The World Bank has published a new report flagging up water investment potential in the emerging markets of Europe, Central Asia, and the Middle East and North Africa for water, renewable energy and resource efficiency.

The Bank says the report presents an assessment of climate-smart investment opportunities in a vast region: Europe, Central Asia, and the Middle East and North Africa (EMENA).

Geographically varied, EMENA spans 49 countries which have seen unprecedented increases in energy demand, population growth, and urbanization, as well as an acute need for improved infrastructure for more efficient industry, transport, and utilities.

The report maps the results of an investigation of private sector investment opportunities related to climate change mitigation and adaptation.

The Bank’s proprietary analysis of climate-smart investment opportunities in EMENA estimates a conservative investment potential of $640 billion up to 2020 distributed across the region in the following sectors:

• $270 billion in renewable energy generation, rehabilitation of power infrastructure, and improved transmission and distribution.
• $240 billion in energy efficiency in the commercial and consumer sectors, via building insulation, appliance upgrades, lighting, and water and space heating.
• About $70 billion in improved water usage, including for power.
• At least $60 billion in cement, metals, and manufacturing, via improved industrial processes and equipment upgrades.

The Bank has also produced a less conservative estimate for climate-smart investments of almost $1 trillion by 2020, which assumes greater reductions in energy-related subsidies and ambitious and consistent public incentive schemes, including funds, tax exemptions, feed-in tariffs, and mandatory efficiency standards.

According to the Report, climate change is creating very real private sector investment opportunities across EMENA and smart investors are already seizing the opportunities. In the Middle East and North Africa (MENA), renewable energy investments reached $2.9 billion in 2012, up 40 percent from the previous year.

The EMENA countries are now facing unprecedented increases in energy demand, population growth, and urbanization, and an acute need for improved infrastructure for more efficient industry, transport, and utilities.

The Report says that the likely impacts of climate change - in particular land surface change and water scarcity - will be strongly felt across the region.

Water opportunities exceed $190 billion in Middle East and North Africa

In the Middle East and North Africa (MENA), investment opportunities exceeding $190 billion are emerging as governments firm up their commitments to resource and energy efficiency at a time when population growth and rapid urbanization herald sharply rising energy and water demands.

The Report states:

“As MENA greens its infrastructure its governments are focused on the reciprocal relationship between energy and water ….because water constraints raise serious concerns for the region’s agriculture,  industry, and people.”

Globally, the water-energy nexus is one of the four investment “megatrends” to watch, according to the U.S. National Intelligence Council’s Global Trends 2030. The World Bank says:

“Nowhere is this truer than in the Middle East and North Africa (MENA), the world’s most water-scarce region where climate change is likely to exacerbate existing water patterns. Yet water is almost universally subsidized across MENA, often making direct financial benefits from water efficiency measures too small to justify investment.”

“However, amidst earmarked government spending on water infrastructure, there are also substantial investment shortfalls across the region, with estimates ranging from about $100 billion to $400 billion annually by the World Bank. In addition, where water is pumped from deep underground aquifers or is unavailable in sufficient quantities, it has a much greater economic value than the nominal price of piped water would imply.”

“ In these cases, water efficiency measures can have significant economic benefits – and imply that there are substantial opportunities for providers of environmental services and technology as well as climate-smart investors.”

According to the Report, climate change is also leading to a greater focus on the reciprocal relationship between energy and water. As a result, emerging investment opportunities related to the water-energy nexus include desalination, wastewater treatment and reuse, and improved water-use efficiency.

Gulf countries represent fastest-growing water investment opportunity

The Report also describes the Gulf Cooperation Council (GCC) countries as representing the fastest growing investment opportunity in the region via independent water and power projects (IWPP), including:

• 15 projects in Saudi Arabia worth $8.8 billion
• 19 projects in Kuwait worth $4.2 billion
• 10 projects in the UAE worth $1.5 billion.

 Saudi Arabia, referred to regionally as the “desalination nation,” is said to have earmarked around $66 billion over the next decade for new hybrid and solar desalination capacity along its Red Sea and Arabian Gulf coastlines.

The Bank says that Japanese firms and government agencies have jumped on the opportunity, helping design models that combine solar- and fuel-powered units to reduce the cost of fuel used in desalination plants by 65 percent.

Saudi Arabia is developing multiple-effect distillation systems (which can cut fuel use by 40 percent) in an effort to move away from the otherwise dominant and far more energy intensive thermal desalination process. The country has partnered with Japanese membrane manufacturer Toyobo and factory builder Itochu to develop reverse osmosis membrane elements near Jeddah. The Report comments that the solar desalination sector stands out for its “highly competitive bidding process, with contracts being fought over by the sector’s giants, including Spanish firm ACCIONA Agua, California-based Energy Recovery Inc. (ERI), Dow Chemical Company and French Veolia.”

The Middle East and North Africa are also looking further downstream in the water cycle, where wastewater treatment and reuse is emerging as a strong growth sector, with investment opportunities estimated at over $16 billion, partially through public-private partnerships.

Citing Egypt as an example, which is expected to grow from 550,000 people to 3 million over the next 15 years, the report flags up a project by Orasqualia, a joint consortium of Egypt’s Orascom Construction and Spain’s Aqualia, which recently completed a new wastewater plant in New Cairo with a processing capacity of 250 million liters of water per day. The $150 million project was the country’s first major public-private partnership. Orasqualia will run the plant for 20 years before handing it over to the Egyptian government, expecting $485 million in revenue over that period.

As the world’s most water-scarce region, MENA offers investment opportunities of around $30 billion in water conservation alone, while capital-intensive water purification and treatment schemes continue to dominate investment opportunities at the water-energy nexus in MENA. Investments in independent water and power projects (IWPPs), producing both desalinated water and power, are concentrated mainly in GCC countries.

In December a milestone regional cooperation agreement in the form of a Memorandum of Understanding (MoU) was also signed at the World Bank Headquarters by senior Israeli, Jordanian and Palestinian representatives. The agreement will support the management of scarce water resources and the joint development and use of new water resources through sea water desalination.

The MoU outlines three major regional water sharing initiatives that will be pursued the cooperating parties, including the development of a desalination plant in Aqaba at the head of the Red Sea, where the water produced will be shared between Israel and Jordan; increased releases of water by Israel from Lake Tiberias for use in Jordan; and the sale of about 20-30 million m3/year of desalinated water from Mekorot (the Israeli water utility) to the Palestinian Water Authority for use in the West Bank. In addition, a pipeline from the desalination plant at Aqaba will convey brine to the Dead Sea to study the effects of mixing the brine with Dead Sea water.Technical work and studies will need to be undertaken order to proceed with the actions, especially the desalination plant at Aqaba. The World Bank will assist the three governments in moving forward with the activities covered in the MoU.

The Bank says its report differs from others because it has sought out on both a pragmatic and specific basis private sector investment opportunities related to climate change mitigation and adaptation. It also addesses the key questions of where the opportunities lie and whether they will deliver healthy returns.

The Report concludes that EMENA is undoubtedly an internationally attractive market to which global players are increasingly flocking – a trend which looks set to continue.

Click here to download the Report in full