In this blog post, we take stock of the Dreampipe Challenge, the innovation prize run by Ideas to Impact to increase water security and revenue for utilities in low-income countries.
Every year, water utilities across the world lose at least 14 billion US dollars in revenue.
The difference between amount of water they supply and that billed to users is known as ‘non-revenue water’ (NRW). Its causes range from physical losses, such as leaking pipes, to commercial losses, including incorrect or lack of billing and unauthorised water consumption.
For developing countries, which already face water scarcity, rapid urbanisation and growing population, NRW is a big challenge. Reducing NRW would not be hard and gains would be quick. However, this issue tends to be low on the political agenda in low-income countries, with most national resources flowing into big infrastructure projects (You can learn more in this paper).
While international donors have been investing into NRW reduction, this financing is not sufficient and not sustainable in the long term as it perpetuates reliance on external aid.
How can we tap into new non-traditional sources?
The Dreampipe Challenge is a competition with a total prize purse of £1 million that aims to reduce NRW by catalysing at least half of the investments required from ‘unusual’ sources, such as commercial banks. Launched in 2016 as a global prize open to contestants from all 27 DFID countries of operation, such as water utilities, it has later evolved into a southern African challenge.
Dreampipe has provided the Ideas to Impact team with a wealth of learning, which we hope could be useful for other innovation prizes as well.
Four key lessons
- Before you launch a prize, talk to as many people as possible to hear their ideas and suggestions. This helps you better understand any underlying challenges or situations which may impact the prize. For instance, we found there was a challenge with the lack of NRW familiarity by the funders, and therefore were able to design the prize to address this issue.
- Don’t be afraid to change course: a major obstacle to NRW reduction is banks’ high perceived risk of lending to water utilities as physical assets cannot generally be used as collateral in case of default on the loans, but also because future revenue streams are too low or not predictable.
Dreampipe, as it was originally designed (Dreampipe I), aimed to incentivise new financial mechanisms, with the expectation that funding would be provided by donors. However, we realised quite soon that this approach did not identify among the solutions submitted by contestants a ‘magic bullet’. So, we redesigned and relaunched it as Dreampipe II to reduce risks for funders and generate faster evidence of a commercially viable NRW solution, focusing on securing unusual funding sources instead.
Dreampipe II is a tournament where prizes are awarded at three stages. Phase 1 invited applicants to prepare a business plan. Phase 2, which will be awarded on 9 May in Cape Town, South Africa, involves the implementation of small-scale demonstration projects in selected water utilities, which they self-finance. In phase 3, winners from phase 2 will need to negotiate a fully structured deal with a financial institution, which is willing to invest in an expansion project in the same utility.
'Demonstration projects show banks that they can get a return on investment easily. Nobody had done it before.'
- Froeydis Gording, Dreampipe Prize Manager
- Cultivate networks: the Dreampipe Challenge team’s close relationship with sector organisations has has been crucial in terms of visibility and support. Because of this, we could launch Dreampipe I at the International Water Association (IWA) Water Loss Conference in Bangalore, India, in February 2016. This relationship also allowed to launch Dreampipe II at the IWA Water Ideas 2016 Conference in Bologna, Italy, in October 2016. Moreover, some members of IWA’s Water Loss Specialist Group, who are best-in-field experts, also volunteered to be judges on our competition.
- Be flexible while being fair: After launch, it is important for the prize team to regularly communicate with applicants. As noted in a previous blog post, participating in a prize competition is a big investment, especially for small organisations, and this not just in terms of money, but also time and energy. If they face challenging circumstances, it is key to be flexible. An example from Dreampipe was the outbreak of civil war in northern Nigeria, which made it impossible for one of the applicants to start fixing leaking pipes within the planned timeframe, so we granted an extension.
Above all, the Dreampipe Challenge has put a spotlight on the NRW issue and has sparked dialogue between water utilities and banks. We hope that once the latter realise through the pilot projects in stage 2 that return on investment is not as uncertain as they might think, their confidence in lending will increase.
It has been exciting for us to see organisations and individuals participate and invest money upfront with no guarantee of winning a prize. This has certainly increased their credibility and further proves that NRW reduction is a quick win. In any case, their work will still pay dividends in the form of increased revenue for their utility and improved water supply for their communities.
We also have hopes for the sustainability of the solutions spurred by Dreampipe and are confident that the competition could be replicated both at country and regional level.
While it is too early to say whether a game-changer has emerged thanks to this competition, if we are to achieve Sustainable Development Goal 6 on access to water and sanitation by 2030, we need to act soon. And NRW reduction needs to be part of the solution.
To keep up-to-date with the Dreampipe Challenge, visit www.dreampipe.org