Rapid population growth and the current linear, ‘take–transform–use–dispose’ economic system that supports it is unsustainable [1
]. In this economy model, raw materials and resources (many of which are nonrenewable) are used and transformed into products that are then used and discarded in a short period of time, generating large amounts of waste that damage the environment. To address this situation, in 2015, the European Commission launched a Circular Economy Plan called “Closing the loop: an European(EU) action plan for the Circular Economy” [3
]. This plan aims to promote a rational use of resources by keeping products and materials in the economy for as long as possible while reducing waste production. A circular economy model aims to separate economic growth from natural resource consumption and environmental degradation [4
In recent years, efforts have been made to adapt the current production system to the circular economy model, with the aim of keeping products in the economic system for as long as possible. This increases efficiency in the use of resources and reduces the generation and disposal of waste generated in the whole set of processes. The circular economy implies that the flow of materials and waste becomes circular, leading to the reuse of different waste streams generated throughout the entire production system and removing the dependence of economic growth on natural resource consumption and environmental degradation. It is a model that goes beyond recycling; it is a system of resource use, the pillar of which is the use of the four “Rs”—reduce, reuse, repair and recycle—which proposes to address the root of the problem in order to offer feasible solutions. This model of managing the planet’s resources establishes a circular cycle that avoids wasting natural resources.
Thus, the circular economy is conceived as a cycle of development and transformation that advances by optimizing the use of resources; promoting the efficiency of production systems; encouraging products, materials and resources to remain active for as long as possible; and, at the same time, reducing the amount of waste generated [5
One of the most vulnerable resources is water. Water is a very valuable resource that is not only essential for human life and organisms but also for many economic sectors. Due to increasing water demand and the high levels of pollution of water bodies, the transition to a circular economic model is key to water resource management. It is estimated that only 1% of the existing water on our planet can be used for human and productive activities. This scarcity of water in terms of quantity and quality has consequences for the environment and the economic and social sphere.
Most water consumption takes place in the agricultural sector, representing approximately 70%, followed by industrial use with 20%, with domestic water consumption representing the remaining 10%. Most countries across the Americas, Europe and East Asia and the Pacific use more than 1 billion m³ for industrial uses per year. Globally, approximately 19 percent of total water withdrawals are used for industrial purposes [6
]. As industrialization increases in developing countries, industrial water use could potentially increase, strongly increasing pressure on water resources [7
Ensuring an appropriate quantity and quality of water supply is a challenge in many areas of the world due to factors such as climate change, water pollution and the rapid growth of water consumption [8
]. In this regard, as industrialization increases in developing countries, the industrial use of water could intensify, putting water resources under severe stress [9
]. At present, the application of various physicochemical treatments allows wastewater to be used for other purposes. The latest studies show how current technological development makes it possible to adapt reclaimed water to different purposes, as it can be used directly for uses that require more stringent quality criteria or for other processes that are subject to lower quality requirements. Ultimately, the use of reclaimed water means releasing better quality resources for more restrictive uses in relation to the required quality.
The most commonly used process is ion exchange, but the main drawback is the production of NaCl used in the regeneration phase, which can negatively affect water quality. Other types of physicochemical treatments used in water reclamation are membrane technologies such as reverse osmosis (RO), nanofiltration (NF) and electrodialysis (ED), the main drawback of which is their high energy consumption due to low efficiency, high pressure requirements and high voltages used in ion migration [10
In water-stressed areas, regenerated water is an alternative water source that ensures water availability; however, from an economic point of view, water reuse represents a major barrier to its implementation [12
], mainly due to costs. This is because the price of water must reflect the costs both of investment and of operation and maintenance of the different treatments that wastewater must undergo to reach the required quality for its use. This idea was formalized in Europe through the Water Framework Directive [13
] (WFD, Directive 2000/60/EC), which requires the establishment of a full cost-recovery principle for water services. This means that the attractiveness of water reuse varies from case to case, being most favorable when the infrastructure is already in place and the additional investments needed are limited.
Another key aspect that makes the full cost recovery of water reuse projects very difficult is the low price of drinking water, which in most cases is subsidized. To encourage the use of reclaimed water, tariffs should be significantly lower than those for drinking water. Tsagarakis and Georgantzis (2003) [14
] showed that farmers’ willingness to use reclaimed water was strongly motivated by the price difference between conventional and reclaimed water.
