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Water utility industry facing challenges and opportunities in next 20 years

October 10, 2012
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In some important respects, the water utility industry is very similar to other sectors of the American economy. It is subject to, and must continuously adapt to, constantly changing economic, societal, governmental and environmental pressures in order to meet its mission. And, like any other industry, it is good to occasionally take a step back from the day-to-day world and look at the water sector from a more holistic viewpoint.

What issues should water utilities be prepared to tackle 10 years from now? In 20 years? What are the trends? In addition to challenges, what opportunities exist?

To help the water sector answer some of these questions and better prepare for the future, the Water Research Foundation (WaterRF) recently completed a research project, Forecasting the Future: Progress, Change and Predictions for the Water Sector. The intent of this study is to help water utilities and others involved in the industry understand what the future may hold by identifying and analyzing societal, political, economic, environmental and business trends impacting the water sector over the next 20 years. The project included the direct involvement of 20 North American and seven international water/wastewater utilities and four larger water organizations.

Four broad trend categories, along with critical topic areas for each, were identified. See Table 1.

Table 1: Trend categories and topic areas
Environmental Trends Energy demand
Climate change
Natural disasters
Total water management
Technological Trends Rate of technological change
Information technology
Water system technology
Water treatment technology
Economic Trends Economic
Societal/Political Trends Governance
Water-related regulation
Water-related legislation
Organizational sustainability
Customer/constituent and community relationships
Mass media management

Top 10 key trends to watch

While there are a number of key issues within each of these trend areas, many are more relevant to specific water utilities based on various criteria, such as size, service area, water source and geography. However, there are several that stand out as being most critical for the entire industry; these include:

  1. Uncertain economy and financial instability cause slow economic growth, which puts increasing pressure on water utilities.

  2. Decreased availability and adequacy of water resources, including uncertainties related to demand for supply from competing interests and new and emerging contaminants.

  3. Aging water infrastructure with increasing capital needs to replace and upgrade systems.

  4. Shifting water demands with personal and industrial use declining and populations in the U.S. moves to the South and West.

  5. Changing workforce with an aging workforce and worldwide competition for skilled technical resources, new strategies to attract qualified workers are needed.

  6. Expanding technology application provides both opportunities and challenges for water utilities.

  7. Customer and media engagement become increasingly important in an era of mass/social media to forming perceptions and generating support for initiatives.

  8. Increasing and expanding regulations dictate stronger water quality/quantity protection standards.

  9. Efficiency drivers and resource optimization will become increasingly important.

  10. Climate uncertainty negatively impacting water resources, infrastructure and water-related ecosystem services.

Blueprint and vision for the future

So, based on these trends, looking ahead 10-20 years, what might the water utility industry look like? The project resulted in a Water Sector Blueprint to provide the water sector with a shared vision of that future along with key strategic imperatives that are critical to achieving that vision.

First, the vision is as follows:

  • Efficient providers of high quality, reliable, affordable water service. Water sector organizations provide reliable, responsive and affordable services that meet or surpass customers' expected levels of service.

  • Trusted guardians of public health. As trusted guardians of the public health, the water sector employs innovative technologies and management strategies to mitigate the risks associated with drinking water supplies and ensure that drinking water is of good quality.

  • Collaborative partners in total water management. As custodians of the environment, the water sector recognizes the importance of working together to effectively manage water resources, looking at the water lifecycle holistically in order to produce the best possible outcomes for communities and the environment.

  • Effective promoters of sustainable resources for water and energy. Water sector organizations recognize that business decisions have a direct bearing on the welfare of natural resources and manage operations with increasingly efficient use of water and energy resources.

  • Financially viable organizations. Water sector organizations demonstrate a level of financial prudence that seeks to strike a balance between present-day operating expenses and revenues, community expectations and demands, condition of assets/infrastructure and long-term debt obligations in order to sustain well-being and quality of service both now and in the years to come.

