Water Conservation: The Tap vs. Time
Contents
Introduction
Why improvements are necessary
Market forces
Facts and Figures
Investment Opportunities and Market Segments
Impact
How much could be saved?
Market movers
Leaders & fast followers
Investors
VC / PE / Funds
Final Thoughts
Are we progressing fast enough?
The Forecast of the Faucet
How are we taking care of our most essential resource?
With 80% of states in the U.S. anticipating substantial water shortages in the next decade, time — and the tap — is running out. Water conservation has become essential to city planning as the ever-present climate crisis continues to jeopardize access to potable running water — not to mention being an existential threat to people living in places where water scarcity is already an impending issue.
Changing weather patterns only exacerbate the degree to which droughts and floods threaten communities all around the world. As of June 2022, Monterrey, Mexico, continues to confront one of its worst-ever droughts, which is depleting the city’s water supply. The drastic measures taken to ration water are impacting the lives of 5.3 million Mexican citizens, only allowing them to access potable water from 4 AM to 10 AM, or sometimes not at all for a couple of days at a time.
Each American uses about 82 gallons of water a day at home on average, and the U.S. Environmental Protection Agency (EPA) estimates that by installing water-efficient fixtures and appliances, individuals could reduce their water consumption by 20%. There is also potential for families to reduce their water expenses by almost 40% when installing appliances that use water more efficiently.
Apart from the residential sector, industries and energy generation consume significant percentages of the public water supply and direct water withdrawal. While the industry sector only consumes about 5% of water withdrawals, thermoelectric power accounts for a whopping 49% of total water withdrawals in the United States. However, according to a McKinsey report, switching 75% of fossil fuel sources to renewable energies would cut water consumption by almost half.
There are opportunities for governments and the private sector to drive investment toward improving water conservation efforts. Clean water is a scarce resource, and this scarcity provides a potential for long-term inflation-adjusted return. Unfortunately, in the absence of security and appropriate regulatory conditions, or a combination of both, the necessary investment in water resources remains distant, and clean water scarcity persists.
“Switching 75% of fossil-fuel consumption to renewables by that time (2040), per individual countries’ Paris Agreement targets, can reduce the water footprint of energy by 47%.”
Market Trends: Facts, Figures, Forces
Facts and Figures
Water loss/waste continues to be a major concern. In the U.S. alone, around 6 billion gallons of water are lost to aging, leaky pipes every day, accounting for 14% of the country’s daily water consumption. To help combat this issue, cities around the world, such as Shanghai, are installing smart water metering systems whereby sensors provide real-time data on quality and pressure in order to proactively detect leakages and ruptures.
These technologies could reduce system leaks by up to 50% and are encouraging other projects to hit the market.
In 2021, the Pre-Commercial Procurement in Europe funded the testing of 600 smart water metering prototypes in five sites: Seléstat (France), Vicenza (Italy), Liége and Herstal (Belgium), Budapest (Hungary), and Zafra (Spain).
In the US, companies are taking advantage of increased funding for similar projects:
California installed smart water meters in response to the state’s drought in 2014, and in 2022, the San Jose Water Company obtained approval to install 230,000 smart water meters in its service area.
WaterSense, a program sponsored by the EPA, identifies and labels water-efficient products, making it easy for consumers to identify said products, and in turn promoting more water-efficient appliances.
In 2020, the CDP group estimated potential business value losses of $301 billion if companies continued not to address water issues. It also estimated that to address water issues, companies would have to invest around $55 billion — which represents only a fifth of their potential losses.
Forces
The need for potable running water remains a priority. As the earth’s human population increases, the availability of fresh drinking water only becomes more of a concern. Of the 332.5 million cubic miles of water on earth, only 4% is freshwater, of which a mere 0.9% is located on the surface. As demand for water continues to increase, the supply grows ever more weary.
Water has long been the reason behind much political conflict on the local, national, and international stages. Debate rages on about the most productive and best use of water not only in California but throughout the United States and the world. In Cape Town, South Africa, and Bombay, India, arguments over how to deal with diminishing water supplies foment debate on the impacts of climate change. Another example is the Nile River, a shrinking source of conflict between Egypt, Ethiopia, and neighboring countries that depend on the river for survival.
