Water scarcity threatens energy plans from U.S. to China

Water shortages increasingly threaten the viability of energy projects from the U.S. to China, the International Energy Agency said.

The water needed for energy production is set to grow at twice the pace of energy demand through 2035, requiring the use of better technologies to manage the risk, the Paris-based agency that advises 28 nations said today in its annual outlook.

“Water is growing in importance as a criterion for assessing the viability of energy projects, as population and economic growth intensify competition for water resources,” the agency said. “In some regions, water constraints are already affecting the reliability of existing operations and they will increasingly impose additional costs.”

Water is becoming more scarce as the globe copes with climate change that’s shrinking aquifers and making some areas dryer while the world population rises to 9 billion by 2050. That’s led to calls from companies including Royal Dutch Shell Plc (RDSA) and Eskom Holdings SOC Ltd. for governments to take “decisive action” on water.

“Inadequate water management, investments, and governance pose a range of challenges and risks to our business,” Shell Chief Executive Officer Peter Voser, Eskom CEO Brian Dames and 44 other company chiefs said in a letter in June to world leaders attending a UN sustainability summit in Rio de Janeiro. “These include business continuity risks, reputational and regulatory risks and health risks for our employees.”

A UN survey of 134 countries in May found that 56 percent said the importance of water for energy rose over the past 20 years, including 20 percent who deemed the increase “significant.” A third said the importance was unchanged.

“The vulnerability of the energy sector to water constraints is widely spread geographically, affecting, among others, shale gas development and power generation in parts of China and the United States, the operation of India’s highly water-intensive fleet of power plants, Canadian oil sands production and the maintenance of oil-field pressures in Iraq,” the IEA said in today’s report.