Mitigating Risks for Water-Intensive Industries with Dynamic Water Pricing
On the surface, our industries appear stable, with a reliable water supply sustaining operations and supporting growth. As long as the water flows, so does production. But from the outskirts, a new reality is creeping in. The dripping stops, the flow ceases. Drought spreads. How can we create the conditions today to ensure that production continues to flow tomorrow?
As water scarcity accelerates worldwide, partly due to climate change, industries must find new ways to manage water. This involves not only taking responsibility for how their operations impact the environment but also addressing the increasingly evident risks associated with this scarcity.
What risks are we talking about then?
A water supply cut could halt production processes, leading to significant downtime. For industries that rely heavily on continuous operations, such as manufacturing facilities, this could result in substantial financial losses. Inadequate water supply can also compromise product quality, resulting in defective goods and increased waste. This is particularly critical for food, beverage, and pharmaceutical industries, where water quality is essential for consumer safety.
Doing nothing now leads to water cost shocks later
Industries facing water supply cuts may incur high costs from emergency measures like transporting water from alternative sources or investing in temporary storage solutions. Stricter environmental regulations and penalties for over-extraction or pollution during scarcity can further increase operational costs and complexity. Additionally, failing to manage water resources responsibly can damage an industry’s reputation, leading to loss of customer trust and potential legal liabilities.
To mitigate these risks, industries need to invest in long-term solutions such as water recycling systems, alternative water sources, and infrastructure upgrades. One compelling strategy to promote this shift is dynamic water pricing, a model that reflects the risks rather than relying on the current price of grid water.
Here’s why:
Reflecting True Scarcity: The current price of grid water often doesn’t reflect its true value, especially in regions where it is becoming scarce. Dynamic pricing adjusts water costs based on availability, making users aware of its true value. Higher prices during scarcity encourage industries to use water more efficiently, reduce waste, and adopt water-saving technologies and practices.
Encouraging Investment in Sustainability: When water prices reflect supply risks, industries are more likely to invest in sustainable water management solutions like recycling, rainwater harvesting, and advanced treatment technologies. Dynamic pricing can drive innovation by creating a market for new technologies and practices that improve water efficiency and sustainability.
Enhancing Resilience: Incorporating water supply risks into pricing helps industries manage these risks, ensuring operational resilience. Accurate pricing enables better decisions on resource allocation, infrastructure investments, and long-term planning, enhancing adaptability to changing water conditions.
Environmental and Social Benefits: Dynamic pricing encourages water conservation, protects ecosystems, and maintains biodiversity. Reflecting scarcity in water prices helps prioritize essential uses like drinking water and sanitation over industrial uses, promoting equitable access.
Accurate water pricing identifies your water risks
As industries face an uncertain future with increasing water scarcity, they must act decisively to secure their operations and sustain growth. The illusion of abundant water is fading, replaced by the stark reality of drought and supply disruptions. Proactive measures such as dynamic water pricing, investment in sustainable technologies, and responsible resource management are crucial for adapting to these challenges. These steps not only mitigate risks but also unlock opportunities for innovation and resilience. This is the roadmap we must follow, outlining both risks and opportunities. Above all, it represents the reality we must navigate today to secure our future.
Jonas Wamstad,
Water innovator & Co-founder of Drupps