Well, from experience with the electric smoker, we dont want to but any fuel product in the water pan, the water pan is for drippings and moisture, such as beer, juice, water, etc. It will never get hot enough to smoke wood chips or even lump charcoal.
The heat source (coil) and being at the very bottom, is not near the water pan, Unless theres something Im not aware of, or a modification to speak about, I maybe wrong... On this site....Anything is possiable....LOL!!!!
I have used lump charcoal pieces in my wood chip tray, and it was a success. The key to this is not to over load the tray, or it will set fire!!!! smoking metal is not a good smell. LOL....!