The lower viscosity of water reduces friction.  Besides, the water can transfer heat way better than oils.  So why not use water as a lubricant in wind or hydro turbines, especially on equipment which is operating in the ocean ...

It seems to be a perfect material.  It's the most abundant liquid on Earth, and it causes no ecological damage. 

The whole point of lubrication is to keep the two surfaces almost apart.

Water has low viscosity in comparison to oil-based lubricants, which means that it forms a thinner film (electrohydrodynamic film thickness) between the two surfaces; the thinner the film, the greater the chance of direct physical contact between the parts. 

So, the higher viscosity actually can be useful here. Another thing about water is that its viscosity doesn’t increase by pressure, unlike oil-based lubricants, as usually, the two surfaces are operating under pressure. 

Oils are better vibration dampers than water. 

As @SolarMike mentioned in the comments, water is extremely corrosive and can also dissolve many destructive elements. 

Thanks to the capillary effect, water molecules can penetrate into micro-cracks on/beneath the surface of parts.  Once there, due to extreme pressure, those molecules can decompose into hydrogen and oxygen, and build up pressure in the cracks, which leads to crack propagation and failure. This phenomenon is called Hydrogen embrittlement.

Water also provides a very good environment for fungi and other living microorganisms, which decay and changes the PH of the water, usually a shift toward an acidic environment, which in turn also corrodes the steel. 
