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Efficiency, innovation and sustainability in the water industry

Milan, 11/03/2019, National Roundtable

Water is an undeniable human right essential to the life and health of all citizens. Its distribution, however, is a complex process that presupposes the existence of a proper industrial sector equipped to deliver it from the supply source to the private home while maintaining high standards of quality and service.

That water is a public resource does not mean that is comes free; a key consideration therefore is the theme of service costs, which can be broken down into the human capital needed to staff infrastructure and the financial capital to build, maintain and upgrade it. The two pillars upon which distribution rests are general taxation and fees.

Over the past 15 years, this sector has undergone considerable transformation in Italy, with a growing industrialization that has improved efficiency and reduced waste. What was once simply “city water” has been replaced by full-fledged industrial companies capable of innovating and investing in upgrading the grid.

Crucial was the assignment in 2012 of water services to the energy authority (subsequently known as ARERA), which allowed for greater transparency in the sector and in the fee system. In this way, water services companies were able to access financial resources without impacting stakeholders (which in many cases had remained public), and at the same time improve services to the community.

Legislative proposals aimed at reducing municipal management of water services, even in small towns, fail to consider the complexity of the sector and of the skills required to upgrade service quality. Moreover, the human right to water, and the necessary guarantees that this resource remain available to people in economic difficulty, must not be confused with the total shifting of costs onto the general taxation. Indeed, it is precisely water companies’ independent financing ability that has led over recent years to restoring efficiency and quality by disassociating investments from public funding.

It should not be forgotten, however, that Italy is markedly heterogeneous, with areas of the country, especially in the south, where the aforementioned strategies have not led to improvement. In these settings, where fee and market-based approaches have not been successful, there is room for forms of public intervention that could focus on creating new management entities large enough to ensure service quality. 

Despite the improvements over recent years, of which the Italian water industry can be proud, much remains to be done to upgrade services and increase sustainability. Italian aqueducts are still registering technical losses of 41%, while other European countries are fined if they exceed 10%. Another difficulty lies in a continuing lack of communication between the various actors responsible for water resources, yet in a context further complicated by climate change it would be useful to institute a dialogue involving all the institutions, companies and agencies that have anything to do with water, the environment and health.

To summarize, the only way to ensure quality water as a human right seems to be to continue to invest in the efficiency and sustainability of water services - i.e. the industrial dimension - with a view to merging market, governmental and societal concerns.