Drought is increasingly impacting the national economy, and this pressure is set to grow. Water availability is becoming a decisive factor for locating facilities, because scarcity drives up investment costs or even blocks productive processes.
“I don’t think a company already operating will abandon operations. Yet there is a risk that growth may stall if this constraint persists,” says Charles Kirby, partner at EY Spain Sustainability Consulting.
In response, the focus shifts to boosting efficiency, cutting consumption, and engaging with the community. The trend is clear: the metric of water use per unit produced is becoming a central element of business strategy, with continuous efforts to use resources more effectively, among other actions.
Water shortages could jeopardize projects that require large water inputs, such as green hydrogen power plants and gigafactories for electric batteries.
“When performing a location analysis for investment, it is essential to consider costs over a 20- to 30-year horizon, and climate change must be factored in,” especially due to its effects on temperatures and water availability. Advancing efficiency requires a pricing approach that rewards responsible consumption.
“Water is a scarce resource and pricing should incentivize prudent use by end users across industries.”
The main idea is not to raise prices for its own sake but to connect pricing with efficiency gains for both producers and consumers. Kirby notes that chemical, agro-food, and metal sectors are among the largest water users.
Today, the regions facing the highest water stress are Andalusia, Murcia, parts of the Valencian Community and Castilla La Mancha, including the Balearic and Canary Islands.
“By 2040, depending on whether a usual or optimistic scenario (aiming for the 1.5°C target) holds, it will be easier to identify areas with lower risk: Galicia, Asturias, and portions of the Basque Country,” a warning has suggested.
Excessive demand as a primary driver
Water scarcity is increasingly affecting Spain and the broader Mediterranean basin. As climate change advances, scarcity becomes more pervasive and can raise costs related to supplying water for industrial activities, according to Peter Easton, a water expert at Waterplan.
This dynamic could prompt the relocation of some industries from more water-stressed regions to areas with more reliable water resources.
Experts advise that companies considering Spain should evaluate location choices carefully, because some areas carry especially high water risk that must be weighed in investment decisions. While climate change is pivotal, the main driver of scarcity is rising agricultural demand, which strains available resources.
The consequences include overuse of water tied to underinvestment in efficiency and poor management of available resources. An example cited is red grape production in Andalusia, which contributes significantly to European output; yet Doñana has seen authorities take tighter control over the wetland reserve.
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The topic remains urgent for policymakers and industry alike as water resources face ongoing pressure from demand growth and climate variability.
End of content summary; further data and analysis available from environmental research and industry reports in attribution sections.