A new era of water reuse and reclamation: opportunities and challenges

White & Case LLP

White & Case LLP

In the wake of recent extreme weather events and existing water stress caused by growing populations, climate change, competing demand across household, agricultural and industry sectors and ageing and inefficient water infrastructure, global demand for fresh water is expected to exceed supply by 40% by 20301. Scarcity of freshwater is likely to weigh heavily on the global economy - the economic value of fresh water reached US$58 trillion in 2021 which is equivalent to 60 per cent of global GDP2.

In light of these extraordinary statistics, many jurisdictions are implementing water reuse and reclamation schemes to help reduce reliance on fresh water. In introducing the European Union's new water reuse regulations which came into force in July 2023, the EU Commissioner for the Environment, Oceans and Fisheries, remarked: "Freshwater resources are scarce and increasingly under pressure. In times of unprecedented temperature peaks, we need to stop wasting water and use this resource more efficiently".3

The EU regulations have come into effect at a time of unprecedented demand on existing sources of freshwater and reflect a global shift towards the prioritization of water security. Water reuse and reclamation, such as wastewater treatment and subsequent reuse by industry, agriculture and domestic and commercial users, enables water utilities and governments to re-utilize existing water flows to meet demand in a way which is less impactful on the environment.

French President Emmanuel Macron recently referred to an era of 'water sobriety' and while many are focused on the 'energy transition', the 'water transition' is just as compelling and potentially more urgent. In this article, we explore some of key issues in relation to this new era, including some of the opportunities and challenges that this new 'water transition' will bring.

Water transition – a world of opportunities (and challenges)

The transition from a linear (use, contaminate and dispose) to a circular (use, contaminate, treat and reuse) water system gives rise to several new and exciting opportunities. The scope and scale of these opportunities, however, also represents some of the key challenges.

Scale of core water investments

As existing water infrastructure continues to age and demands on water systems increase over time, many water authorities are increasingly relying on latent capacity and system resilience. However, in order to ensure that water is produced, treated and transmitted with minimal losses over the long term, it will be necessary to urgently accelerate investment in water infrastructure. The statistics on ageing water infrastructure are staggering. The World Bank estimates that water supply systems worldwide have real water losses — primarily due to leakage and breakage—of 8.6 trillion gallons per year.4

In terms of scale, commentators have suggested that 'water security is going to be the biggest global investment theme over the next decade'5 and current estimates of the required investment range from US$6.7 trillion (by 2030) to US$22.6 trillion (by 2050)6. In Europe, all member states except for Germany will need to increase annual expenditures for water supply and sanitation by more than 25% in order to reach and maintain compliance with EU water directives 67. The new EU regulations are expected to further promote sustainable water management solutions, and as a result spending on water reuse in Europe is expected to grow from US$154 million currently to US$396 million by 2030.8 Similarly, in 2021, the US government passed an infrastructure bill allocating US$1 billion to water reuse projects over a five-year period9.

The pace of the energy transition and technology sectors will also necessitate further capital investment in the water sector. Energy transition is a thirsty industry and is likely to require volumes of water which far exceed those required for fossil fuel production. The Energy Transitions Commission estimates that the water required for renewable power generation (e.g. water for cleaning solar panels), hydrogen electrolysis, nuclear power stations and carbon capture and storage could amount to 58 billion cubic meters per year by 2050.10 New and growing industries such as data centre and semiconductor manufacturing businesses are also expected to further increase overall demand for water. Therefore, while the energy transition is a global imperative, it will have an ever increasing impact on global water security, creating further challenges and opportunities for water infrastructure and investment.

Accelerating new downstream water industries

Facilitated by governmental policy, shareholder activism, business opportunities and climate change imperatives, the new era of 'water transition' has spawned a range of nascent but rapidly emerging commercial opportunities in downstream water industries. The scope and nature of these downstream industries demonstrates that there are genuine commercial opportunities which are emerging from the 'water transition' process.

The scope of these downstream industries is broad and include contaminated water treatment, by-product recovery, and offtake and water treatment heat extraction and reuse.11 For instance, the Australian Research Council has funded research to find a commercially viable method of turning wastewater into fertilizer.12 Companies are also investing in technology through which the water and energy transition can be combined. In England, for example, the first sewage-powered domestic heating scheme is planned to provide "green" heating to new homes through excess heat recovered from a sewage treatment plant at Hogsmill.13

The role of government

Levels of governmental involvement in funding water transition projects is jurisdiction-specific, however some general observations have been made. In 'developed' nations, a lack of political focus on climate resilient water sources has largely resulted in the stagnation of the development of water reclamation infrastructure.14 By contrast, 'developing' nations are facing a different subset of issues, with a lack of basic infrastructure prohibiting access to new water treatment technologies.

