by Richard T. Stuebi
One of the fastest growing “themes” of the cleantech sector is water. While clean energy gets the most attention, clean water is also becoming a high priority. According to Richard Smalley, the late Nobel laureate and nanotech pioneer from Rice University, water trailed only energy on the list of humanity’s top challenges over the coming decades.
Like all things cleantech, a major difficulty has been trying to earn good investment returns from innovations in the water sector. And so it is that the Water Innovations Alliance was formed, to serve as an industry association to promote the emergence of a vibrant entrepreneurial sector in water technologies.
In May, the Alliance held its annual conference in Dayton Ohio. I attended, and heard a number of good presentations providing some interesting tidbits on the water sector.
In his overview, Mark Modzelewski (the Executive Director of the Alliance) gave some eye-opening statistics. Only 3% of the water on earth is freshwater, and little of that small sliver is accessible for human use, with 1.5 billion people globally not having access. By his measures, water is the third largest industry on earth, representing $550 billion of revenues. Modzelewski cited data indicating that 75% of U.S. water infrastructure will need to be replaced, at a cost of “hundreds of billions of dollars.” Soberly, he noted that “the way we move, treat and filter water has changed little since the time of Julius Caesar: we move water through trenches and tubes, we force water through tiny holes to clean it, and we put poisons in water to kill other poisonous things.” Unfortunately, innovation is not happening at the required pace: only $130 million in venture capital was placed in 33 water deals in 2009, with minimal corporate, academic and public sector resources and centers for water R&D.
Paul Gagligardo of American Water (NYSE: AWK) noted in his presentation the huge size of the water technology market: $172 billion of water-related capital expenditures in 2009, with $30-60 billion per year expected in North America over the next several years. Alas, he also noted how balkanized the demand-side of the market is, with 52,000 community water systems and 155,000 non-community water systems in the U.S.
Notwithstanding the difficulties facing companies trying to profit from water technology innovation, a number of presentations from leading firms hinted at the opportunities.
Peter Williams, the CTO of Big Green Innovations at IBM (NYSE: IBM), described IBM’s activities to parallel the smart grid in the water sector. In his presentation, Williams noted that 20-25% of all treated water is lost through leaks, and moving/treating water consumes 3-5% of all energy in the U.S. — implying that smarter water management represents an enormous economic and energy opportunity area.
In his presentation, Ed Hackney of United Water — a subsidiary of Suez Environnement (Paris: SEV, Brussels: SEVB) — took the smart water grid theme further, by noting the need to push intelligence from already-sophisticated treatment centers through the relatively-dumb network.
Probably the biggest splash made at the conference was by Veolia (Paris: VIE, NYSE: VE), a major sponsor with a significant presence, including several speakers. It’s clear that Veolia is trying to show itself as the leader in the water technology field. As profiled in a presentation made by Finn Nielsen, the Chairman of VWS (Veolia Water Systems) North America, Veolia has created the Veolia Innovation Accelerator to work closely with start-up companies on their water treatment technologies to speed up the pace of commercial adoption, by helping such companies validate/improve their technologies and introduce them more rapidly to the marketplace through Veolia’s vast channels in the water industry.
Other presentations from the conference are available, and are worth perusing to gain a better handle on this important but often-overlooked segment of the cleantech universe.
Richard T. Stuebi is a founding principal of NorTech Energy Enterprise, the advanced energy initiative at NorTech, where he is on loan from The Cleveland Foundation as its Fellow of Energy and Environmental Advancement. He is also a Managing Director in charge of cleantech investment activities at Early Stage Partners, a Cleveland-based venture capital firm.