In developing countries, about 45 million cubic meters of water are lost every day, and the economic value lost every year exceeds US$3 billion.
World Bank research pointed out that the world is estimated to lose 32 billion cubic meters of physical water every year, half of which occurs in developing countries. The water supply company incurs huge financial costs in the water treatment and pumping process, and can only watch the water leak back to the ground and lose the revenue from the water that could be sold. If water losses in developing countries are halved, the water saved can be enough to supply about 90 million people.
We refer to this type of water as non-revenue water or water that is lost after extraction or whose destination is unknown.
Better management of non-revenue water and protection of precious water resources have become increasingly important. Non-revenue water management enables utilities to expand and improve services, improve financial performance, make cities more attractive, enhance climate resilience, and reduce energy consumption.
In water-stressed environments, non-profit water management can often bring excellent cost-effectiveness compared to increasing water supply. At the same time, the revenue generated from the saved water can improve the bottom line of service providers, and reducing water extraction can increase the resilience of cities.
However, reducing the benefits of non-revenue water has not yet become the driving force behind solving the local challenges in developing countries. Despite the various benefits, and decades of training and advocacy by international organizations and industry organizations, there is still little attention to reducing non-revenue water in these utilities that benefit the most. What is the reason for this situation?
The reasons for the lack of progress in the utility sector include weak capacity, lack of incentives, poor financial discipline, and insufficient effort to find and repair leaks compared to building new treatment facilities. These factors create a lifeless atmosphere. At present, pressure from climate change, water scarcity and increasing consumer expectations is gradually awakening this atmosphere.
The World Bank participated in the 2016 World Water Week activities. As part of the 2016 Stockholm World Water Week, the World Bank, in collaboration with the Inter-American Development Bank and the International Water Association, hosted a seminar to discuss the political, financial, technical, and technical aspects of this underutilized but far-reaching task. Market constraints. The seminar took the form of case studies to discuss how to overcome constraints, and brainstormed with water resources experts to study a global initiative to increase non-profit water management.
The seminar and the more formal partnership with the International Water Association are part of a broader plan by the World Bank's Water Industry Global Practices to help build sustainable urban utilities. This plan is funded by public and private infrastructure consulting funds, and focuses on how to increase the use of performance-based contracting mechanisms (PBC) as a way to solve the problem of high leakage.
With the help of the PBC model, public utilities can obtain the capabilities and equipment they lack; at the same time, with the aid of a result-based payment mechanism, performance incentives can be increased, and the risk of contractor default can be reduced. A project funded by the World Bank in Ho Chi Minh City adopted the PBC model for non-profit water management in some areas of the city, saving half of the previously lost and leaked water, which is 100,000 cubic meters per day (enough to meet the water consumption of 500,000 people) demand). This remarkable achievement has established a new benchmark for the PBC model of non-revenue water management!
At present, when the PBC concept has been proven effective, the challenge is how to streamline and simplify the preparation and contracting process for non-revenue water PBC projects. The World Bank worked with the International Water Association and collaborated with the Inter-American Development Bank to jointly advocate for the reduction of non-revenue water and create a more dynamic market at the national and international levels. We have worked with multiple potential customers in various regions to introduce non-revenue water PBC contracts as part of the utility company’s performance and sustainability improvement plan.