Smart Finance for the Water-Energy Nexus

Water efficiency and Water-Energy Nexus are key contributors to reach EU decarbonization targets. Financing mechanisms are cornerstone to achieve much needed water and energy savings through water and energy nexus (WEN) improvement measures in buildings and cities.

The implementation and deployment of water and energy efficiency solutions, such as new decentralized solutions for water and energy production, in cities and buildings, require significant investments. Funding and financing instruments can have a critical role to enabling and increasing the magnitude of these investments. However not many studies focus on adapting these mechanisms towards combined water and energy savings.

This study delves into funding and financing options for water and combined water and energy efficiency in the built environment, under a WEN approach, identifying existing mechanisms, challenges to implementation, and solutions to overcome them. It also reflects on the role that EnR Agencies can play in facilitating improvement and application of these mechanisms. Through a designed survey for EnR Agencies, this study gathers different perspectives about finance and investment funds adopted by some countries. Additionally, through a literature and technical review, aims to bring new light on a set of existing mechanisms allowing a benchmark between the different type options available.

As a conclusion, a set of examples are analysed, barriers identified, and actions recommended to be adopted by European Energy Agencies. EnR Agencies can be critical in confirming investment eligibility, aligning with the EU Taxonomy, and tracking efficiency gains. There is also opportunity for water utilities to innovate on their business models, to a greater focus on water efficiency and WEN services provided to their customers. Finally, there are several smart and innovative funding solutions already implemented in different countries at a European and international level, worth to be investigated and replicated by other European countries.

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The present report will be updated with contributions from the ongoing discussion, until a public presentation event, to be announced during 2023 at the EnR website and social media. Contributions to be incorporated include those at the annual meeting last March 28th 2023, where the study was first presented, but also from other stakeholders to be consulted until or at the discussion at the public presentation event.