Some studies suggest that the price may be determined by political decisions [15
] or specific local conditions [16
]. Pinto and Marqués (2016) [18
] propose a tariff regulation tool based on multiple criteria in order to integrate the social, economic and environmental dimension. Other studies suggest a dual tariff structure, i.e., decreasing in order to encourage the use of reclaimed water and increasing from a certain volume consumed [19
]. However, the first limitation for the use of reclaimed water is precisely the availability of conventional water at a lower price. In turn, the differences in the price of conventional water in the different regions mean that depending on specific geographical areas, the adoption of a tariff model for reclaimed and treated water can be competitive. Therefore, the first constraint on the consumption of treated wastewater is indeed the price of the substitute good (price based on competition). Other aspects related to the demand and its different uses can also accelerate the adoption of unconventional water systems as the main source of supply. In this sense, some industrial sectors are large consumers of water, allowing the generation of positive synergies that as a whole benefit and encourage the change of the current water model.
This study combines the economic aspects related to the costs of supplying reclaimed water, the current tariffs for conventional water and the advantages of its applicability in specific environments with a high concentration of users. This work analyzes a specific tariff structure for an industrial environment, differentiating between two qualities and taking into account the annual demands of the different user companies. The results obtained make it possible to establish a tariff framework that combines multiple aspects, both economic and technical, allowing it to be replicated in other regions with similar characteristics.
To recover the costs of the proposed system, there are a number of different tariff systems available [21
]. However, it is of great importance that the final price setting is accompanied by a business strategy. In this sense, in order to ensure the sustainability of the economic model proposed, pricing must form an integral part of the company’s strategy [22
]. The main pricing strategies include cost-based pricing, consumer-based pricing, competitor-based pricing and consumer-perceived economic value [23
]. In the case of unconventional water, the maximum that a user is willing to pay is defined by the price of conventional water (competition-based price) for a similar level of quality. In this context, a dynamic pricing approach based on the price of conventional water is proposed below.
In the wastewater treatment process, it is important to highlight the possibility of adapting the quality of reclaimed water to the requirements of industrial processes. Thus, in order to adapt the water to different uses, two qualities of treated wastewater are differentiated: (a) high-quality reclaimed water (B1) obtained from advanced tertiary treatment with a membrane system and involving higher treatment costs and (b) low-quality reclaimed water (B2); this is water subjected to tertiary treatment, which may simply be disinfected and is therefore only suitable for certain uses such as the cleaning of equipment or installations and other processes that do not require high-quality water, being the most economical treatment.
Continuing with the tariff design, freshwater tariffs are first identified for each of the specific regions or supplies being assessed. It is important to mention that conventional water acts as a substitute good for unconventional water. Thus, it is assumed that companies will show a preference for main drinking water if it is available and priced below treated or reclaimed water. Second, tariffs are set for the qualities offered, in our case, B1 and B2, taking as a reference the minimum threshold of current supply tariffs. The differences in tariffs between regions generate different scenarios, so it is important to carry out the exercise by selecting the different candidate areas.
In addition, we must ensure a lower cost of the qualities (B1 and B2) with respect to the current drinking water supply, and the tariff designed must promote the use of both qualities (B1 and B2), for which the price (EUR/m3) is used as the main mechanism to encourage their use. For this reason, the price associated with water quality B2 should be lower than the price of water quality B1.
Finally, in order to ensure the sustainability of the project, we must ensure the industrial margin of the supply companies with the aim of serving as a source of financing to extend this model to other user profiles, such as the agricultural sector (with the implementation of other technologies if required). The possibility of generating greater volumes of reclaimed water would mean savings for the companies in the area, increasing their comparative advantage by reducing production costs, and achieving greater volumes of treated water would allow a reduction in costs due to the presence of economies of scale in the sector [24
], and the price of water can be reduced in terms of both quality (B1
) and quality (B2
2.1. Analysis of the Investment and Operating Costs of the Reuse Project
Investment costs correspond to all those costs related to the acquisition of the necessary assets and the startup of the project. Particularly, a water reuse project involves land, piping, civil works (reactors) and electromechanical equipment (impulsion pumps, submersible pumps, blowers, centrifugal pumps, etc.). In addition, associated with the investment costs, we would find engineering services (preliminary studies, project drafting, supervision and control of the works) as well as other costs related to the development of the project itself (administration, environmental permit and legal services). In order to guarantee the viability of the project and the fare system, the latter must comply with the principle of cost recovery, for which the useful life of the different assets that make up the project’s infrastructure as a whole must be taken into account.
