In July, the U.S. Department of Energy and the Union of Concerned Scientists (UCS) released reports (see U.S. Energy Sector Vulnerabilities to Climate Change and Extreme Weather  and Water-Smart Power: Strengthening the U.S. Electricity System in a Warming World ) highlighting the energy sector’s vulnerability to future water constraints. The reports’ findings paint a worrisome picture: currently, 60% of coal power plants in the U.S. are experiencing water stress; hydropower is threatened due to more frequent and severe droughts; and energy infrastructure is endangered by water variability due to climate change.
Water is critical for producing power, and vice versa. Almost all energy generation processes require significant amounts of water, and the treatment and transport of water requires energy, mainly in the form of electricity. Even though the interdependency between water and energy is gaining wider recognition worldwide, water and energy planning often remain distinct. The tradeoffs involved in balancing one need against the other in this “energy-water nexus,” as it is called, are often not clearly identified or taken into account, complicating possible solutions.
Population and economic growth, urbanization, and increasing demand for food and energy place competing pressures on water. According to the IEA’s World Energy Outlook 2012 , water consumption for energy generation will increase by 85% over 2010 to 2035, posing a serious challenge to many countries around the world.
In the U.S. several power plants were affected  by low water flows or high water temperatures. In India, in February 2013, a thermal power plant with installed capacity of 1130 MW shut down  due to a severe water shortage in the Marathwada region. France was forced  to reduce or halt production in nuclear power plants in the past, due to high water temperatures threatening cooling processes during heatwaves. Recurring and prolonged droughts are threatening hydropower capacity in many countries, such as Sri Lanka , China  and Brazil . These stresses will mount as emerging economies, like China , will double their energy consumption in the next 40 years.
To mitigate the challenges of the nexus, the World Bank Group recently started Thirsty Energy , a global initiative in partnership with the World Bank's water and energy departments and supported by the Energy Sector Management Assistance Program (ESMAP). Thirsty Energy will contribute to the Sustainable Energy for All (SE4All) initiative by evaluating trade-offs and synergies between water and energy planning. It will also identify potential constraints resulting from their interdependency, and develop evidence-based operational tools to assist developing countries assess the economic and social implications of water constraints in energy security and power expansion plans. See Thirsty Energy , the first paper in a series of working papers.
One of the pilot countries selected for Thirsty Energy is South Africa, a country with important water issues and large energy expansion plans. The Bank is working with partners there to incorporate water allocation quantities by catchment area and marginal costs in energy optimization tools and plans. This enables planners to assess, using economic tools, whether or not, or to what extent, cross-sectoral competition will impact the technology mix in energy generation. Through case studies such as this, the Bank aims to reduce energy projects’ vulnerability to water constraints, and encourage water and energy to be planned in an integrated manner to maximize benefits. Through Thirsty Energy, the Bank and its partners will work to break disciplinary silos that prevent cross-sectoral planning and learning and to ensure the “sustainability” factor in Sustainable Energy for All.