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Stanford researchers develop financing framework to fund critical freshwater projects

Using lessons from the energy sector, Stanford researchers outline strategies to bring the nation’s water infrastructure into the 21st century.

Residential towers in Milan, Italy, use filtered gray water from the building itself to irrigate trees, an example of innovative water use. Stanford's Water in the West program has developed financing frameworks that could be used to encourage such uses.

Residential towers in Milan, Italy, use filtered gray water from the building itself to irrigate trees, an example of innovative water use. Stanford’s Water in the West program has developed financing frameworks that could be used to encourage such uses.

A new report by a team of researchers at Stanford University offers a framework to fund water projects based on lessons learned from the energy sector.

“Our sophisticated water system is slowly reaching the end of its lifetime and is in need of renewed investment due to population growth, urbanization, climate change impacts, environmental degradation, aging infrastructure, and ever-increasing operation and maintenance costs,” said report co-author Newsha Ajami, the director of urban water policy at Stanford’s Water in the West program. “Tackling these modern challenges calls for new thinking and innovative, multipurpose infrastructure solutions.”

The new report also calls for significant investment, which is harder than ever to come by when traditional federal and state government funds are limited. Local utilities and municipalities are often too cash-strapped to meet existing operations and maintenance obligations, let alone finance new projects.

The recommendations include:

Catalyzing change through external forces. Regulations such as direct enforcement, economic incentives and innovative pricing structures that have proved successful in the electricity sector can similarly be used to promote adoption of innovative water projects.

Establishing public and private funding. In the electricity sector, distributed clean energy projects – such as customer-, community- or utility-scale solar and wind energy systems ­– often rely on a diverse set of public and private funding sources. Similarly, the water sector should take advantage of funding sources such as bonds, end-user fees and venture capital.

Using resource pathways to facilitate flow of funding. Once funding for a project has been acquired, stakeholders should be able to access these funds through resource pathways. Pathways used in the electricity sector include loans and grants, rebates, tax credits and on-bill initiatives. They could be used in the water sector to promote cost-sharing opportunities among customers or to eliminate upfront costs.

Creating innovative governance structures to enable project implementation. Given the many diverse stakeholders and complex transactions involved, distributed solutions can be difficult to manage under a traditional project management scheme. Novel governance tools such as net metering, end-to-end service companies and project or financial aggregation have been useful in the energy sector and hold promise for use in the water sector.

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