WATER POLICY IN THE AMERICAS ROUNDTABLE

1. WATER POLICY IN THE AMERICAS ROUNDTABLE “Energy Efficiency for Water Utilities” presentation by Amarquaye Armar Principal Energy Specialist Infrastructure Group World Bank October 19, 2000 Padilha Vidal Conference Room Organization of American States

2. STRATEGIC FRAMEWORK FOR ENERGY EFFICIENCY IN WATER UTILITIES ENERGY EFFICIENCY IMPROVEMENTS ARE INTEGRAL TO WORLD BANK’S THEMATIC PRIORITYOFWATER UTILITY MODERNIZATION IN LATIN AMERICA • Unsustainable dependence on increasingly scarce public finances to cover operational expenditures (including energy and chemicals) • Consensus on private participation in provision of water supply and sanitation services • Need to devise more effective regulatory tools to enhance economic efficiency in the provision of water supply and sanitation services • Key focus is on assessing, sharing and disseminating “lessons of experience” in harnessing low cost technologies to improve energy efficiency.

3. “CRITICAL SUCCESS FACTORS” FOR SUSTAINABLE ENERGY EFFICIENCY FINDINGS OF ESMAP SURVEY OF 1995/96 • Awareness - realizing that energy costs can be controlled • Start-Up - reinforce commitment through low cost measures that achieve significant cost savings in short-term • Sustained Approach - institutionalizing measures to establish baseline for pre-investment activities and also to ensure that short -term savings are not eroded in medium to long term • Selective Investment - identifying and providing justification for major new investments in energy efficient technology MONITORING AND TARGETING (“M&T”) WAS IDENTIFIED AS MOST PROMISING LOW COST TECHNOLOGY FOR DISSEMINATION

4. ENERGY EFFICIENCY FOR WATER UTILITIES - CASE STUDY ON BRAZIL ESMAP INITIATIVE • Initiated by ESMAP in 1995, following “Critical Success Factors” Study on Energy Efficiency • Executed in parallel with support to energy efficiency pre-investment activities of ELECTROBRAS (PROCEL) and of FINEP/CNI for industries. • Impetus provided by Energy Conservation Manager of CEDAE (Rio de Janeiro Water Utility), based on internal awareness campaign of CEDAE’s Energy Conservation Committee (CICE). • Interest reinforced by energy efficiency presentation at 1996 Annual Convention of Brazilian Association of Water and Sanitation Engineers (ABES).

5. ENERGY EFFICIENCY FOR WATER UTILITIES - CASE STUDY ON BRAZIL PRELIMINARY ESMAP ASSESSMENTS OF BRAZILIAN WATER UTILITIES • Collaborating Water Utilities were: • CEDAE of the State of Rio de Janeiro • CESAN of the State of Espirito Santo • EMBASA of the State of Bahia • NOVACON, private concessionaire of small municipal systems in the States of Sao Paulo and Mato Grosso • Associated agencies were: • Brazilian Association of Water and Sanitation Engineers (ABES) • Caixa Economica Federal (CEF), the Brazilian Bank for Infrastructure Development

6. ENERGY EFFICIENCY FOR WATER UTILITIES - CASE STUDY ON BRAZIL ESMAP INITIAL FINDINGS • Water utilities had considered energy (primarily electricity for pumping) as fixed overhead cost of water treatment and pumping operations. • Typically, losses of treated water was 40-50% of total production of water treatment facilities • Expenditure on electricity was 10-15% of operating costs, usually concentrated in water treatment facilities. • Major impediment was “corporate” viewpoint about extent to which electricity use could be managed as “variable cost” rather than a “fixed overhead cost”. • CEDAE and ABES highlighted need to mobilize CICEs to create awarenessabout potential to reduce operating costs through energy efficiency measures.

