The Stress Nexus: Ensuring Water, Food and Energy Security
Written by Ruth Cairnie, EVP Strategy and Planning, Royal Dutch Shell
Last year, Shell released Signals and Signposts, which analyzed long-term energy scenarios and concluded that we are in an era of volatile transitions at the economic, political and social levels. The stresses building in our global systems, such as water, food and energy production, will make industrial and social transformations inevitable. We must acknowledge the links between these stresses and “connect the dots,” before it is too late.
According to the United Nations, by 2050 our planet will be home to nine billion people, and three in four people will live in urban centers. Asia’s new and fast-growing cities will absorb much of that growth. With this level of urban growth, basic needs for water, food and energy will need to be met - in a planet that already shows signs of stress meeting the resource needs for seven billion. So how do you start addressing such huge challenges and connect them to find solutions?
We will see a shortfall with the world’s freshwater supply if we continue to consume freshwater in the same way as today. According to a McKinsey study, there will be a 40% gap between supply and demand by 2030, impacting agriculture (which accounts for 70% of all water consumption), industry (20%) and domestic use (10%).
It is also predicted that the world’s increasing population will drive a 50% increase in the world’s food needs. An increase in food demand could see food prices double by the year 2030 and as the shift to meat increases, so will the water and energy resources needed to keep up with demand. A kilogram of beef requires approximately 1500 liters of water to produce and every calorie of food we consume uses approximately 5 calories of fossil fuel energy in the supply chain.
These issues are close to home for us at Shell and it’s clear that unconstrained growth in demand would challenge sources of energy supply to the limit – both conventional and new. Our own analysis for Signals & Signposts suggested ‘business as usual’ out to 2050 would result in an energy supply and demand balance of about three times the levels in 2000. Even by stretching assumptions for demand moderation and supply growth, the gap between supply and demand is significant. We will need all sources of energy and must find ways to mitigate CO2 emissions and the risk of climate change, while meeting this surge in energy demand.
We believe one part of the solution to cut down on water resources in energy production could be more use of natural gas in power generation: the water consumption intensity of gas in power generation is significantly lower than other fossil fuels and nuclear energy. We have developed water recycling and treatment facilities in Dawson Creek, Canada, Geelong, Australia and at Raízen in Brazil.
We’ve worked with academics to build a deeper understanding of the stresses on our resources and developed a consistent water accounting framework for assessing and monitoring the water impact of different projects in different environments. We have developed formal partnerships with select environmental NGOs, such as IUCN, Wetlands International, Earthwatch and The Nature Conservancy, to improve how we develop our energy projects and in 2011, we worked on more than 35 projects with these organizations.
It is clear there is a lot of work left to do – we are still working to understand the link between energy, water and food. Addressing the Nexus means addressing complex challenges that cross boundaries between countries, industries and the public and private sectors. Solving them will require a broad, holistic approach, an open mind and an understanding beyond our own areas of expertise. Together, we can shift the needle in finding more efficient, affordable and sustainable ways at securing our world’s resources.
Ofwat allows retailers to raise prices from April
Retailers can recover a portion of excess bad debt by temporarily increasing prices from April 2022, according to an Ofwat statement.
The regulator confirmed its view that levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue, thereby allowing "a temporary increase" in the maximum prices. Adjustments to price caps will apply for a minimum of two years to reduce the step changes in price that customers might experience.
Measures introduced since March 2020 to contain the spread of Covid-19 could lead to retailers facing higher levels of customer bad debt. Retailers’ abilities to respond to this are expected to be constrained by Ofwat strengthening protections for non-household customers during Covid-19 and the presence of price caps.
In April last year, Ofwat committed to provide additional regulatory protection if bad debt costs across the market exceeded 2% of non-household revenue.
Georgina Mills, Business Retail Market Director at Ofwat said: “These decisions aim to protect the interests of non-household customers in the short and longer term, including from the risk of systemic Retailer failure as the business retail market continues to feel the impacts of COVID-19. By implementing market-wide adjustments to price caps, we aim to minimise any additional costs for customers in the shorter term by promoting efficiency and supporting competition.”
There are also three areas where Ofwat has not reached definitive conclusions and is seeking further evidence and views from stakeholders:
- Pooling excess bad debt costs – Ofwat proposes that the recovery of excess bad debt costs is pooled across all non-household customers, via a uniform uplift to price caps.
- Keeping open the option of not pursuing a true up – For example if outturn bad debt costs are not materially higher than the 2% threshold.
- Undertaking the true up – If a 'true up' is required, Ofwat has set out how it expects this to work in practice.
Further consultation on the proposed adjustments to REC price caps can be expected by December.
"While it’s great that regulators are helping the industry deal with bad debt in the wake of the pandemic, raising prices only treats the symptoms. Instead, water companies should head upstream, using customer data to identify and rectify the causes of bad debt, stop it at source and help prevent it from occurring in the first place," she said.
"While recouping costs is a must, water companies shouldn’t just rely on the regulator. Data can help companies segment customers, identify and assist customers that are struggling financially, avoiding penalising the entire customer in tackling the cause of the issue."
United Utilities picks up pipeline award
A race-against-time plumbing job to connect four huge water pipes into the large Haweswater Aqueduct in Cumbria saw United Utilities awarded Utility Project of the Year by Pipeline Industries Guild.
The Hallbank project, near Kendal, was completed within a tight eight-day deadline, in a storm and during the second COVID lockdown last November – and with three hours to spare. Principal construction manager John Dawson said the project helped boost the resilience of water supplies across the North West.
“I think what made us stand out was the scale, the use of future technology and the fact that we were really just one team, working collaboratively for a common goal," he said.
Camus Energy secures $16m funding
Camus Energy, which provides advanced grid management technology, has secured $16 million in a Series A round, led by Park West Asset Management and joined by Congruent Ventures, Wave Capital and other investors, including an investor-owned utility. Camus will leverage the operating capital to expand its grid management software platform to meet growing demand from utilities across North America.
As local utilities look to save money and increase their use of clean energy by tapping into low-cost and low-carbon local resources, Camus' grid management platform provides connectivity between the utility's operations team, its grid-connected equipment and customer devices.