The world can be a scary place. Concerns over international terrorism, growing geopolitical tensions between Russia and the West, and climate change dominate the headlines alongside more personal concerns, such as the economy and family finances. But there is a threat facing the world that few people realize exists, and it could affect all these things -- unless strong, decisive, and swift action is taken. 

The world is running out of fresh water 
According to research out of Denmark's Aarhus University, the Vermont Law School, and the U.S. Center for Naval Analyses, by 2040 the world will face a massive water crisis due to economic development and a global population increase of 2 billion people.

Source: ExxonMobil,The Outlook for Energy: A View to 2040

In the past 100 years the world's population has tripled, but water consumption has increased sixfold. The report indicates that, if these trends continue, by 2030 there will be a 40% shortfall in fresh water supplies.

"Three years of research show that by the year 2040 there will not be enough water in the world to quench the thirst of the world population and keep the current energy and power solutions going if we continue doing what we are doing today."

This according to Bejamin Sovacool, director of the Center for Energy Technology at Aarhus University. The situation is expected to be exacerbated by climate change, which is already threatening billions with insufficient access to fresh water.  

Source: International Energy Agency

This is a major humanitarian and economic concern because water has so many uses in today's worlds, such as agricultural production, drinking, industrial production, and energy production (both electricity generation and oil and gas extraction). 

Global energy demand set to soar

Source: IEA

As the above graphic illustrates, the world's hunger for energy is set to expand by over a third within the next two decades. This is a major problem given that an enormous amount of the world's freshwater is used for generating electricity. For example, in the U.S. in 2005, 41% of fresh water used that year was for cooling power plants. This is especially a problem in drought-prone states such as Texas, which generates 91% of its power from coal, gas, and nuclear power, all sources that require intensive liquid cooling.

However, the problem isn't limited to heat-intensive sources of power; hydroelectric power, one of the safest, most affordable, and greenest sources of power, is also threatened by a water shortage. For example:

  • In 2012 a water shortage decreased California's hydroelectric output by 38%.
  • In Brazil, the worst drought in 50 years left dam reservoirs at just 28% of capacity in 2012.
  • In 2001, decreased hydroelectric output in Brazil resulted in eight months of power rationing and $26 billion in economic damage.
  • In 2012 85% of hydroelectric power generation was lost due to drought in Sri Lanka.
  • In 2000, a drought in Kenya reduced hydroelectric power output by 25% resulting in $2 billion in economic damage.

To understand just how devastating this last fact is, consider that in 2000 Kenya's GDP was $12.71 billion. This means that the economic costs of lost power generation that year resulted in a 16% decrease in GDP.

Unfortunately, the developing world is most likely to be hurt the worst by the coming water crisis.

Source: World Energy Council

It's already happening 

As this graphic from the Carbon Disclosure Project's 2013 Water report indicates, water shortage is a major concern for some of America's largest electric utilities, such as Duke Energy (NYSE:DUK), Pacific Gas and Electric (NYSE:PCG), and Exelon Corporation (NYSE:EXC) -- while less so for NextEra Energy (NYSE:NEE).

Duke Energy is America's largest electric utility but generates almost all of its 50 GW of capacity from coal, gas, nuclear, and hydroelectric sources, all of which are threatened by the coming water shortage. 

Pacific Gas and Electric is the largest electric utility in California, and is facing one of the state's worst droughts on record.

Exelon is the nation's largest operator of nuclear power plants, which are especially vulnerable to water shortages or even just increases in water temperature. For example, in 2003 France faced a heat wave that raised river temperatures enough to force a powering down of nuclear power plants. This resulted in a 50% decrease in the nation's power exports that year.

Meanwhile NextEra Energy is less vulnerable, being the nation's largest operator of wind and solar with 11 GW of capacity. In fact, NextEra operates 17%, and 14%, respectively, of America's utility scale wind and solar power and is constructing another 2.44 GW (22% increase) by 2016. This is significant because solar and wind power don't require cooling, making them well suited to a world facing an imminent water crisis.

What can be done?
According to the report mentioned above, as well as the World Bank, there are several solutions to this impending water/power crisis. These include alternative, dry cooling methods, water recycling, using salt water for cooling purposes, and expansion of solar and wind power capacity.

The reason these alternatives haven't yet been implemented is that wind and solar energy has thus far been more expensive and intermittent than cheaper, more reliable alternatives such as coal and gas. Likewise, dry cooling technology produces 10% less power and is five times as expensive as liquid cooling; but the National Science Foundation and Electric Power Research Institute are investigating ways to reduce these drawbacks.

In the meantime the falling cost of wind power is making a big difference in some of the most drought-effected areas of the country. For example, Texas, despite facing the worst drought in history in 2011, was able to stave off blackouts because it generated 18% of its power from wind. In March of 2014, that number temporarily hit 37% due to advanced weather forecasting, expanded windmill construction, and new transmission lines.

Bottom line 
The world faces an imminent water shortage that threatens not just our ability to supply a growing population with food and drinking water, but power as well. Innovative new methods for conserving water, the most valuable resource on earth, are needed if the world is to keep its lights on and its economy growing in an age of water scarcity. 

Adam Galas has no position in any stocks mentioned. The Motley Fool recommends Exelon. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.