Addressing the water storage gap
Water availability is key to life but is increasingly under stress. Worsening droughts globally, aging water infrastructure and rising imbalances between water supply and demand are resulting in significant pressures on populations, industrial activities, and the agricultural sector to sustain the population.
Key takeaways
- Water storage is vital to protecting water availability against water scarcity
- Over the last fifty years natural water storage globally decreased by around 27,000 billion m³ 1
- Investments along the whole water-storage value chain can help to address water scarcity and associated hydropower challenges
To mitigate the impact of water stress, sustainable water supply and water storage solutions are needed that help enhancing water availability in water-scarce times.
The increasing water storage gap
Source: World Bank: What the future has in store – A New Paradigm for Water Storage, February 2023.
Water storage, a critical cornerstone to water security
Water storage is rarely viewed as a critical sustainable water management technology in addressing waterstress related challenges. However, natural, hybrid and built water storages can significantly contribute to mitigate the effects of prolonged drought periods and hardly predictable precipitations by:
- Meeting different and evolving needs from the population and industry in drier periods
- Supporting Hydropower, which is the largest renewable energy source by capacity and generation
- Reducing the environmental and social risks from floods
- Ensuring waterway transport access through all seasons
Considering the benefits delivered by water storage to communities, businesses, and regions, it’s crucial to preserve and improve existing natural water storage (aquifers, lakes, wetlands) as well as to invest in the modernisation and development of built water storage systems.
The Colorado River basin: a giant water storage in peril
Seven US states are highly dependent on the Colorado River, an already over-used waterway, and recently reached an agreement to cut consumption and help to save a stream that:
- provides drinking water for more than 40 million people
- is an irrigation resource for some of the country’s most important farmlands2
- creates hydropower for eight surrounding states.
- generates (approximately corresponding to the water needed to fill 6 million Olympic-sized swimming pools) around USD 60 billion per year in crops and livestock3
Under this agreement, the Inflation Reduction Act launched by the Biden Administration will compensate Colorado River Basin water districts, cities and indigenous communities with USD 1.2 billion for conserving 3 million acre-feet of water (corresponding approximately to the water necessary to fill 6 million Olympic-sized swimming pools) until 2026.4
Overall, over USD 10 billion of Inflation Reduction Act funds are being directed at water, including drought relief, flood mitigation and climate resiliency of the domestic US water infrastructure. While USD 10 billion for water is great, especially in the context of more than 90 billion the U.S. government allocated for water through the Bipartisan Infrastructure Law (2021) and the Drinking Water and Wastewater Infrastructure Act (2021), it is important to get further evidence that water is finally getting the necessary attention it deserves.
The recently accorded deal comes at the right time. The Colorado River basin has suffered a two-decades-long drought period5 while the drastically shrunken average snow runoff is accelerating the lowering of the river’s as well as of Lake Powell’s and Lake Mead’s – the two major reservoirs in the Colorado River basin – water levels.
Water storage issues’ impact on hydropower
This alarming development has far-reaching consequences as the river system is not only supplying water to the surrounding communities but is also a key economic factor for the region accounting for USD 1.4 trillion of the annual U.S. economy and supporting 16 million jobs in several neighbouring states8. Additionally, a drying-out of the Colorado River basin would very probably also have a significant impact on electricity and water bills which could increase at the same rate as water levels fall. Once the reservoirs’ hydropower capacities decrease while electricity demand is growing uninterruptedly, the region will have to examine building infrastructure for alternative renewable power sources, like solar and wind.
It’s worth noting that currently the Hoover Dam at Lake Mead and the Glen Canyon Dam at Lake Powell supply hydropower for around 4 million residents in the seven basin states.9
Looking at the implications of decreasing stream flows and shrinking reservoir levels not only in the Colorado River basin, from an US-level perspective it’s also worth mentioning that the hydropower share of total U.S. renewable electricity generation is currently at 28.7% and at around 6.2% of total U.S. electricity generation.10
Under these circumstances it becomes even more urgent that additional financial flows are redirected to the restoration of existing and the further build out of new hydropower capacities.
Investing across the entire water storage value chain
Comprehensively addressing water storage issues means going beyond feasible quick wins like fixing leakages in water tanks, freeing water storage from sediment deposits, managing the transportation of water from reservoirs to people and businesses, and addressing the lifecycle of water storage – though these measures are, of course, indispensable for ensuring a sufficient water supply.
