Water is a critical resource and there are clear signs that the water sector is getting smarter. After GE, a number of Fortune 500’s like IBM and Coca Cola are now jumping into the big pond. “The interesting thing is that you see companies involved in water that you never heard of” notes water industry veteran Hu Fleming from Hatch Water before adding: “IBM just announced that they are going to do 3 to 5 billion dollars in water this year… IBM! Google is now in water and everybody is asking why?”
“The most interesting part in water is data management” explains Dr. Fleming. “The water equipment market is traditionally sized around $100Bn. What traditional water treatment equipment manufacturers miss is that the overall market is over $600Bn when you include the “soft” part like sensing, data management, analytics and so on.” IBM estimates the smart-water market alone to be between 15 and 20 billion dollars. IBM originally started to invest in water for semiconductor fabrication that requires large quantities of high purified water.
“The water industry: a massive market bubbles to the surface” was a recent headline on Greenbiz.com. And investors are starting to take notice. A number of smart water companies are closing financing from non-water funds. WaterSmart Software closed in May a $900,000 seed-round led by Menlo Incubator and joined by Sand Hill Angels, Draper Fisher Jurvetson and Physic Ventures. “WaterSmart Software is really about creating a relationship between the water utility and the homeowner.” Explains Co founder Peter Yolles that is aiming to have the same impact that OPower has had with power utilities.
The Israel-based company TaKaDu is also making headlines. It is going after the other grid – water – that needs to be smarter. TaKaDu is currently the only SaaS analytics platform provider for water utilities. The company is backed by Emerald Technology Ventures, Gemini Israeli Funds, and Giza Venture Capital. The amount of legacy data in water treatment facilities is considerable and this provides opportunities for vendors across the entire value chain. Monitoring and control of water is a critical task at treatment facilities.
The main barriers to innovation in the traditional water industry are the fear to test new technologies on the utility side, and the lack of seed funds for early-stage companies. Booky Oren is CEO of Booky Oren Global Water Technologogies and was the co-founder of Miya, which offers water loss management solutions to municipal water utilities. He explains that municipalities are locked into a risk management mode. When he was previously the head of Mekorot, the Israel National Water Company, he championed the idea of using its existing facilities to integrate new technologies under the Watech program. It took some convincing and trust building but 20 innovation ideas were tested out of 600 reviewed.
“Israel decided to expand this initiative to municipalities with a seed fund that covers the cost of the first beta-site after a methodical and rigorous screening of new technologies” applauds Mr. Oren. “The fund is less than $10M but it comes from the regulator, thus easing the way to introduce new technologies.” As a result Israel continues to be a leader in water technologies. Israel is the world's leader in wastewater recovery, with a water recycling rate of about 75%. Spain is a distant second with a rate of 12%.
However, Booky Oren quickly points out that it is a global problem that requires collaboration. An example of collaboration across countries is the request for information that the cities of Akron, Ohio and Natanya, Israel issued last year. They realized that they invested $15M a year in new technologies on their city infrastructure of similar size, yet identified they did not have any software the data. They now are issueing a common request for proposals. The winner will have two reference sites, which will be a lynchpin to sale worldwide.
Suez Environment is the other French water giant and is present around the world, managing and operating water projects. Unlike Veolia with its accelerator prgram, it established a €50M seed fund called Blue Orange that will primarily invest in water management. Bertrand Camus, the CEO of Suez Environment and United Water sees opportunities for innovation In the Western US where there is a competition for the use of limited water across sectors: “How to use water more efficiently and do more with less?” In constrained areas like Los Angeles, agencies are reviewing allocation of water. They looking at new technologies like water re-use, desalination, smart metering, etc. "The goal is to survive with less water and avoid situations like in Nevada where agriculture still uses 70% of the water but only provides for 6% of the jobs" notes Mr Camus.
Perhaps, the biggest sign that the water industry is getting smarter is that it questions some of its long-time assumptions like the current centralized model. Aleid Diepeven is Director for the Netherlands Water Partnership stated that “the water system needs to be distributed to be more efficient”. The Netherlands is known for private public partnerships to accelerate and reduce the cost of new infrastructure build-out. Their broadband policy and shared fiber network build-out remain references in the developed world.
Dr. Hu Fleming comments that “it does not make sense to build pipes in countries like Bangladesh”. The western world is attached to the throwing large capital at building infrastructure but drinking water represents only 2% of our needs. He adds that “non centralized distributed treatment make sense when you at the overall cost. 95% of the cost is in the pipeline. Why not do treatment at the point of use?” The solution is distributed community-size water systems that avoid transportation losses and that empower the local populations in developing countries.
The bigger issue might be the need for a change of narrative from the traditional ‘black-hats’ vs. ‘white-hats’. Two thirds of the world’s population does not have access to tap water nor water sewage. NGOs continue to claim that access to water is a right and must be free while counting accurately the death toll related to water scarcity. On the other side, companies building infrastructure in Africa scratch their head on how to extract and convey water to populations that theoretically cannot afford it. Developing a sustainable business model is part of creating a sustainable eco-system. We are all stake-holders.
Dr. Andrew Benedek received the first Lew Kuan Yew Water Prize in 2008 and he is working with the World Bank to adapt the water innovation model from the western world to developing countries. "Instead of copying of the model of developped countries, which is like expensive mainframes in computing, let's take membrane technologies to small and affordable water plants, like personal computers". He adds "It is happening very slowly and it is painful for me to watch over the last 20 years". The World Bank has a new initiative and Dr. Benedek remains confident that we will rethink water treatment and water waste: "Human inginiuity is boundless".
Some interesting new business models are being tested with the help of micro-financing or trackable Government subsidies, in the Eastern part of Africa for example. A pilot deployment of solar powered water kiosks was successful earlier this year in Nairobi, Nigeria. The villagers are empowered in this situation and have now more time to produce goods. The key is to show the local Government that productivity is increased significantly. There can be a real economic return in developping countries with smart and decentralized water solutions.
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