Water authorities should throw the door wide open to private investors by moving to 'hybrid' business models as well as allow increased supply autonomy if they are to meet the challenge of continued growth in water consumption in the major cities, a new study has found.
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With the population of both Sydney and Melbourne forecast to rise to 8 million by the middle of the century - if not sooner - this will place increased pressures on utilities to keep up with demand.
Both cities have faced pressure from a prolonged lack of rainfall at various stages over the past decade which has resulted in desalination plants being installed at considerable cost, driving up water bills.
"Our population will be best served if water authorities migrate towards a hybrid model that incorporates greater decentralisation and autonomous management of water supply and greater participation of additional service providers and smarter management of the water grid," the head of Arup Australia's water unit, Daniel Lambert said.
He was speaking with the release of a joint study by Arup and Sydney Water into urban water management issues that will emerge over the next 25 years.
Along with rising supply pressures and the need to lift operating efficiencies, there have been sporadic moves to lift competition by, for example, changing legislation to allow competition in water marketing.
Similarly, there have been some private funds in water recycling along with sewer mining and storm water harvesting, but activity has been limited.
"Private sector involvement has been piecemeal - if you exclude the desalination plants," Leigh Martin of the Total Environment Centre said.
"Unless you're developing the infrastructure, [water] is not especially attractive to private investors."
And it has been fraught, with the prolonged tussle a decade ago by a private operator, Services Sydney, which sought to gain access to Sydney's water market, but after eventually forcing its way in, was unable to source water at a competitive price. That may now be changing.
"There seems to be more openness to privatisation," Arup's Mr Lambert said.
"Water is the last [public] asset to face privatisation. It has largely remained in a monopoly structure."
Rainfall supplies most water sources in Australia, but future patterns of rainfall are likely to be highly variable and unpredictable due to the effects of climate change, the study found.
As a result, equitable access to sufficient water supply presents a key challenge for government.
In Sydney, surface water is the primary water source. Due to the irregularities in rainfall throughout the year, Sydney is highly dependent on its reservoir capacity.
Water affordability will be an increasing issue, the study found, along with rising pressure on water utilities due to the environmental value of water as a resource for water flows in the river system, for example.
The cost of desalination plants has already driven up water bills in several Australian cities over the past few years.
