This post is submitted by Paul O’Callaghan founding CEO of O2 Environmental .
‘Growing world population will cause a “perfect storm” of food, energy and water shortages by 2030′. That is what a UK Government chief scientist told attendees at the Sustainable Development conference in London yesterday. Prof. Beddington told the group that demand for food and energy will jump 50% by 2030 and for fresh water by 30%, as the population tops 8.3 billion.
Despite this, investment in water deals represented just 1.8% of the total investment in the Clean Technology area in 2008. There are number of reasons for this and also signs that this is changing.
The Venture Capital Community has been slow to invest in the water sector. Last year out of a total investment of $8.4 billion into clean technology ventures, just $148million (1.8%) is reported by the Cleantech Group by having been made into water. Why?
Some companies are not convinced that there is enough activity in the sector. Others feel it is a conservative market. However DFJ just made their first investment in water by investing $10M into Oasys Water, a US company with a forward osmosis technology.
The Artemis Project is running a ‘Water Top 50’ to identify companies with game changing strategies in the water sector and to demonstrate to the VC community that there are quality opportunities in this space. Global Water Intelligence has number of potentially disruptive technologies as entrants in their ‘Water Idol’ competition and overall several Water Indices, while showing losses, are still outperforming major stock indices.
One of the problems with water is that we only use it once. Of the wastewater which is collected globally, 38% is actually treated and only 5% of that is actually re-used. Michael Braungart, the author of ‘Cradle to Cradle – remaking the way we make things’, is addressing this issue at the Water Meets Money Conference in Zurich with a talk entitled ‘The End of Wastewater’.
So yes, it may be a perfect storm in terms of water shortages, but it may also be a perfect storm which will see innovation, the end of wastewater and new ways of using and managing this resource.
Reading my way through Cradle to Cradle now. The fact you mention that only 5% of water is actually re-used is stunning.
For those of you in the discussion on the Eco Water Saver™ Shower Timer article at http://ecopreneurist.com/2009/02/01/eco-water-saver%E2%84%A2-shower-timer-green-blue-just-neat-idea/ the Water Meets Money Conference is a good example of a place where this type of promotional item does make sense.
Yes, it puts it into perspective doesnt it. Though another interesting statistic is that only 10% of the water which is extracted and used by humans is actually collected as wastewater! That is basically because about two thirds of all water used is used in agriculture for irrigation.
There is proposed legislation in motion in California for recycling and beneficial re-use of at least half of the wastewater discharged annually into the ocean. That would be a significant jump.
Certainly makes me think twice about where I am investing my money. Sure, real estate is an important commodity, but it can’t really compare with water, now can it.
I am certain that we will see a monumental jump in interest and experimentation in this area over the next 8-10 years. Maybe we just need to get this pesky “renewable energy” thing off of our plate first.
Interesting you mention energy… Scientifican American did a cover piece on Energy Vs Water last December.
Essentially, coal and nuclear require lots of water, as do biofuels. So if you ‘repatriate your energy’ to avoid being dependent on foreign oil, you have to be sure you have the water for it. Wind and solar certainly have the edge in that regard in not requiring water.
I wrote about that on the Cleantechnica site at the following link:
http://cleantechnica.com/2008/11/10/energy-versus-water-is-blue-the-new-green/
I’ve been in the reverse osmosis business for many years and the scarcity of fresh water has been a looming issue since I started. It seems the value placed upon fresh water, however, has lagged far behind the need. While a change in the current paradigm seems inevitable, what early-warning signs of a tipping point do you anticipate and when do you expect to see them?
It also seems to me that the markets for the diverse technologies involved in water purification and reclamation are particularly fragmented and relatively immature, compared with those of energy development and delivery. How do you see the application and marketing of water technologies evolving in the short term?
Colin, you are correct, the water technology market is fragmented. I’ve finished a book on Water Technology markets for Global Water Intelligence (GWI). The editor there Chris Gasson, made some very insightful comments on this which I am just going to quote directly:
“There are just not enough synergies between the different components involved in water and wastewater
treatment and distribution to grow a big water technology group which is worth more than the sum of the parts.It suggests that water technology companies are doomed to be born alone, live alone, and die alone: unless, that is, they can turn that solitary experience of hacking open the market into a fast track for other innovators and entrepreneurs to
use to reach their potential.”
In terms of water pricing, the tipping point comes when you reach water scarcity, or have less water than you require. If you have 101 gallons and you only need 100, the price of water can be low or zero. When you reach the point where you only have 99 gallons, and you need a 100, suddenly that extra gallon becomes extremely valuable, particularly if that extra gallon is what enables you to keep that power plant running or maintain agricultural production.
When you refer to the price of water, I think you mean price of the resource. The price for abstraction. That has not been priced or regulated. Lux Research recently produced a report where they say we that we still ‘hunt’ water. We go out, find it where we can and use it. They see a vision emerging where we ‘cultivate’ water, through things like efficiency and water re-use. While water may not be priced correctly, water abstraction rights are allocated, and they have, or will soon have, a significant value. In California, farmers may find that the value of their water rights is their greatest assett.
In terms of a tipping point. I think if you look at the global increase in desalination over the past 20 years, that is a barometer which tells you something. The industry has grown hugely. It is predicted that the rate of growth in the water re-use market, will grow even more than the desalination market in the coming years.
The other element in the ‘cost of water’ or water pricing, is the cost of producing water. Energy is a large component of the costs of water treatment and water distribution. As energy prices rise, and as we have to pump water longer distances and desalinate water, the cost of providing potable water will inrease, even if the cost associated with abstraction remains at zero. That in itself will provide an economic driver. A carbon tax and GHG reduction targets will also focus minds on water efficiency.
Overall, from many different quarters, I am seeing a picture emerge of a more efficient water system. This will require change. And if there is a significant grass roots change in how things are done, this will open up new market opportunities for water technologies. Personally, I think the innovation is going to be led by small start-ups, these will most likely be acquired at some point in their life cycle by ‘Big Water’. Even if the overall market strucuture, in terms of the companies which dominate the space does not change, the way in which water is produced and used, will change.