A fundamental aspect in the determination of costs is the type of technology used in the treatment of reclaimed water [25
], which will depend on the quality standards required for its use established in Royal Decree 1620/2007, of 7 December (RD 1620/2007).
The reuse project must provide for the amortization of all investment costs. The function used for the calculation of the amortization of B1 and B2 is as follows:
(1) Amortization function (capex):
a = depreciation (EUR);
c = investment cost (EUR);
m = periodicity (annual);
n = term in years;
im = interest rate in instalments (%).
These costs are expressed in EUR/m3. The aim is to include them in the water tariff, in either the fixed or variable part.
(2) Function of amortization (EUR/m3
a1 = amortization investment (EUR).
Thus, a higher flow rate means a decrease in the costs charged per m3 (dedicated to the amortization of the infrastructure). Generally, investment costs for physicochemical treatment range between 20 and 30 EUR/m3/day installed. For sand bed filtration, the investment costs range between 55 and 100 EUR/m3/installed day. Investment costs for microfiltration (MF), ultrafiltration (UF), reverse osmosis (RO) and reversible electrodialysis (RED) processes range between 200 and 400 EUR/m3/day depending on the quality of the effluent.
On the other hand, operation and maintenance costs are those that derive exclusively from the operation or functioning of the installation. Table 1
below shows the operational costs of different treatments [27
Operational costs vary according to the different treatments. These costs reached 0.26 EUR/m3
with secondary treatment, 0.06 EUR/m3
with tertiary treatment and up to 0.35 EUR/m3
with advanced treatments. Likewise, the distribution cost is approximately 0.1 EUR/m3
2.2. Identification of Price Restrictions
In the case of Spain, each municipality designs its own tariffs and sets its own rates, which are managed by the local councils, who delegate or share with private companies and who are responsible for setting the structure of the tariffs and the prices to be charged to users. This can lead to differences in the prices paid by users in the different autonomous communities, provinces and even at the local level. Following competition-based pricing, the regions and municipalities where companies pay the highest price for water (m3) are, in strategic terms, potential users for the implementation of water reuse projects. However, aspects related to project costs are what finally determine the minimum price to achieve economic feasibility.
The proposed tariff model incorporates two restrictions: The first restriction refers to the price of conventional water in the geographical area evaluated, so that the price of reclaimed B1 water will be lower than the price of fresh water (EUR/m3) in order to encourage its use. In addition, the price set for water quality B2 shall be lower than reclaimed B1 water. In the latter case, the price of water quality B2 can be used to compensate for possible negative differences compared with fresh water. Therefore, the water suppliers in those areas where the price of fresh water is lower than the current cost of reclaimed B1 water will be able to compensate the overall balance by supplying water of quality B2.
The second restriction is aimed at encouraging the demand for reclaimed water. To this end, it is proposed to reduce the total amount currently paid by companies for the consumption of conventional water; in the practical case, a 10% reduction is considered.
2.3. Proposed Tariff
Competition-based methods can be used to set the price of the good or service by referencing the price of the substitute good. One good is considered a substitute for another as long as one of them can be consumed or used instead of the other in one of its possible uses. Thus, in the water sector, when we talk about reclaimed water, we are referring to the price that users (companies) currently pay for the use of conventional water. In this sense, it is possible to distinguish different qualities of reclaimed water that can be used by companies in order to adapt the quality of the water to the final use [29
This method can be very useful because the demand for the two kinds of goods (fresh water and reclaimed water) will be considered together, i.e., users can exchange one resource for the other if there is an economic advantage. In this sense, a lower price for reclaimed water will increase its demand, decreasing at the same time the demand for drinking water. In the same way, an increase in the price of conventional water (substitute good) due to aspects related to its scarcity or greater technological requirements will lead to an increase in the demand for reclaimed water and therefore a possible update of the price, making the model more dynamic. The following economic function is then proposed:
(3) Tariff function
T1: B1 tariff (EUR/m3);
T2: B2 tariff (EUR/m3);
VB1: Volume of B1 water (m3);
VB2: Volume of B2 water (m3);
Z: Current consumption amount (mains water);
Tp: Conventional water tariff.
