UK government launches prize to finance solutions on water loss
The UK government's Department For International Development (DFID) has unveiled a new innovation prize with the aim of mobilising funds to reduce the vast amounts of 'non-revenue water' (NRW)–the difference between water entering the system and the amount customers are billed for–in developing countries. A World Bank study, The Challenge of Reducing Non-Revenue Water in Developing Countries, estimates that there are 27 billion cubic metres of water lost annually in the urban areas of developing countries. Just halving these losses could generate US$2.9 billion each year and provide water for an additional 90 million people, without having to utilise new resources. “What has lagged behind are widely applicable solutions for financing-related investments,” said Chris Shugart, a consultant working with IMC, who are managing the competition for DFID. “This prize will stimulate thinking on how to increase the provision of needed financing. In principle, these deals will be financeable: by cutting costs and raising revenue, well-planned investments to reduce NRW can pay for themselves over 7 to 10 years.” The Dreampipe challenge is open to applicants globally and is designed to encourage financial specialists, transaction advisors, and water utility experts to work together on devising finance mechanisms that will reduce non-revenue water. The final prize will be awarded in 2018 and has a total purse value of £1.25 million, which will be distributed in instalments in two stages over a period of 22 months. Until now, the emphasis on water-loss reduction has been focused on the technical rather than financing aspects. “Financing for water infrastructure investment in developing economies has been hard to mobilise owing to lack of borrower creditworthiness and high risk,” said Tom Williams, Programmes Director at the International Water Association (IWA). “This prize should help incentivise and drive improvements and move utilities towards more efficient service delivery.” According to Shugart, many companies say they need funding for NRW-reduction programmes and that they can do a good job if given the funds. “It is normal for them to say that, and I’m sure it is true for some of the companies,” Shugart told Development Finance. “Experience, however, suggests that many companies need to take action in many other areas before they can make the best use of external financing for NRW reduction. What we hope is that progress made by the first group of companies can put the spotlight on the laggards and provide ‘competition by example’ so that the second group will feel more pressure to undertake these needed preliminary reforms.” Many water sector projects funded by international financial institutions in developing countries have components that address NRW reduction. “The question is why these programmes are not more effective,” added Shugart. “There are many reasons, and they aren’t technical. In general, to be effective these programmes often require substantial improvements in governance, management, organisation and control within the water utilities, and these can be difficult to implement which are part of the deep-seated problems often found in state and municipally owned companies.” Shugart says greater effectiveness on NRM reduction also requires a change in perception: traditionally, the emphasis both in the companies and with politicians has been on new ribbon-cutting capital improvement projects rather than looking at ways to cut water losses in existing infrastructure. The Dreampipe competition will be judged by a panel of judges with five winners receiving £10,000 in summer 2016 at the ‘ideation’ stage, which requires proof of interest in their concept from at least one utility. In a second phase, three recipients, who need not have participated in phase one, will share up to £1.2 million depending on the nature of their innovation and also provided they have secured all financial and contractual commitments including an MoU with a utility (or the promise of such an agreement). The final awards will be made in April 2018 and while the amounts will vary at the judges’s discretion depending, for example, on the country where the utility will employ the innovation, prizes could be for £550,000, £400,000 and £250,000 for the gold, silver and bronze winners. The initiative forms part of DFID’s ‘Ideas to Impact’ innovation inducement programme, which was launched in April 2014 to stimulate solutions for low-income households with regard to climate change adaptation, energy access, and water and sanitation. The UK government believes competitions for prizes rather than grants can generate ‘out-of-the-box’ solutions and bring in greater participation through the publicity generated by such competitions. The deadline for applicants’ submissions for stage one is April 2016.
By Kirsty Tuxford?
SHARE THIS ARTICLE
SHARE THIS ARTICLE
Photo: Dreampipe Challenge