Exploring the transferability of market, technical, and regulatory concepts from the electricity to the water sector

Sonja Arnold-Keifer, Robin Barkhausen, Frederic Berger, Thomas Hillenbrand, Fabian Liesenhoff, Jutta Niederste-Hollenberg and Rodrigo Sánchez González

No WP S04/2025, Working Papers "Sustainability and Innovation" from Fraunhofer Institute for Systems and Innovation Research (ISI)

Abstract: This report investigates relationships between the water and electricity sectors, emphasizing their shared challenges in the context of climate change and urbanization. As both sectors are crucial for modern society, their evolution towards sustainability is increasingly vital. The report begins with a historical overview of each sector, illustrating how the electricity sector has pioneered innovative approaches that can inform the water sector's transition. The analysis identifies three key concepts - smart meters and dynamic pricing schemes, legal instruments such as cap-and-trade schemes, and extended sector coupling - that have proven effective in the electricity sector and evaluates their potential applicability to the water sector. Smart meters, which enable real-time monitoring and efficient demand management, could enhance water usage efficiency, while dynamic pricing models could incentivize conservation behaviours. Additionally, the exploration of legal instruments like cap-and-trade schemes may provide new frameworks for managing water resources more effectively. The report also discusses the potential for extended sector coupling, where the integration of water and energy systems can optimize resource use and improve resilience. This approach highlights the importance of viewing water not just as a utility, but as a resource that can contribute to energy management and sustainability. Despite the opportunities for innovation, the report acknowledges the challenges faced by the water sector, including its regulatory constraints and the fragmented nature of its market. These factors contribute to a slower adoption of new technologies compared to the electricity sector. However, the potential benefits of adapting successful strategies from the electricity sector are significant, with implications for resource management, regulatory compliance, and system integration. In conclusion, the report advocates for further research and pilot projects to explore the feasibility and impact of these concepts within the water sector. By leveraging lessons learned from the electricity sector, stakeholders can enhance the resilience, efficiency, and sustainability of water systems, ultimately contributing to a more sustainable future for both sectors.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fisisi:328002

DOI: 10.24406/publica-4903

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