Embrace a circular approach, shift from take-use-discharge to sustainable water management – Roland Berger’s Dieter Billen

This approach involves collaborative efforts across the entire value chain to reduce stress on global water resources, especially critical in Southeast Asia.

The water industry plays a pivotal role in ensuring access to clean and sustainable water resources, particularly in regions like Asia, where water scarcity and quality issues are prevalent.

As the world grapples with the pressing challenges of water management, experts like Dieter Billen, Partner and Lead of Roland Berger's Energy & Sustainability Practice in Southeast Asia, are at the forefront of addressing these issues. 

Billen is a seasoned professional with a wealth of experience in Southeast Asia's energy and sustainability landscape. Originally starting his career at Roland Berger's Brussels office in Belgium, he has since worked in several countries across Southeast Asia. His expertise spans public sector development, economic development, regulations, and strategic infrastructure development, with a particular focus on energy and utilities, transport, and telecom.

Billen's involvement in the water industry encompasses a wide range of activities, including due diligence for water utilities, business plan reviews, market assessments for water treatment chemicals, and negotiations for water supply concessions in new industrial and residential areas. His extensive experience and expertise make him a valuable judge at the Asian Water Awards, where he evaluates water-related projects and provides insights into the industry.

In this interview, Billen emphasised the importance of transitioning from a "take-use-discharge" strategy to a more circular approach in addressing water scarcity and quality issues. He also highlighted the potential of decentralised supply systems, particularly in Southeast Asia, where low water network coverage is a challenge.

As someone deeply engaged in the water industry, what innovative technologies do you believe will play a pivotal role in addressing water scarcity and quality issues across Southeast Asia?

The answer lies in moving away from a “take-use-discharge” strategy and pursuing a more circular approach. Given the sheer magnitude and imminence of the consequences, all actors along the value chain must play their part, devising collaborative ways to reduce stress on global water resources, including in Southeast Asia. Technological developments can also help increase water supply and improve water productivity. In addition, decentralised supply systems can be a viable alternative to centralised water networks, mitigating supply issues in regions with low water network coverage. Regulatory intervention can encourage sober usage of water and provide frameworks for increased reuse.

Decentralised supply systems based on locally harvested rainwater help alleviate pressure on groundwater. After treatment and purification, collected rainwater can be redistributed to households and used in non-potable applications, replacing potable tap water (which is often used as the main source of water even for non-potable uses). The advantage of decentralised supply systems is that they can be rolled out more economically and at a lower environmental cost than centralised systems. There is a significant opportunity for such decentralised systems also in Southeast Asia.

Pilot studies using rainwater as a source for secondary usage have shown that rainwater substitution can be economically viable for both distributors and households. In the long term, climate change and water scarcity will drive up the price for conventional sources of water and drive the necessary investments in centralised networks, further incentivising the use of decentralised supply systems.

Treating effluent creates water at a quality like potable water – an ideal circular way to keep up with increasing water consumption.
Purified effluent can also be reinjected into existing aquifers to recharge these vital water bodies. As most effluent is currently untreated and discharged into the environment, the untapped potential is huge. Whilst using treated effluent or greywater as a supply of secondary water is promising, the current lack of scale and technological maturity renders it uncompetitive with tap water in most regions. However, recent advancements in filtration technologies and chemical applications aimed at improving efficiency and reducing the cost of chemicals are now increasing the potential of effluent treatment. 

A continuously available supply of high-quality wastewater treatment plant (WWTP) effluent could significantly benefit intensive water users such as agriculture and data centres – sectors that are very relevant in Southeast Asia. Other use cases for WWTP effluent include closed-loop district cooling, in which water is circulated through a closed loop instead of being discharged into the environment. Treated wastewater from sewage treatment plants can be used in these systems, reducing the need for freshwater, and promoting circularity and sustainable water management.

Regarding transport and distribution, a significant amount of water is lost annually to leakages in the water distribution network. Average water losses in developing countries are estimated to be as high as 35 percent. Besides being a huge waste of critical resources, these losses cost water utility companies vast amounts of money. To limit distribution losses, pipes, pumps, and valves are being digitalised and enhanced with the use of smart technologies that continuously measure and communicate real-time consumption, enabling them to identify leakages. Integrated digital infrastructures that collect and manage data, coupled with predictive modelling tools (for example, artificial intelligence and machine-learning algorithms) and “digital twins” have the potential to reduce leakages by up to 50 percent.

