures. 7 Establish sustainable financing mechanism consistent with existing legislation, regulations, and financial and 8 energy services markets. Develop the monitoring, reporting, and measurement and verification approach. 9 Note: PPP = public-private partnership; WWU = water and wastewater utility. WATER GLOBAL PRACTICE | MAINSTREAMING ENERGY EFFICIENCY INVESTMENTS IN URBAN WATER AND WASTEWATER UTILITIES 11 REFERENCES Limaye, Dilip R., and Suvedh Jaywant. 2019. Development of Indicators from the World Bank IBNET Database. Bakalian, Alexander, Jas Singh, and Ivan Jacques. 2019. Washington, DC: World Bank. Energy Efficiency in Water Sector Operations. Washington, DC: World Bank. 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