Leakage is a global problem that risks water security, sustainable supplies and good-quality services. Bill Kingdom outlines the measures that utilities can take to address this pressing problem.
There are ever-increasing levels of leakage observed around the world. A report that I prepared with Roland Liemberger and Philippe Marin in 2006 estimated total global non-revenue water (NRW) to be 49 billion m3/year. Roland updated this in a 2016 study with Alan Wyatt and estimated total NRW to be 126 billion m3/year globally. Today, the numbers will surely be higher still. This is surprising given the huge number of conferences and articles on the topic.
This article makes the case that the technical aspects of leakage management (which garner the most attention) are necessary but not sufficient to reduce leakage. A more integrated approach is needed that considers design, construction, management, financing, and incentives.
The foundational document Leakage Control Policy and Practice was published by the Technical Working Group on Waste of Water under the UK’s National Water Council in July 1980. This set out a comprehensive technical and financial strategy for leakage management. While technology has improved over time, the fundamentals in this document are still valid 40 years on. Yet, despite this knowledge, leakage levels continue to increase and, today, they are the root cause of, or a significant contributing factor to, intermittent water supplies (IWS), resulting from an imbalance between supply, demand and leakage.
This article highlights four actions that, if implemented by governments, utilities and donors, would lead to a marked reduction in IWS, improved quality of service, and better financial sustainability of the sector. None are complex, and many have been tested and shown to be feasible, but they have not been embraced as an action-oriented philosophy within the sector. Historically, the focus has been on narrow technical solutions that have left behind a graveyard of failed NRW initiatives. The four actions that are considered foundational to reducing IWS are:
- Leakage centric planning, design and construction
- Leakage centric operational management
- Partnering with the private sector
- Mobilising finance for investment.
Leakage centric planning, design and construction
The sector must implement a concept of leakage centric planning, design and construction (PD&C) where the impact on levels and management of leakage are considered as part of investment evaluation and implementation.
Planners and designers must assess how new investments might increase physical losses and propose mitigation measures accordingly. This would address situations where new production facilities provide as much treated water for groundwater recharge as they do to customer tanks. Leakage centric PD&C would also influence network design by requiring engineers to assess the impact on pressures and leakages elsewhere in the system. District metered areas (DMA) aligned with active leakage control (ALC) modalities would be core to network design, along with the construction of chambers that allow for later installation of pressure reducing valves.
The World Bank leakage project in Ho Chi Minh City in Vietnam found that the retrospective creation of DMAs and chambers for improved flow/pressure management in existing networks constituted around half of the cost of the leakage reduction programme and introduced major construction complications. With leakage centric PD&C this cost and complexity would be eliminated going forwards, making future ALC simpler and less expensive.
Good design, bad construction
Material quality is generally well defined, but price may sway clients towards lower-quality products. This is a false economy. These poor-quality materials will bake in a lifetime of ever-increasing leakage that cannot be fixed easily. As does poor-quality workmanship.
Leakage centric operational management
Responsibility for leakage management in a utility is often ‘everyone and no-one’. This creates a laissez faire approach, euphemistically called ‘passive leakage management’, that if you can’t see the leaks, then there isn’t a problem. A leakage centric approach to network management requires consideration of organisational structure, staff resources and incentives.
When preparing an NRW reduction project in East Asia, the lack of ownership and responsibility for reducing leakage in the host utility was clear. The project design proposed the establishment of a directorate of leakage management, along with staff and resources needed to do their job and deliver results – which they did.
High leakage means higher costs, lower revenues and poorer quality of service. In a competitive marketplace, all these implications would force companies to address leakage, and quickly. In a public sector monopoly, those market-based incentives don’t apply. Managers and politicians blame each other for the current situation, and little gets done. Ultimately, both parties are complicit in robbing customers of the quality of service they deserve, further weakening the financial performance of the utility. Strong incentives at staff level are shown to deliver improvements, whether in Haiphong in Vietnam, or in the National Water and Sewerage Corporation in Uganda.
Partnering with the private sector
Partnering with the private sector to reduce leakage in developing countries can be attractive for the same reasons as water utilities hire construction firms to build treatment plants. Utilities need access to specialist expertise to provide:
- Capacity – If the public sector doesn’t know how to do it, and the private sector does, then why not benefit from that knowledge and experience? A well-designed public-private partnership (PPP) can include capacity building for the public sector client for long-term sustainability.
- Incentives – These matter when results need to be delivered. A PPP by its nature is incentive driven, especially when using a performance-based leakage reduction contract.