  • Employers of choice for serving the public good. Water sector organizations are public servants, providing essential services that promote community health and well-being, support economic strength, sustain our natural resources and improve quality of life.

  • Good stewards in preserving the natural and built water infrastructure. As responsible stewards, water sector organizations protect and restore natural and built water infrastructure through innovation, collaboration and advocacy.

  • Successful users of state-of-the-art technology and information. Water sector organizations use the most advanced information, communication, water system and water treatment technologies available to provide customers with the best service possible.

  • Proactive, open communicators with all stakeholders. Water sector organizations generate discourse that supports greater understanding and public awareness, builds consensus between all interested parties and ultimately helps establish a shared vision that serves everyone.

  • Respected organizations with transparent performance information. Establishing open disclosure of performance information strengthens utilities as well as communities. Transparency of information demonstrates a willingness to be forthright that stresses accountability, supports continuous improvement, builds stakeholder trust, reinforces credibility and educates and serves the public.

  • Advocates for community quality of life; enablers of economic development. Water sector organizations make decisions that positively contribute to the social, environmental and economic well-being of citizens today and in the future.

  • Effective emergency responders. Committed to the well-being of communities and the environment, water sector organizations recognize their responsibility to be prepared to respond quickly, safely and effectively to emergency situations that arise within their jurisdiction — building partnerships with other water sector utilities and businesses for mutual aid, establishing clear public communication procedures and having resources in place that will effectively meet the need at hand.

Strategic imperatives

To achieve the vision outlined above, seven strategic imperatives were identified that represent the most critical issues demanding action by the water sector:

  • Communication: Multi-faceted engagement. A multi-stakeholder process, including environmental, social, corporate and regulatory sectors, is critical to build trust among all. Broad participation and involvement of all stakeholder groups, understanding of utility customer demographics and a consistent outreach program are critical to achieving long-term goals and acceptance of the changes ahead.

  • Collaboration/partnerships. To meet the significant challenges they face, municipalities and utilities must consider alternative models in the provision of various water services, such as private-sector participation, public-public (PUP) partnerships and regional partnerships.

  • Total systems view. Utilities must take a holistic approach that accounts for the ecosystem services affecting water use and delivery. Those utilities that consider all of the technological, financial, physical and regulatory practices that affect water resources will be more successful at providing sustainable and economical water services in the future.

  • Rate making/financing. Utility financial planning systems must be upgraded to assure that all cost factors are included in revenue projections used to establish a rate structure. Rate structures should be designed to reflect the very high capital intensity of the water industry by placing a larger charge for capital funding relative to the traditional volume charge used by most utilities.

  • Applied technology. Utilities must foster innovation and the use of new information, communication, water system and water treatment technologies to effectively meet the challenges facing the water sector over the next 10-20 years. Technology should be viewed as a solution, not a problem.

  • 21st century leadership skills. To meet the challenges of a sustainable future, water sector leaders must acquire three clusters of leadership knowledge and skills, including:

    • Context: Senior executives need to understand the business risks and opportunities of environmental and social trends. And, they need to know how their sector and other stakeholders are responding. Senior executives also need the skills to respond to this information.

    • Complexity: Leadership needs to develop the knowledge and skills required to lead in the face of increasing complexity and ambiguity.

    • Connectedness: Leaders must acquire the knowledge and skills that will enable them to understand the actors in the wider political landscape and to engage and build effective relationships with new kinds of external partners.

  • Adaptive planning. Water sector organizations should adopt a strategic planning process that facilitates the development of strategies under various levels of uncertainty and includes the monitoring, updating and revising of strategies as necessary in volatile markets.

The water sector is facing an increasingly challenging future. At the same time, opportunities also exist. The key is acknowledgement that "business as usual" is a mindset of the past and that the future will require a new approach to the management of water utilities. Strategic planning for sourcing, treatment, storage and delivery of water will be essential and early, proactive adoption of strategic imperatives, such as engagement with all stakeholders, leveraging new technologies and developing 21st century leadership skills will help position water utilities for future success.

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