7. ENERGY EFFICIENCY FOR WATER UTILITIES - CASE STUDY ON BRAZIL OVERVIEW OF PILOT M&T APPLICATION AT CEDAE • ESMAP support consultant services through Manager of CEDAE’s Energy Conservation Committee (CICE) • CICE secured approval of CEDAE Senior Management for pilot demonstration of M&T as “Start-Up Tool” for achieving sustainable energy efficiency improvements at the GUANDU Water Treatment Station • GUANDU Water Treatment Station • Water treatment and supply capacity of 1500 million cubic meters/annum. • Expenditure on electricity is equivalent to US$40 million/annum or approx. 25% of total operating costs. • Expenditure on chemicals is equivalent to US$ 15 million/annum. • Pilot M&T system by CICE at GUANDU (with portable meters only) resulted in US$1 million savings in annual electricity expenditure

8. ENERGY EFFICIENCY FOR WATER UTILITIES - CASE STUDY ON BRAZIL OVERVIEW OF FEASIBILITY STUDY AT EMBASA • ESMAP supported consultant services for system-wide assessment of energy savings potential of M&T systems and introduction of Variable Speed Drives (VSDs) • EMBASA System Characteristics • Water treatment and supply capacity of 560 million cubic meters/annum. • Expenditure on electricity is equivalent to US$20 million/annum or approx. 11% of total operating costs. • Expenditure on chemicals is equivalent to US$ 5 million/annum. • Two-stage program to initially apply M&T systems followed by VSD retrofits of motors would require an investment of US$ 8 million but payback period would be less than 2 years, based solely on the projected value of electricity savings.

9. ENERGY EFFICIENCY FOR WATER UTILITIES - CASE STUDY ON BRAZIL OVERVIEW OF FEASIBILITY STUDY AT CESAN • ESMAP supported consultant services for system-wide pre-investment study of energy savings potential of M&T systems in the SANTA MARIA system. • SANTA MARIA System Characteristics • Water treatment and supply capacity of 76 million cubic meters/annum. • Expenditure on electricity is equivalent to US$1.8 million/annum or approx. 12% of total operating costs. • Expenditure on chemicals is equivalent to US$ 0.2 million/annum. • M&T approach (installation of sub-metering units for water and electricity, computer software, training transfer activities) would require an investment of US$ 0.7 million and payback would be less than 3 years, based solely on the projected value of electricity savings.

10. ESPIRITO SANTO (PRODESPOL)PILOT PROJECT ON ENERGY MANAGEMENT IN WATER TREATMENT AND SEWERAGE FACILITIES

11. ESPIRITO SANTO (PRODESOL)PILOT PROJECT ON ENERGY MANAGEMENT IN WATER TREATMENT AND SEWERAGE FACILITIES

12. ENERGY EFFICIENCY FOR WATER UTILITIES - CASE STUDY ON BRAZIL OVERVIEW OF ASSESSMENT AT NOVACON • ESMAP consultant assessed energy savings potential of M&T systems in the small municipal water utility concessions held by NOVACON. • Municipalities are: • Pereiras, Tuiuti, Tanabi, Santa Isabel, Serrana, Pirangi, S. Jose Rio Pardo, Tambau, Uchoa, Severinia (State of Sao Paulo). • Caceres, Barra do Garcas (State of Mato Grosso) • Combined water treatment and supply capacity of 60 million cubic meters/annum. • Expenditure on electricity is equivalent to US$2 million/annum or approx. 22% of total operating costs. • M&T approach (installation of sub-metering units for water and electricity, computer software, training transfer activities) would require an investment of US$ 0.5 million and save US$ 0.2 million/annum.

13. ENERGY EFFICIENCY FOR WATER UTILITIES - CASE STUDY ON BRAZIL

14. ENERGY EFFICIENCY FOR WATER UTILITIES - CASE STUDY ON BRAZIL POSSIBLE NEXT STEPS • FINANCING OF PILOT AND SCALE-UP PROJECTS • WORLD BANK PROJECT PIPELINE WITH CEF FOR BRAZIL WATER PRIVATIZATION/SECTOR REFORM (e.g., PROPAR)? • CEDAE, CESAN, EMBASA • FUNDING OF DETAILED PRE-INVESTMENT WORK • PUBLIC PRIVATE INFRASTRUCTURE ADVISORY FACILITY (PPIAF)? • NOVACON • ENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAM (ESMAP)? • CEDAE, CESAN, EMBASA, NOVACON, etc.