The increasingly broad interest in water may be attributed to the growing collective concern over the water challenges local and global communities face. Water industry "outsiders" (i.e., the 99.999 percent of the population not reading this article) are shocked to learn how scarce freshwater resources have become and how critical water is, not just to human life (an understood fact), but to the economic livelihood of the planet (mostly misunderstood). When the topic turns to the value, price and cost of water, people quickly grasp the disparity between what is paid for bottled water versus what is paid for potable water. But unlike power, phone or cable TV bills, most people do not actually know how much municipal water services cost. And when it comes to the "real" cost of water and its importance in enabling sustainable global growth, the conversation quickly becomes complex, wonky and technical, and the water industry outsider’s attention wanes. The cost and complexity of the global water infrastructure and the role of water in a sustainable economic path forward are the main themes of this article, and amid this boundless topic, I focus on three specific topics:
- The role of water as a limiter or enabler of sustainable economic growth
- The emergence of China and India not only as end markets, but also as sources of global water industry dominance
- The important role and myriad barriers that innovation plays and faces in enabling higher impact solutions to global water challenges
Shifting global water use
With each passing year, more of the world’s growing population moves further out of extreme poverty, even if far too many people still live in life-shortening conditions. As quality of life and population increase, the demand for more stuff increases along with them, for example, food, clothes, phones, cars (and the fuel that drives them), houses, and electricity. This is the stuff of economists’ dreams because they measure gross domestic product growth and map the movement of goods and services around the planet.
However, one measure rarely mentioned is the amount of water required to produce and transport these items. This may be because it is so difficult to track and therefore poorly understood. While it is directionally accurate that a more agrarian context of water is used for agricultural purposes, as countries and cities increasingly modernize, most water use actually shifts to industrial uses. This inexorably shifting usage pattern has significant implications for the movement and monetization of water. In the new industrial equation, water becomes a major raw material for the manufacturing and power sectors and a key risk management factor for infrastructure placement and operational decisions.
The effluent streams coming from industrial activities are a complex mix of salts, minerals and organics that creates a highly variable and difficult treatment challenge and has largely overwhelmed traditional solutions. The water industry must endeavor to work alongside other traditional industries and process disciplines to define and implement workable solutions for this large amount of industrial wastewater. And these solutions must not be rooted only in new technologies, but also offer new business and delivery models like those that have unlocked the capital and capabilities in the
China & India
The topic of rapid industrialization and water issues naturally leads to the second theme of China and India where the world has seen high levels of growth and modernization. It is not surprising that China and India suffer from massive environmental challenges and therefore are also among the most aggressive in driving new regulations and solutions to deal with these issues. In today’s transparent and interconnected global dynamic, environmental issues are impossible to mask and critical to remedy. That China and India are taking proactive measures to deal with these challenges has created the unique and tricky symbiosis of mixing a burgeoning domestic water industry with solutions from traditional global water industry players. The cost and localization demands for delivering solutions into these challenging contexts has created the need for new types of solutions and operating models, which further pressures the relationships between the value, price and cost of water.
As these dynamics have driven Chinese and Indian water industry players to become more established domestically, their ambitions have led them to expand regionally and then globally. Chinese and Indian engineer-procure-construct projects and technology providers are moving further from their shores, which is radically, and perhaps forever, changing the face of the global water industry. Customers and competitors will have to recalibrate to this new reality when making purchasing and pricing decisions.
These changing industry dynamics coupled with increasingly challenging water issues leads to the third and final theme: innovation. Innovation can be thought of simply as when something new solves a problem. Most important, something merely being new is insufficient; it must also provide a viable solution to a real problem. This could be a new technology that effectively treats industrial wastewater or a new private-public financing model that unlocks a capital bottleneck.
Whether it is a new technology or business model, the fragmented and complex nature of the global water industry is a significant barrier to these innovations accelerating enough to keep pace with problems. And again, the disconnect between the value, price and cost of water creates disincentives for investment. These non-technology barriers deter not only incumbent industry players, who operate amid the pressures of the public capital markets, but also the private investment community (for example, venture capital, private equity, family offices) whose capital has enabled massive innovation in so many other sectors. To attract the human, intellectual and financial capital required to build a 21st century global water industry, the industry needs to courageously illuminate and overcome the many hurdles to innovation that exist.
These intersecting and often colliding trends create an opportunity that awaits and beckons all — huge, challenging problems with a significant, urgent need for solutions amid a swirling, global industry dynamic. This is not a scenario for the faint of heart, but with commitment and collaboration, capital and creativity, perhaps future "outsider" discussions will turn to the cool, new water gadget that makes clean energy and freshwater from people’s homes’ wastewater, or the exciting new renewably powered seawater desalination plant that is going in across town which will provide water that is much better, and cheaper, than bottled water.
This future will only happen if the world begins now, and it all starts with a conversation.Jim Matheson