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World Observer

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Using renewable energy to manage water and climate risk

ByJerzy Nawrocki

Nov 25, 2021

Fresh water resources are dwindling, posing a significant commercial risk: according to one estimate, a lack of pure fresh water threatens $425 billion in value across upwards of 500 enterprises. Companies that use a lot of water are more likely to be concerned about water danger. However, all organizations might be exposed to water risk indirectly through their energy purchases, as water is commonly utilized to produce energy from steam-powered turbines.

Electricity generated from renewable sources, on the other hand, uses less water than electricity generated from fossil fuels. Making increased use of renewable electricity, whether by procuring a larger percentage of the grid power from renewable sources or by adding their renewable-generation capacity, is a promising approach for businesses to reduce their risk exposure while also helping to relieve local water stress.

Switching to renewables is also well known for lowering carbon emissions, which firms are increasingly pursuing in order to limit the accumulation of physical climate threats by attaining net-zero emissions. Renewable energy’s dual water and climate advantages can be large, and they should be examined together.

The notion that energy management impacts water conservation and climate stewardship isn’t new: academic research on the so-known energy-water-carbon nexus has increasingly become the focus of academic research on various topics, including seawater desalination. However, it is becoming increasingly important in multinational firms’ decisions about how to minimize their water footprints and carbon emissions in water-scarce countries.

A comprehensive examination of site-level elements, ideally driven by a company-level strategy, is required to assess the potential carbon and water savings from utilizing more renewable energy. We studied data from over 1,500 enterprises in 2019 on water use and carbon emissions linked with their energy purchases to see how these variables play out at the sectoral level and then focused on two industries: chemicals and food-and-beverage processing.

In both industries, two site-level criteria stood out in an analysis. The first is the carbon and water intensity of electricity obtained from the grid, which varies greatly by region. The second element is the amount of water stress in a company’s places, which varies by region. In our data collection, 40% of energy purchases are made by chemical firms in locations with medium-high or greater levels of water stress, compared to 25% for food-and-beverage-processing companies. Taking all of these considerations into account can help executives optimize the water and carbon savings of converting to renewable energy when it is practical.

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