- Autonomy – A public sector company often reacts to political priorities. An NRW contractor, while not free of such influence, benefits from a contracting arrangement that provides some protection, allowing them to focus on leakage reduction.
- Accountability – A NRW contractor is committed to delivering results and has a contract that sets out targets, and payment relies on their achievement.
Diagram 1 demonstrates that, on average, NRW PPPs perform better than the public sector alone. So, it would seem churlish not to at least try using a PPP to reduce leakage as part of a well-defined strategy for utility performance improvement.
However, the use of the private sector is no silver bullet and clients, particularly, need to understand this. A PPP contract cannot quickly rectify decades of poor management.
NRW reduction is not practised by many public utilities in developing countries, so there are few staff or vested interests to object to a NRW PPP. In fact, many companies may welcome offloading the burden of NRW reduction to a contractor, thereby avoiding working at night, digging up roads, and generally being disruptive. At the same time, the benefits of a NRW reduction contract, in terms of improved service, may constitute a significant proportion of what a deeper, and more contentious, form of PPP might deliver.
Mobilising finance for investment
Developing country utilities are rarely sufficiently creditworthy to mobilise finance to improve their systems. The blame is often attributed to low tariffs. However, Diagram 2, first presented at SIWI in 2016, shows that the number of potentially creditworthy utilities (revenues > 120% of costs) would quadruple by addressing the efficiency of collections, energy efficiency and leakage.
This improvement would be achieved by moving utilities from their current performance levels to those demonstrated by their top quartile peers.
Fixing these endemic performance challenges is at the heart of improving financial sustainability. Energy efficiency, for example, often has payback periods of just a few years. NRW is likely to take a little longer.
So why doesn’t such creditworthy and performance-enhancing investment take place? There are many reasons, including:
- Lack of familiarity or understanding between lenders and water companies
- Lack of capacity to prepare bid documents or oversee implementation, particularly of performance-based contracts
- High transaction costs when each opportunity is tackled individually and are relatively small
- The perceived high cost of borrowing in local capital markets.
Every water company in every developing country could benefit from investments in energy efficiency and NRW reduction. In any country, tens, hundreds, or even thousands of utilities need this support. One way to provide solutions to fix these problems would be to establish national NRW and energy efficiency funds managed as standalone entities or as part of existing financial institutions. Such funds would have two streams of activity:
- A technical assistance window to streamline and speed up the design and evaluation of projects and address issues of capacity constraints
- A financing window to provide blended financing for viable projects. Such financing would be a mix of government funds, donor funds, domestic commercial finance, and even Green Climate Funds. The latter are of particular interest given the adaptation and mitigation benefits that flow from energy efficiency and leakage reduction.
Improving service, particularly moving from IWS to continuous supply, provides a once in a lifetime opportunity for utilities to make impactful changes to tariffs in return for a significantly improved service quality. Carefully managed community outreach can link better service to higher tariffs in a way that will be appealing to customers and improve the creditworthiness of the utility.
In summary, despite the decades-long drive to improve leakage reduction technology, the hoped-for results have not been delivered.
This article argues that technology is necessary – but not in itself sufficient – to deliver results. Instead, there should be much greater focus on the following four topics, which, if packaged alongside technical solutions, are likely to deliver the outcomes all sector professionals are seeking:
- Leakage centric planning, design and construction to assess and mitigate the impact of new investment on leakage
- Leakage centric operational management to create a directorate for leakage management, which is adequately resourced, accountable, and has flexibility to introduce incentives to motivate staff
- Leveraging the public sector by partnering with the private sector as part of a strategy for utility improvement by bringing in much-needed skills, experience and equipment
- Establishing national funds that can provide technical assistance and blended finance for improvements in service and creditworthiness through NRW reduction and energy efficiency.
None of the above actions are a big ask. They are refinements of existing models of which examples can be seen around the world, and are supported by vast amounts of literature, working groups and conferences that have devoted a great amount of time and effort to this topic. But by raising their profile and bundling them into a strategy for reducing NRW and eliminating IWS, they can deliver the sort of service customers expect in the 2020s. •
Bill Kingdom is a lecturer at Oxford University, a consultant, and former global lead for water supply and sanitation at the World Bank.
This article is dedicated to Roland Liemberger who sadly died on 18 May 2023. His friendship and professional guidance was ever present throughout my career and this article draws heavily on experiences gained from working together. He will be sorely missed.