Outsized Thirst
Brazil, Russia, India, China and South Africa use more freshwater annually than over 150 countries combined.
Investment Opportunities and Market Segments
Smart sensors can be used for residential, agricultural, and industrial purposes, as they aid in the control of water usage based on consumption patterns, weather conditions, soil and atmospheric moisture levels, etc. These sensors, when embedded into the smart water utility system, can permit utilities to better monitor water usage and detect leaks, allow businesses to identify areas of opportunity to reduce water consumption in their supply chain, and enable households to identify leaks and thereby avoid heart-stopping water bills.
Innovative sensors are on the rise and projects are being funded by grants given by organizations such as the Bureau of Reclamation. The Biden administration has also allocated funds for water efficiency projects that will likely encourage innovative prototypes to enter the market and create more opportunity for investment and commercialization.
Other investments in water and its associated value chain include funding to improve industrial water and wastewater utilities, long-duration water concessions, pipe and pump manufacturing, and desalination plants.
Impact
Focusing on water conservation can have outsized impacts on resource conservation:
Reduction of water waste: The EPA estimates that roughly 900 billion gallons of water are lost across the U.S. each year due to household leaks — equal to the annual household water use of 11 million homes. That means the average family wastes 180 gallons per week, or 9,400 gallons of water annually (the equivalent to the amount of water needed to wash more than 300 loads of laundry!).
Energy and water conservation dilemma: Moving and treating water consumes approximately 2% of the U.S.'s electricity, so an efficient water system is an important energy savings measure. While hydroelectric power stations do not consume water per se, the rate at which a dam's reservoir fills affects downstream flow for other water uses.
Moving and treating water consumes 2% of all electricity in the U.S.
Market Movers: Current and Future Heavy Hitters
Heavy Hitters
Asterra offers a patented radar technology for pipeline assessment, leak detection, and infrastructure assessment, while also providing information on efficient remediation of freshwater systems.
Elster Water Metering Limited is a global company that specializes in technology that improves the flow of natural gas, electricity, and water, providing innovative water metering solutions and offering products for utility, commercial, and domestic use. Its complete water metering portfolio includes solutions for revenue metering, cost allocation, network monitoring, distribution, radio reading, smart metering systems, and industrial applications.
Arad Group is one of the leading companies in the water metering market, providing sensors and smart networks to irrigation units, individual consumers, and water management companies worldwide.
Fast Followers
Itron offers a wide portfolio of metering technologies, sensors, software, and smart networks that help measure and manage water and energy use. The company’s products help consumers and cities more efficiently utilize resources while exploring innovative strategies for the coming decades.
Hydroko is a Belgium-based company specializing in top-quality valves and appliances for the country’s water supply system. It was one of the suppliers to the European Commission’s Pre-Commercial Procurement smart water sensors testing project.
Elemental is an early-stage accelerator company that seeks to fund up to $1 million each 15–20 companies annually that work within energy, water, and food spaces.
Venture Capital/PE and Other Fund Investors
Elemental is an early-stage accelerator company that seeks to fund up to $1 million each 15–20 companies annually that work within energy, water, and food spaces.
XPV is a fund that invests both directly and indirectly in companies that make a positive impact on the water industry.
President Biden’s Infrastructure Law will provide $25.5 million for water efficiency projects in eight states located in the western U.S.
The Bureau of Reclamation has selected 22 projects to receive $17.3 million from WaterSMART Water and Energy Efficiency Grants.
Final Thoughts
EPA results show that water consumption has steadily decreased over the last several years. However, with the ongoing threat from climate change looming, drastic efforts should predominate. Climate change will continue to negatively impact the hydrological cycle over time, including intensified effects from flood and drought, leading to increased competition for water resources and inevitable price increases for the world’s most important commodity — access to which remains inequitable globally.
The world’s investment managers need to make room for capital to address climate change, while at the same resolving the social and environmental issues raised by an ever-decreasing supply of clean water resources in both the developed and developing world. In addition, individuals — and, most importantly, industries — should focus on reducing water consumption and rethinking how supply chains use and waste water.