Drupps Water Pricing Model
Because Water Price and Water Value is not the same thing
Water’s true value is not reflected by its tariffs
Price and Value are two different things. Price is your cost for getting something. Value is the maximum price you’d be willing to pay for it. Because water is considered a human right, water prices are set in line with production cost. But human rights do not apply to companies. So why should commercial users enjoy this low water price as a form of subsidy?
We think commercial water users should pay more for water. Letting market forces guide them toward making the proper investments is more efficient, to increase water efficiency and reduce waste. If there is no cost to offset, a company will have a hard time justifying necessary investments.
The Drupps Water Pricing Model
Many businesses have been hooked on near-free water for so long they cannot see its true value. That prevents them from making sound investments in their own water security.
Drupps has developed a simple model to visualize the true value of water for commercial users. Its purpose is to highlight water’s value as a vital component for continued operation, instead of just another input.
Probability of Water Shortage
This one is based on official statistics for your local water basin, combining current water levels with future projections.
Since future projections come with a range we propose choosing the mean value, or the “top” of the normal distribution.
Calculation example
An operation with an output value of 100 M€ facing an average 5% drop in water supply is running a Financial Water Risk Exposure amounting to 5 M€/yr.
With a desired 3-yr payback on the investment, this operation should invest up to 15 M€ to reduce net water need by 5%.
Water is too important not to understand
You may disagree with our Water Pricing Model. Maybe you have ideas on how to develop it further. The main point here is to understand what water is worth to your business. What’s the financial implications of a drought?
Access to clean water is a human right. Businesses are not humans. That’s why companies need to think harder about what to do if water shortage hits. Drupps can help you prepare by increasing your water efficiency today.