In stand mixer with the whisk attachment, or with a hand mixer, mix the powdered sugar, meringue powder and water together on high for 1 1/2 to 2 minutes. *Start with 9 tbsp of water and add additional tbsp at a time as needed to reach desired consistency.
You will know when you have reached the correct consistency when the icing drizzles down from the whisk into the bowl and disappears and surface of icing is smooth after about 5-10 seconds.
Notes
Icing takes about 2 hours to completely dry at room temperature. You can speed this process up by placing decorated cookies in fridge if needed for layering designs.
If you add extra designs or sprinkles before icing is dry they will settle down into the icing and become smooth.
You can add food coloring after desired consistency is reached.
Icing can be made ahead of time and stored in completely air tight containers and frozen or kept in fridge for a few days. Be sure to store in icing bags without cutting tip or in a bowl with plastic covering.
While working with icing, be sure to cover icing you are not using with a damp paper towel to prevent it from drying out.