3. Results and Discussion
In order to obtain an example of the applicability of the proposed tariff, a specific geographical area is selected. Spain is a southern European country with more than 2533 wastewater treatment plants (>5000 p.e.) treating 3370 Hm3
per year of which a total of approximately 1200 Hm3
is reused. Moreover, in 2018, Spain was ranked as the country with the highest water reuse rates in the European Union and is among the top 10 worldwide [30
]. Regarding the uses of treated wastewater, agricultural use accounts for 75%, recreational uses and golf courses for 12%, 6% goes to urban services, 4% to ecological uses and aquifer recharge and around 3% to industrial use [30
3.1. Characteristics of the Selected Region
The Valencian Community is in the east of Spain. There are a total of 487 wastewater treatment plants that annually manage 453 million m3
of wastewater, approximately (Entidat Pública de Sanejament d’Aigües Residuals, EPSAR—the Regional Public Entity of Wastewater Treatment). The distribution of the facilities mainly reflects the urban agglomerations (Directive 91/271/EEC) that exist in the three provinces of the region, Castellón, Valencia and Alicante, where 26%, 33% and 40% of the total number of WWTPs are located, respectively (Figure 1
The most commonly used technology is extended aeration (76.60%), followed by biodiscs (12.36%), activated sludge (8.61%) and constructed wetlands (2.43%) (Table 2
Next, the agglomerations of the most water-intensive industrial sectors are identified: paper and cardboard, ceramics, chemicals and agri-food. To supply the industry with water, it is necessary to build a distribution and collection network. For the design of this network, the distances from the WWTPs to the companies must be assessed, as well as the necessary distribution infrastructure (pipes and impulsion pumps). The distribution network involves the installation of a double pipe in order to differentiate the qualities (B1 and B2) mentioned above. On the other hand, the construction of storage tanks will ensure the availability of water, avoiding service discontinuity.
3.2. Empirical Implementation
The case study simulates the implementation of a water reuse project in an industrial area. First of all, specific characteristics are described regarding the location, volumes of water (B1
) required by two industrial areas and costs of the necessary infrastructures. In order to set up the water tariffs of the reuse project, the geographical area under study is divided in three sectors, according to the tariff of fresh water. Then, the following sectors are differentiated: sector 1, the tariff of fresh water is 1, 0.73 EUR/m3
; sector 2, the fresh water tariff of which is 0.93 EUR/m3
; and sector 3, where the fresh water tariff is 0.47 EUR/m3
. Moreover, it should be noticed that sectors 1 and 2 are served by the same WWTP; therefore, sectors 1 and 2 will share the facilities of the water reuse project. The volumes of water required by the companies in the first example, sectors 1 and 2, distances and economic costs of the necessary infrastructure, are given in the table below (Table 3
In sector 1, there are two companies to be supplied that require 179 m3/day of reclaimed water of quality B1 and 146 m3/day of water of quality B2. They are located 2.7 and 1.7 km from the WWTP, respectively. Meanwhile, in sector 2, five companies need to be supplied with a total of 289 and 794 m3 per day of B1 and B2 water, respectively.
Following the cost estimations, an investment of EUR 82,741 and 133,478 is foreseen for each sector. The costs related to the amortization of the infrastructures are 0.131 EUR/m3
water quality and 0.073 EUR/m3
water quality (Table 4
). The last cost is explained by the fact that B2
quality does not require regeneration.
