Energizing partnerships for investments in climate-resilient WASH

As USAID’s Water, Sanitation, and Hygiene Finance 2 (WASH-FIN 2) continues to collaborate with partners to mobilize finance for climate-resilient WASH, the opportunity to share lessons, gather feedback, and learn from the hundreds of sector practitioners at UN-Habitat’s 5th Congress of the Global Water Operators Partnership Alliance (GWOPA) was highly appealing. Under the theme ‘Resilience in challenging times - Mobilizing collaboration for future-ready water and sanitation service providers’, the Congress brought together practitioners from around the globe representing water utilities, policymakers, regulators, civil society groups, development partners and multilateral development banks. Attendees, in person for the first time since the pandemic, were energized and optimistic about the challenges ahead, notably regarding critical WASH-FIN 2 themes of water governance, utility performance and creditworthiness, and access to finance. Together with Aqua Publica Europea (APE), the European Association of Public Water Operators, WASH-FIN 2 was pleased to co-convene a technical session on ‘Exploring energy options for water production and climate resilience’ including three presentations and an expert panel of representatives from Zambia, Kenya, Germany, and Jordan. The session highlighted the water-energy nexus, emerging solutions, and generated a number of insights from the expert panel.

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Challenges of the water-energy nexus. A scene setting presentation by Strathmore University’s Water Governance and Innovation Hub in Nairobi highlighted vulnerabilities inherent in the fact that energy is needed to produce water and water is needed to produce energy. This year’s rolling blackouts in Zambia and previous power cuts in Kenya are caused by droughts’ impact on hydropower production, while water providers struggle to meet demands due to unreliable energy from the grid. Renewable energy is critical to balancing energy security, affordability, and environmental sustainability, the so-called ‘Energy Trilemma’. However, developing and emerging countries received only 15% of global renewable energy investments in 2022, despite having massive potential and needs[1]. Challenges to increased investment are linked to inadequate finance, governance, and operational capacity.
[1] IRENA and CPI (2023), Global landscape of renewable energy finance, 2023, International Renewable Energy Agency, Abu Dhabi.

Cases highlight emerging, viable solutions. Energy is commonly the largest non-labor cost for water and sanitation utilities, many of which struggle to cover operational costs. Case studies from Germany, Jordan, Kenya, and Zambia showed how strategic investments can improve service, address challenges, and optimize operations, often in a low cost manner relative to other options. 

USAID’s WASH-FIN 2 presented its experience supporting water utilities in Kenya and Zambia to solarize 13 pumping facilities under the WASH-FIN project with the goal of reducing electricity costs and addressing challenges caused by unreliable grid supply, including lost water sales. The presentation contrasted economic drivers in the two countries. In Kenya, grid electricity costs are 2.5 times higher than Zambia while also having lower solar installation costs. For a water utility in Kenya, solarization enabled water production to increase 162% while reducing electricity costs and customer complaints by 62% and 75%, respectively. The Kenya case demonstrates that commercial financing of solar investment is possible under the right conditions. While Zambia had some promising results, including an 18% drop in electricity costs, solar projects are not yet viable with commercial financing alone, primarily due to the much lower cost of grid-provided electricity there. Still, projects may be bankable via blended finance solutions and are highly beneficial for increased climate resilience including reduced reliance on hydropower-dependent electricity grids, and the improved cost recovery they provide. Additionally, as local demand increases for additional solar energy supply, this will stimulate the market to bring down installation costs and improve financing terms.

A case presentation on a wastewater utility partnership between hanseWasser, the utility serving Bremen, Germany, and Miyahuna, the utility serving Amman, Jordan, organized by APE, demonstrated how energy audits and benchmarking can reveal opportunities for low-cost optimization to dramatically improve cost recovery without extensive investment and planning. A relatively simple analysis showed that retrofitting existing surface aerators at a wastewater treatment facility in Jordan can dramatically lower energy use and cost, providing much greater benefits than more expensive options like pump replacements.

Panel Insights. Panelists were assembled with specific expertise in the three challenges to increased investment identified in the scene-setting presentation: finance, governance, and operations. Senior managers from the European Investment Bank (EIB), Zambia’s National Water Supply and Sanitation Council (NWASCO), and Hamburg Wasser discussed the challenges and opportunities of increasing investment in renewable energy. Several insights emerged:

• New financing sources are emerging, but linkages between financiers and service providers are lacking. Linking a utility to one or more funding sources is not always straightforward. Support is needed from mechanisms like USAID’s WASH-FIN 2 to connect utilities to available financing resources and help navigate financiers’ requirements.
• ‘There isn’t a shortage of finance, just a shortage of bankable projects’. The panelist from EIB heralded ‘good news’ that funding is available but lamented a dearth of good projects and good governance, echoing the findings of WASH-FIN and others in the sector. In short, utilities need to show financiers they have a vision and plan for where they want to go and how they will get there. Utilities need technical support and coaching from programs like USAID’s WASH-FIN 2 to develop business plans, bankable projects, and establish track records of good management and improving performance.
• Climate change now factors into most major utility decisions. Climate change loomed large in almost every session at the conference and clearly pervades water operators’ consciousness, influencing both daily decision-making and long-term planning. Utilities need support to build climate resilient management systems and infrastructure to provide greater resilience against increasing droughts, floods, typhoons, and other extreme weather events.
• Energy innovations hold promise for boosting utilities’ viability, but some markets remain nascent. Through direct investment in energy efficiency, solar, and wind, Hamburg Wasser described how their wastewater system now generates more electricity than it consumes. WASH-FIN 2 contrasted market conditions in Kenya, where opportunities exist for commercial financing, with those in Zambia, where extensive external support is required as the market continues to develop. However, both cases demonstrated solarization’s ability to dramatically increase production while slashing one of utilities’ largest costs. NWASCO, EIB, and Hamburg Wasser voiced their support for increased collaboration to support renewable energy market development and scaling.

About The Author

David Favazza

Senior Technical Advisor with USAID’s WASH-FIN 2. Since joining Tetra Tech ARD in 2008, he has provided technical support to USAID water and sanitation programs across the globe working to improve water supply and sanitation access and improved performance. He is a U.S.-registered Professional Engineer (PE) and holds a Master of Science degree in Water Resources Engineering and a Master of Public Affairs.

About The Author

Sumbi M Shimwambwa

Performance Improvement Specialist with USAID’s WASH-FIN 2. She has experience in water utility operations management, infrastructure development, construction management, stakeholder engagement and performance improvement having served in various positions over the years. Sumbi joined Tetra Tech in 2019 on the predecessor WASH-FIN program that supported water service providers to improve performance through activities aimed at building their creditworthiness. She holds a BSc in Civil Engineering, MEng in Construction Management, and an MBA.