Whilst the upfront investment costs of digitally enhancing water networks can be huge, an estimated nearly EUR 39 billion a year in revenues is lost by water utilities around the world through leakages and other non-revenue water. This financial loss should further incentivise water utility companies to actively combat leakages.

Circular economy principles are gaining momentum. How do you see these principles being applied effectively in the energy and utilities sectors, and what benefits can companies expect from embracing circularity?

Optimising overall water usage to curtail excessive demand is key to maintaining sustainable access to water resources.

Agriculture – Agriculture already makes gigantic water withdrawals, and the Food and Agriculture Organization (FAO) expects that agricultural pressure on freshwater resources will continue to increase in the period to 2050 as the world’s population grows by around two billion people. Besides this 25 percent global population growth, increases in average disposable income and hence shifts in caloric intake will mean that food output will grow more than 50 percent. To alleviate pressure on diminishing freshwater resources, it will be key to implement levers to reduce agricultural water consumption by reducing total crop waste and increasing the “crop per drop” ratio.

Optimising water usage per crop can cut agricultural water withdrawals significantly. Switching from flood irrigation to sprinkler or drip irrigation reduces water consumption by 30 to 50 percent, for instance. Newly emerging technologies in data collection for soil moisture and temperature, related to precision agriculture technologies, are expected to further increase the water efficiency of drip irrigation. By installing smart meters, farmers can even detect leakages in their irrigation systems in real-time. 

Industry – Apart from using vast amounts of freshwater, global industry is also a significant source of water pollution. Businesses should aim at optimising their water efficiency as well as collecting and treating their wastewater.

Water-efficient equipment, digital control, and smart tracking systems (for example, smart meters) can help companies reduce their water consumption and detect leakages in a timely manner. Power plants across the globe are deploying AI software to reduce water requirements by optimising equipment efficiency. Manufacturing companies can rethink production processes and product designs, or substitute production materials with less water-intensive inputs to reduce water consumption. Industrial players should also focus on collecting and distributing wastewater to wastewater treatment plants, and further develop their reuse of water to support the circular supply of water and further decrease pressure on resources.

Households – Whilst household water consumption is significantly lower than agricultural and industrial consumption, and its per capita level is falling in developed countries by around 0.5 percent a year, its total volume is expected to increase due to population growth and rapid economic development in developing countries. Making conscious choices about direct and indirect water usage in our day-to-day lives can help alleviate the water crisis. We can reduce direct consumption quite simply by using more “sober” equipment (for example, water-saving showerheads), checking plumbing and fixing leakages, and being more conscious about our water consumption. However, certain daily household activities have a much greater impact on water demand through their indirect footprint.

Average indirect daily consumption can be as high as 1,500 to 10,000 litres per person, compared to a direct consumption of 100 to 150 litres. The food we eat significantly impacts our indirect water consumption, accounting for a staggering 2,000 to 5,000 litres per person per day of indirect water usage. Moreover, it is estimated that households are responsible for half of all food waste.

Concerted action is needed by all stakeholders to maintain current water resources and improve our environmental footprint. Existing technologies and capabilities are sufficient to limit water loss, but further initiatives are necessary for greater impact. Government and policymakers can facilitate change by making sure that regulations, pricing, and incentive mechanisms stimulate sober water consumption, reuse, and circular and hybrid models. They should also promote an environment that encourages research and development (R&D) as this will support technological innovation on both the supply and demand side of water resources. 

Water sector operators should focus their efforts on reducing leakages and raising awareness about water consumption levels. Embracing reuse, decentralised and hybrid water networks will be necessary to build circular water systems and reduce the environmental footprint of the sector. Net zero commitments by water utilities are still limited in number – so far, just 81 water utilities serving three percent of the worldwide population have committed to net zero targets by 2050. Momentum is growing, however. Water companies also need to implement effective levers to reduce emissions across the value chain and manage water in a more sustainable way.

Finally, technology providers and financial institutions can play an important role as catalysts of change. Technology providers should keep on pushing the envelope by proposing new technologies and business models to stimulate innovation at each link in the value chain. Financial institutions and private investors, by contrast, should invest more capital in upgrades of existing infrastructure, circular models, new technologies and product redesigns.

Given your background in negotiating water supply concessions for industrial and residential areas, how do you balance the interests of various stakeholders whilst ensuring equitable and efficient water distribution?