Regarding operation and maintenance costs, a total of 0.477 EUR/m3
is estimated for water quality B1
. In this regard, in order to achieve a higher quality of reclaimed water, three subsequent treatments are proposed to regenerate water, namely activated carbon, ultrafiltration and nanofiltration (Table 5
The total costs include infrastructure amortization, operation, maintenance and distribution costs, resulting in 0.708 EUR/m3
for water quality B1
and 0.173 EUR/m3
for water quality B2
). The depreciation of the water regeneration plants is based on a constant flow rate, an annual interest rate of 2% and a useful life of 25 years. For the rest of the infrastructure (network and tanks), an interest rate of 2% is used, as well as a depreciation period of 35 years for the structural elements and 15 years for the electromechanical equipment (pumps).
3.2.1. Calculation of the Cost of Conventional Water (According to Conventional Water Tariff) in Sectors 1 and 2
Currently, many of the companies are supplied directly from the drinking water network. Next, an estimation of the supply costs is made using the freshwater tariffs discussed above. The results are given on a quarterly basis.
According to Table 7
, companies 1 and 2 would pay a total of EUR 20,396 and 1186, respectively, with a total of 27,847 and 1460 m3
consumed. Similarly, sector 2 shows different water consumption (fresh water) for each industry, with a high dispersion in the required consumption.
The aim of the following proposal is to encourage the use of both qualities of water, B1 and B2, within the framework of economic feasibility, resource availability and environmental sustainability. For this reason, a zoning study is proposed in the following section that takes into account different criteria: firstly, to ensure that companies save money by using water from an unconventional source and secondly, to maximize the industrial margin of the water suppliers with the aim of providing a source of financing to extend this model to other user sectors (with the implementation of other technologies if required). The possibility of generating greater volumes of treated or reclaimed water would lead to savings for the companies in the area, increasing their comparative advantage by reducing production costs. Furthermore, achieving greater volumes of treated water would enable a reduction in costs due to the existence of economies of scale in the sector and could reduce the price of water of both B1 and B2 quality.
3.2.2. Proposed Tariff for Water Qualities B1 and B2 for Sectors 1 and 2
In order to establish a price for both qualities, competition-based pricing, discussed in previous points, is followed. The first restriction refers to the price of drinking water in each area, so that the price of reclaimed B1
water must always be lower than the price of fresh water (EUR/m3
) to encourage the use of reclaimed water. Moreover, the price set for water quality B2
must be lower than reclaimed B1
water. This second restriction is aimed at reducing the total amount paid by companies, which will be 10% lower than the price that they currently pay for the use of drinking water. Thus, applying the proposed function (3) would lead to the results in Table 8
In sector 1, the proposed tariff implies a price reduction compared with the current tariff of 0.04 EUR/m3 for B1 and 0.11 EUR/m3 B2. The (quarterly) bill paid by companies implies a reduction of approximately 10% for companies 1 and 2.
The production costs for both qualities (B1
) are as follows (Table 9
), and as can be seen, the margin is EUR 5672 (quarterly) in sector 1.
The economic proposal for sector 2 implies a price reduction compared with the current tariff of 0.09 EUR/m3
and 0.19 EUR/m3
. The information in Table 6
is used to calculate the total cost. The amounts are expressed per m3
and include capital amortization costs and operating costs. These costs (EUR/m3
) are then multiplied by the volumes consumed of each quality (Table 9
). In the case of company 1, it consumes 14,651 m3
of quality B1
) and 13,197 m3
of quality B2
). Therefore, the sum of the total cost of B1
(EUR 10,372) and the total cost of B2
(EUR 2283) gives a total amount of EUR 12,665. The proposed bill (quarterly) implies a reduction of approximately 10% in costs for the following companies (Table 10
As can be seen (Table 11
), the margin is EUR 43,658 (quarterly) in sector 2, which has an impact on the economic sustainability of the project.
In the following subsection, sector 3 is analyzed. An example is shown where the tariff for main water supply is lower than the cost of reclaimed water production (B1). However, the companies in the example also require high quantities of B2 water for other production processes that are less demanding in terms of water quality.
3.2.3. Proposed Tariff for Qualities B1 and B2 for Sector 3
The volume of water required in the sector is 172,000 m3
(quarterly consumption). Companies 10 and 11 require the largest volumes of water for their production processes, 41,000 and 92,000 m3
, respectively. The current supply tariff is 0.47 EUR/m3
Continuing with the example, it is necessary to present a new tariff for water of B1 and B2 quality. In order to incentivize their use, the price of B1 water should be lower than 0.47 EUR/m3; similarly, the cost of B2 quality should be lower than the current price of fresh water.
