Demand Management
The demand for drinking water worldwide continues to increase due to population growth, urbanization, rising incomes and standards of living and possibly the effects of climate change. As a result, additional water resources are needed, which are becoming increasingly scarce and expensive. Meeting the demand from existing resources is rapidly becoming an urgent challenge in many regions of the world.
The Future Cost of Water
To illustrate the increased cost of water into the future, let us take a look at the example of Hyderabad in India. The cost of water in Hyderabad, India in 1994 was below US$ 0.2 per m3 whereas the calculated cost of future water to be supplied through new schemes was more than US$ 0.6 per m3. This meant that future water was more than three times as expensive as water from the existing resources (Source: Serageldin Ismail 1994: The Financing Challenge)
There are typically two potential responses:
- ‘supply-side’ solutions, meeting demand by accessing additional water resources or
- managing consumptive demand itself to postpone or avoid the need to develop new resources.
As new water resources are becoming increasingly scarce, “Demand Management” is more and more used as a strategy to balance the demand and supply of drinking water and make the best possible use of already available water.
Water demand management involves the adoption of policies and other measures to achieve efficient water use by all members of a community. A demand management plan may involve a wide range of demand management measures including:
1. Reducing the demand for water by increasing the price of (excessive) water use. The theory is that by increasing the price of water the demand or quantity of water used will reduce. There are many measures that can be taken to increase the price of water, e.g.
- Introduce universal water metering
- Increasing the average water tariff
- Introducing progressive water tariff structures, aiming at the reduction of excessive water use
- Increasing tariffs for wastewater discharge
- Introducing groundwater abstraction fees
- Providing fiscal incentives (e.g. for investments in water saving devices or for water treatment plants)
- Introducing so-called “water markets” and use these as a framework to stimulate the efficient use of water.
2. Taking other measures to reduce the quantity of water used, such as
- Introducing water saving devices
- Changing customer behavior through educational programs
- Legal measures, such as regulating the use of groundwater
- Carrying out water audits: review the use of water and wastewater in e.g. industrial plants with the purpose of reducing the use of water
- Increasing efficiency at the utility level by reducing production losses and water leakage or reducing pressure in the system
- Re-use water (e.g. wastewater/grey water) to reduce the demand for fresh water)
Demand management measures can be short or long term depending on the needs of the community served by the water utility. Measures which have a short lead-time are for instance restrictions, drought pricing and retrofitting programs. Others such as pricing structure reform, leakage detection and repair and regulation of the water efficiency of new buildings are longer-term measures.
To be effective, water demand management and conservation policies should preferably consist of an integrated set of measures which are carried out over a longer period of time to achieve the desired results.
Demand Management and Investment Planning in Australia
In Melbourne, Australia, a combination of water demand management measures was used, such as: water pricing reforms, water saving devices, public education, etc. As a result, the water utility of Melbourne was able to reduce water demand with some 15% and could delay investments in additional supplies by about six years. The deferral in investment was valued at $25 million.
Source: Bhatia, Ramesh, Rita Cestti and James Winpenny. Water Conservation and Reallocation: Best Practice Cases in Improving Economic Efficiency and Environmental Quality. A World Bank-ODI Joint Study