A comprehensive needs assessment is crucial for this. Different stakeholders have unique water requirements. To manage these interests sustainably, water is a regulated business, and as such, governments play a key role in ensuring access to clean water at affordable prices. A clear regulatory framework with well-defined guidelines on pricing, quality standards, and service levels help ensure fairness and equity in water distribution to industrial and residential areas.

From your perspective, how can governments and businesses collaborate to accelerate the adoption of sustainable practices in the Southeast Asian energy and water sectors, considering the diverse socio-economic landscape of the region?

Governments, policymakers, and non-governmental organisations (NGOs) should now focus on raising awareness and stimulating “sober” water consumption. Demand for food and other consumables is consumer-driven, so stimulating conscious consumer water usage, both direct and indirect, is an important lever to reduce domestic, agricultural, and industrial water withdrawals.

One effective way to raise consumer awareness is through eco-labels on products indicating their environmental impact. Whilst some eco-labels already include information on water pollution and water usage, eco-labels specifically focused on the product’s water footprint could potentially steer consumer choices further towards a water-secure future.

New pricing mechanisms that incorporate the real cost of water would be a more aggressive way to balance supply and demand. Dividing water tariffs into a fixed cost based on capacity and a progressive variable cost based on volume consumed would encourage both circular and more conscious water use. Moreover, having a progressive variable cost based on water availability, quality or circular sourcing would make overall water consumption more sustainable. Another option is to levy taxes on surface and groundwater abstraction in line with availability or scarcity. Furthermore, imposing monetary penalties for leakages would give water distributors a powerful incentive to reduce leakages.

Without knowing what is consumed, it is hard to optimise consumption. Smart meters continuously measure and communicate actual water consumption levels to both consumers and service providers. Besides detecting irregularities and identifying leakages, permanent tracking of consumption can be leveraged to shift consumer behaviour as it makes real-time dynamic pricing possible. Imposing higher prices when overall consumption is high gives people a good incentive to reduce (or delay) their peak consumption, which in turn lessens the pressure on water resources. Smart meters also give service providers a real-time view of flows through their network, which allows them to optimise maintenance scheduling. Empirical studies show that water consumption decreases by between seven and 22 percent after installing smart metering technology. Governments and policymakers can also use the large amounts of data on end-use consumption collected to get a better picture of consumption patterns, which can then guide their policy and investment decisions. 

In general, water tariffs tend to be higher in richer countries, where water is often treated as a commodity and consumers are willing and able to pay more for reliable, high-quality water services. By contrast, water tariffs tend to be lower in poorer countries, where there may be a lack of investment in water infrastructure and limited access to financing. In many developing countries, the cost of water services is subsidised by the government to make them more affordable for low-income households. This can result in underinvestment in water infrastructure, leading to inadequate water services in the long run. Across Asia, for example, tariffs are set at around US$2/m3 of water. By comparison, European countries set tariffs at around US$5/m3, according to Global Water Intelligence.

The COVID-19 pandemic has introduced new challenges to various industries. How do you envision the post-pandemic landscape influencing the priorities and strategies for water management in Southeast Asia?

The post-pandemic landscape in Southeast Asia has seen a shift in water management priorities and strategies, largely influenced by two key factors.

First, the COVID-19 pandemic has had a significant impact on the region's digital economy boom. The rapid adoption of the internet during the pandemic has fuelled a remarkable surge in Southeast Asia's digital economy. This sustained growth in the digital economy has led to an enormous increase in the volume of data generated, driving the expansion of data centres across the region. As critical components of the digital infrastructure, these data centres require significant amounts of water mainly for cooling. In addition, there is a stronger willingness and ability of companies to adopt digital technologies, including in water management.

Second, Southeast Asia has emerged as a primary destination for companies looking to diversify manufacturing from China. This strategic shift is part of the "China Plus One" approach, which aims to diversify production bases to reduce reliance on a single location of production. As more manufacturing facilities are established in Southeast Asia, there will be a corresponding increase in the demand for water resources from the industrial sector. 

This surge in water demand underscores the urgent need for sustainable water management practices and wastewater treatment strategies.

As a judge at the Asian Water Awards, you have the responsibility of assessing various water-related projects. Could you provide some insights into the specific criteria you use to evaluate these projects?

One important aspect to consider when assessing the projects is the balance between the roles of the private and public sectors. How do companies invest in financially viable projects, through innovation and new business models – whilst aligning with the government’s policy and regulations related to pricing, quality and standards, and access?

The integration of innovative technologies and the adoption of new business models within these projects is therefore crucial. The industry is undergoing a transformational period with the emergence of innovative water technologies and sustainable business approaches.