High levels of water loss in distribution networks lead to low levels of efficiency. The difference between the amount of water produced and put into a supply system and the amount of water which is billed to consumers is called Non-revenue Water (NRW) (ADB, 2010a). It consists of three main components physical losses due to leakage, commercial losses due to poor metering and unauthorised consumption of water (Wyatt, 2010). The concept of non-revenue water, revenue water and NRW are illustrated in Figure 1 with reference to the total water supply. When a utility’s product (water) is lost, water collection, treatment, and distribution costs increase, and income through water sales decrease (Tool C4.01) causing a vicious cycle of water and economic losses (Farley, Wyenth, Ghazali, Istandar and Singh, 2008). Supply efficiency improvements lead to reduction of these losses, allowing suppliers to meet greater demand through the same system allowing better cost recovery and economic sustainability of water supply.
Figure 1. Components of Total Water supply including unaccounted, non-revenue and revenue water (Adapted from ADB, 2010b)
Reducing physical losses as a result of leaks and evaporation include options such as lining irrigation canals and fixing leaks in urban water-supply systems can improve conveyance efficiency. Regular maintenance of infrastructure supports to maintain and archive water efficiency levels and is more cost-effective than rehabilitation or new infrastructure development (WEF, 2014). It does no good to develop a lot of new water infrastructure if it is not going to be maintained, as poor conditions lead to inefficiencies and major losses over time.
These technical measures have to be complemented by regulation and compliance (Tools B1) to limit commercial losses, through illegal connections or broken metering. Commercial losses can be identified by walk-through surveys and illegal connections can be legitimised as well as added to the network. Therefore, before considering expansion of distribution networks, or new supply systems, supply efficiency should be considered to reduce physical losses and NRW.
Supply efficiency can postpone major capital investments in supply infrastructure. However, interventions such as lining of irrigation canals to reduce conveyance losses is capital intensive. Hence, the cost-benefits of efficiency should be weighed and compared with the cost-benefits of new infrastructures through an economic analysis (Tool D1.01). On an equitability dimension, there may be trade-offs between efficiency and accessibility. Such as, the choice between expanding service to new users and making current infrastructures more efficient.