Similarly, a comprehensive regulatory framework for water reuse and reclamation has received mixed support . In Australia, further work is required to update and consolidate national water recycling guidelines and develop a clear national strategy for water reuse and reclamation15, whereas jurisdictions like the EU, California and Texas have developed streamlined regulations dictating direct potable use and indirect potable use schemes. The absence of a broadly common regulatory approach to reuse and reclamation is likely to impede the wider adoption of water reuse technology across different states.

The 'yuck' factor – managing social licence issues

Despite the many technological advancements in water reuse technology over recent years, attitudes towards water reuse and reclamation remain unpredictable and are considered to represent a 'fundamental problem for large scale water reuse applications'.16 In jurisdictions such as Australia, water reuse projects continue to face significant public disapproval. In Queensland, Australia, the AUD$2.5 billion Western Corridor Recycled Water Scheme was halted due to community backlash. In jurisdictions that are not yet experiencing extreme water scarcity17, water reuse and reclamation initiatives also remain unpopular. Developing and promoting social licence in the context of water reuse and reclamation will be critical to ensure that the water reuse and reclamation is generally well tolerated, if not broadly accepted, by end users.


A new era has dawned, and a 'water transition' is now fast emerging.

The scale of the issue is staggering. However, pressure placed on water supplies by population growth, ageing infrastructure and impacts of climate change have now pushed nation states to re-examine the ways in which water is acquired and used. The range of opportunities and challenges in the water reuse and reclamation industry will require a multi-pronged approach by governments who will need to focus their efforts in delivering and facilitating change through regulatory, social, economic and institutional reform. More broadly, industry stakeholder support will be essential to ensure the development of downstream water industries and the adoption of alternative water sources. If these changes are not implemented soon, societal acceptance of water reuse and reclamation could be diminished in the long term.

In terms of investment, we can expect that water reuse and reclamation infrastructure will increase in demand and popularity in the coming years in order to address global water scarcity concerns. As this occurs, significant investment opportunities will emerge to meet demand for water reuse and reclamation infrastructure.

1 'Asian Governments must work together to address water insecurity'. Genevieve Donnellon-May, Australian Strategic Policy Institute, 28 March 2023.
2 High Cost of Cheap Water: The True Value Of Water And Freshwater Ecosystems To People And Planet, WWF Report, October 2023
3 Virginijus Sinkevicius, EU Commissioner for the Environment, Oceans and Fisheries, press release (August 2023)
4 'The Challenge of Reducing Non-Revenue Water in Developing Countries'. The World Bank, December 2006. In Rome, 42% of water is lost through 'sieve-like infrastructure that in some neighborhoods dates back to the Roman Empire'. See, 'Europe's Water Crisis: how supplies turned to 'gold dust'. Alice Hancock, Camilla Hodgson and Alan Smith, Financial Times, 27 August 2023.
5 'Who will tell the public the truth about water?' Christopher Gasson, Global Water Intelligence Magazine, 20 July 2023, pg. 7.
6 'The United Nations world water development report 2020: water and climate change, facts and figures'. Engin Koncagul, Michael Tran and Richard Connor, UNESCO World Water Assessment Programme, 2020, pg. 2.
7 'Financing a water secure future'. Organisation for Economic Cooperation and Development, 2022, pg. 6.
8 'Europe Municipal Wastewater Reuse: Market trends and Forecasts, 2023-2030'. Bluefield Research, 16 July 2023.
9 Bipartisan Infrastructure Deal (Infrastructure Investment and Jobs Act) 2021.
10 'Material and Resource Requirements for the Energy Transition'. Energy Transitions Commission, July 2023.
11 See, eg, the work of Aerzen, a company that manufactures sewer heat recovery systems that the hot water from sewer pipes into an eco-friendly district energy source for nearby buildings.
12 'You're a walking urea factory. Could your pee help avert the fertiliser crisis?' Angus Dalton, Sydney Morning Herald, 26 July 2022.
13 The Kingston Council is working in conjunction with Thames Water to recover from the final effluent of the sewage treatment process, and if successful, supply up to seven gigawatt of energy per year. See further, 'England's first sewerage-powered domestic heating'. Thames Water, 26 February 2021.
14 'Who will tell the public the truth about water?', Global Water Intelligence Magazine, July 2023, pg. 7.
15 'Supplying and Using Recycled Water'. Victorian Auditor-General's Office, pg. 30.
16 'From Acceptance Snapshots to the Social Acceptability Process: Structuring Knowledge on Attitudes Towards Water Reuse'. Mohammad Al-Saidi, Frontiers in Environmental Science (2021) pg. 2.
17 'Sociospatial Understanding of Water Politics: Tracing the Multidimensionality of Water Reuse'. Ross Beveridge, Timothy Moss and Matthias Naumann, Water Alternatives 10(1), (2017).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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