The economic proposal for sector 3 implies a price reduction compared with the current tariff of 0.05 EUR/m3
and 0.08 EUR/m3
. The proposed bill (quarterly) implies a reduction of more than 10% in costs for the companies shown in Table 13
The production costs for both water qualities (B1
) are presented in Table 14
The calculation follows the same procedure as explained in Table 9
; for example, company 9 consumes a total volume of 5863 m3
water, which multiplied by its cost (0.708 EUR/m3
) results in EUR 4.151. It also consumes 16,524 m3
water, which multiplied by its cost (0.173 EUR/m3
) results in 2858. Finally, in order to determine the total amount that the company would pay, the two results are added together, giving a total amount of EUR 7010.
calculates the margin generated for the reclaimed water supplier. In this example, it is calculated for sector 3. In this sector, there are a total of four companies that consume water of both B1
quality. The total cost of producing water is expressed in the column “Total Costs”. The sum of these costs gives a result of EUR 52,606 (for the four companies). In order to find out the profit generated by the supply of reclaimed water in this sector, the income obtained with the proposed tariff is calculated (Table 12
). In this case, the price paid by the four companies amounts to a total of EUR 68,362. Finally, the difference is calculated, resulting in EUR 15,756.
As can be observed, in sector 3, the margin is EUR 15,756 (quarterly). In the last case, the margin generated by the supply of B2 water manages to offset the losses generated by the supply of B1 water.
In view of the results, three aspects should be highlighted. Firstly, supplying a larger industrial area allows a greater flow of both qualities to be generated, accelerating the amortization of the project. Secondly, treating the area as a whole compensates for the lower consumption of one or more specific companies and/or specific periods of reduced water consumption by the companies (seasonality). Thirdly, offering two qualities of water helps to adjust the water supplier budget, thus offsetting the possible negative differences generated by theB1 water quality.
Generally, there is a lack of awareness of the potential of water reuse in society. Therefore, to guarantee the success of a water reuse project apart from considering technical and economic aspects, it is necessary to implement information and communication campaigns for users. It is a question of transmitting the benefits associated with this activity to society. To this end, it is necessary to design indicators that enable the quality of reclaimed water to be measured, adapting the resource to the specific use required.
In addition to improving the aspects mentioned above, it must be taken into account that failure to implement these projects can have negative environmental, social and economic impacts, i.e., costs of nonaction. If water reuse projects are not implemented, there is a risk that water needs may not be met, leading to restrictions on the use of water, with consequent implications.
In order to avoid future restrictions, a water reuse model is presented, specifically in the industrial sector, that guarantees the economic feasibility of the water reuse project. For this, it is necessary to give a price to reclaimed water and to include it in a competitive tariff system. Generally, water reuse projects are conceived as high-investment solutions that neither distributors nor users are willing to pay for. However, with the appropriate tariff system, both users and distributors can benefit.
A tariff policy based on the price of the competitive product can overcome the first barrier in terms of the use of reclaimed water as a resource by companies while reducing the pressure on conventional water, contributing to the sustainability of the industrial sector covered. Similarly, providing two qualities of water permits the production to be adapted to the real demand of the industry. In this work, three industrial sectors are evaluated: For the first sector, the user industries would achieve a saving of approximately 10% by changing the consumption of conventional water to reclaimed water; in the second sector, they would achieve a saving of 18%, and in the third sector, they would achieve a saving of approximately 16%. Thus, sustainability in the consumption of reclaimed water in industry is guaranteed. Furthermore, in order to ensure the viability of the supplying company, the costs of the infrastructure necessary to produce and distribute reclaimed water are evaluated. In sectors 1 and 2, production costs represent approximately 50% of the income. In sector 3, the costs represent approximately 76% of revenues. These variations are determined by fluctuations in the consumption of the qualities offered. In conclusion, the design of a specific tariff for reclaimed water, as well as the aspects that have been taken into account, guarantee the feasibility of a reuse project.
This research provides valuable results that will be very useful in establishing future strategies aimed at incentivizing the use of reclaimed water in industrial sectors.