Polski
Business and economics, Issue 16/2025
How much does inefficiency cost in the water sector?
Nov
Water management needs energy, while energy requires large amounts of water. Inefficiencies in both of these interrelated sectors can reduce GDP in developed countries by up to 8 percent, according to a recent Danfoss report The potential of the water-energy nexus: Tapping into efficiency. How can waste be addressed?
Water and energy – an extremely important interdependence
Half of human demand for water today is covered by underground resources. Unfortunately, the rate of their depletion is faster than the rate of renewal, and climate change is making the situation even more difficult. According to Danfoss experts, the water sector is severely underinvested, leading to massive waste – in the United States alone, leaking water pipes caused $7.6 billion in treated water losses in 2019. By 2039, that total could rise to $16.7 billion.
The water sector accounts for about 4 percent of global energy consumption – most of which comes from fossil fuels. Energy is needed to extract, treat and transport water, and continued demographic growth means that both electricity demand and emissions are constantly increasing. Energy consumption in the water sector is estimated to more than double by 2040.
On the other hand, the energy sector is responsible for about 14 percent of global water consumption, and this could increase by a further 60 percent by 2040. Water is used to cool power plants, power hydroelectric plants, refine fuels and irrigate fields where crops are grown for biofuel production. As a result, energy production is sometimes severely disrupted during periods of drought and heat waves.
Inefficiency in the water sector weighs on the entire economy
Negligence on the water-energy axis entails serious financial risks and loss of competitive advantage. This is particularly true for sectors heavily dependent on the supply of both resources, such as manufacturing and mining. As climate change deepens, restrictions on access to clean water could, according to the report’s authors, reduce GDP in wealthy countries by 8 percent by 2050. In poorer countries, a water crisis could result in a loss of up to 10-15 percent of GDP over the same period.
To prevent the worst from happening, companies, politicians and lawmakers should focus on three basic types of action:
- Lowering demand for water;
- reducing losses;
- Optimization of processes in water management.
According to the report’s authors, the priority today is to reduce inefficiencies in the water sector in the use of energy for pumping, treating, heating and cooling water, while improving control over and monitoring of water utilities.
Energy-intensive water extraction
Pumping groundwater for agriculture consumes 469 TWh annually and is responsible for 192 million tons ofCO2 emissions. Meanwhile, simply replacing pump drives with a more efficient variable speed drive (VSD) system could save 20 to 50 percent of energy. Experience in the UK shows that investment in pumps translates into a fundamental reduction in emissions in the water sector.
Where water abstraction cannot be carried out responsibly and economically, modern technologies such as seawater desalination are worth considering. Unfortunately, despite technical improvements, this is still a highly energy-intensive method, and the International Energy Agency (IEA) predicts that associated energy demand will increase from 562 TWh in 2023 to 1,079 TWh in 2030.
Desalination plants operating on the basis of reverse osmosis (so-called SWRO) urgently need to be upgraded with a focus on energy recovery systems and high-pressure pumps. Their use is crucial in regions where there are regular surpluses of renewable energy produced by wind or solar farms. It is worth mentioning that the DESALRO 2.0 experimental desalination plant in the Canary Islands achieved a record energy efficiency of 1.86 kWh/m3 of water – if all plants could be upgraded to use up to 2 kWh/m3, the global savings would be colossal.
Reduce the scale of leaks
Inefficiencies in the water sector are the result of huge losses in the distribution phase – between 30 and 60 percent of treated water in each country does not reach consumers and does not generate financial returns. Annually, that’s up to 126 billioncubic meters globally.
Inefficiencies at this stage are helped by technological solutions such as digital leak detection systems. In Chile, two water utilities that invested in online network monitoring reduced annual water losses by 13 billioncubic meters, and saved €5.8 million over three years by doing so. This is important, because these funds can be invested in even greater water and energy efficiency.
Outdated, degraded infrastructure requires the application of more pressure to the network, which entails additional energy expenditures. This is another sphere that urgently needs investment, and through which the feedback between water supply and energy production can be relieved.
How to reduce water consumption?
Another step that can move modern societies away from the water crisis is, of course, reducing the amount of water taken. The greatest potential for this is in agriculture, where up to 60 percent of water is wasted, according to WWF data. And since the demand for water for irrigation is expected to increase by 146 percent by the middle of the 21st century, eliminating waste is a task of the utmost importance. How to accomplish it?
Huge savings can be achieved by investing in modern irrigation systems that deliver water in a tightly controlled manner, i.e. directly to the roots, and reducing evaporation and surface runoff. Replacing pumps from the currently dominant gasoline ones with electric ones, meanwhile, will reduce the energy inefficiency of crop watering.
The report’s authors also point out the huge water consumption in industry, particularly in the semiconductor manufacturing process and in the food industry. As a positive example of change, they point to four Carlsberg beverage factories in Poland, where the implementation of the Zero Water Waste system has reduced water consumption by 17 percent. As a result, the production of 1 liter of beer requires 2.55 liters of water, while the market standard is as much as 4-6 liters.
Treatment and reuse, or the end and beginning of the cycle
The Danfoss report also devotes considerable attention to the water treatment and reuse phase, crucial for sustainable development, particularly in decarbonizing the economy and strengthening regional water resilience.
Studies show that wastewater treatment accounts for 30-40 percent of municipalities’ energy budgets, and electricity bills alone are the second largest operating cost for wastewater treatment plants (after personnel costs). And in this case, the key to eliminating waste is to modernize and optimize technological processes, with particular emphasis on the use of smart sensors and the aforementioned VSD drive.
The report’s authors also emphasize the importance of wastewater as a potential source of energy, which can be recovered using digesters. In them, sewage sludge is converted into biogas, primarily methane, and can be used as fuel. In addition, cooling the treated water with pumps generates heat that can be transferred to local district heating networks.
Inefficiency in the water sector is mainly due to outdated technologies and lack of investment. Danfoss experts suggest setting ambitious targets for reducing intake, leakage and consumption, and then using modern tools to achieve them. Water losses directly translate into financial and energy losses, and only a comprehensive approach to all three aspects can save us from economic crisis.
In the article, I used:
The potential of the water-energy nexus: Tapping into efficiency, Danfoss Impact No. 7, 2025