Looking at sustainable water management from a broader and systematic perspective implies the identification of innovators and enablers along the entire value chain. This ranges from technologies that help to understand, monitor and preserve aquifers, wetlands and other natural water storage where the majority of freshwater is stored, to companies that design built water storage tailored to specific climate, local or regional requirements. Indeed, minimising the environmental impact and maximising the efficiency and variability of reservoirs is vital.
Not least, integrated solutions to combine natural, hybrid and built storage capacities and harmonise their differing dynamics are needed to follow a holistic approach to sustainably manage and restore existing and build new water storage capabilities.
1 World Bank: What the future has in store – A New Paradigm for Water Storage. February 2023
2 Washingtonpost.com: Colorado river drought explained. May 2023
3 Farmland.org: Colorado River Challenges Pose Risks to Western Agriculture. April 2023
4 U.S. Department of the Interior: Biden-Harris Administration Announces Historic Consensus System Conservation Proposal to Protect the Colorado River Basin. May 2023
5 Agu.org: The Colorado river basins worst known megadrought was 1800 years ago scientists discover. June 2022
6 Washingtonpost.com: Colorado river drought explained. May 2023
7 Ibid
8 Nature.org: Economic Impact of the Colorado River. April 2023
9 Slate.com: The Colorado River’s Urgent Lesson for Energy Policy. February 2023
10 Energy.gov: Hydropower basics
Recent insights
-
Investing involves risk. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Past performance is not indicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any security and shall not be deemed an offer to sell or a solicitation of an offer to buy any security
The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted.
This material has not been reviewed by any regulatory authorities. In mainland China, it is for Qualified Domestic Institutional Investors scheme pursuant to applicable rules and regulations and is for information purpose only. This document does not constitute a public offer by virtue of Act Number 26.831 of the Argentine Republic and General Resolution No. 622/2013 of the NSC. This communication’s sole purpose is to inform and does not under any circumstance constitute promotion or publicity of Allianz Global Investors products and/or services in Colombia or to Colombian residents pursuant to part 4 of Decree 2555 of 2010. This communication does not in any way aim to directly or indirectly initiate the purchase of a product or the provision of a service offered by Allianz Global Investors. Via reception of his document, each resident in Colombia acknowledges and accepts to have contacted Allianz Global Investors via their own initiative and that the communication under no circumstances does not arise from any promotional or marketing activities carried out by Allianz Global Investors. Colombian residents accept that accessing any type of social network page of Allianz Global Investors is done under their own responsibility and initiative and are aware that they may access specific information on the products and services of Allianz Global Investors. This communication is strictly private and confidential and may not be reproduced. This communication does not constitute a public offer of securities in Colombia pursuant to the public offer regulation set forth in Decree 2555 of 2010. This communication and the information provided herein should not be considered a solicitation or an offer by Allianz Global Investors or its affiliates to provide any financial products in Brazil, Panama, Peru, and Uruguay. In Australia, this material is presented by Allianz Global Investors Asia Pacific Limited (“AllianzGI AP”) and is intended for the use of investment consultants and other institutional/professional investors only, and is not directed to the public or individual retail investors. AllianzGI AP is not licensed to provide financial services to retail clients in Australia. AllianzGI AP is exempt from the requirement to hold an Australian Foreign Financial Service License under the Corporations Act 2001 (Cth) pursuant to ASIC Class Order (CO 03/1103) with respect to the provision of financial services to wholesale clients only. AllianzGI AP is licensed and regulated by Hong Kong Securities and Futures Commission under Hong Kong laws, which differ from Australian laws.
This document is being distributed by the following Allianz Global Investors companies: Allianz Global Investors GmbH, an investment company in Germany, authorized by the German Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin); Allianz Global Investors (Schweiz) AG; in HK, by Allianz Global Investors Asia Pacific Ltd., licensed by the Hong Kong Securities and Futures Commission; in Singapore, by Allianz Global Investors Singapore Ltd., regulated by the Monetary Authority of Singapore [Company Registration No. 199907169Z]; in Japan, by Allianz Global Investors Japan Co., Ltd., registered in Japan as a Financial Instruments Business Operator [Registered No. The Director of Kanto Local Finance Bureau (Financial Instruments Business Operator), No. 424], Member of Japan Investment Advisers Association, the Investment Trust Association, Japan and Type II Financial Instruments Firms Association; in Taiwan, by Allianz Global Investors Taiwan Ltd., licensed by Financial Supervisory Commission in Taiwan; and in Indonesia, by PT. Allianz Global Investors Asset Management Indonesia licensed by Indonesia Financial Services Authority (OJK).
3014391