By Steve Maxwell

Once one more fully understands the array of pressing water challenges, it becomes easier to think through strategic alternatives and begin to propose potential solutions. Fortunately, the world water crisis lends itself to small and incremental improvements.

Across the board in the water industry, there are many solutions or steps – some of them perhaps baby steps – that can be taken immediately. There are simple things that can be done individually and collectively to address and reverse some of the more problematic trends – to begin to move in the right direction.

All of these actions can be undertaken voluntarily, but they will all gather considerably more momentum as water prices rise. Our ‘water behavior’ will begin to have a bigger and bigger impact on our pocketbooks as we some perspectives and approaches that might help us move towards solutions.

Rising prices
If there is one single and inescapable conclusion resulting from a review and discussion of the water business, it must surely be the inevitability of continuously rising water prices over the longer-term. Water has traditionally been priced so low that most users simply don’t have any serious economic incentive to conserve it or use it wisely.

People naturally don’t pay much attention or conserve a commodity if they tend to view it as virtually free – and until recently, that is exactly the way in which a lot of people viewed water. There are still those today that suggest that water should be provided free to everyone – demonstrating a remarkable lack of understanding of both the hydrologic cycle and the water infrastructure system.

The true cost of delivering clean water – as well as the average price of water – is continuing to creep slowly upwards in most localities. But in most areas prices are not rising at the kind of rates that will be necessary if we are going to upgrade and maintain our infrastructure on a truly sustainable basis.

Many observers have pointed out that we suffer not so much from an absolute shortage of water as from an inability to properly manage and allocate that water that we do have. This is a good perspective to keep in mind.

An authoritative special report a few years ago from the Economist concisely concluded that water is “ill-governed and colossally under-priced” around the world. Or, as Peter Gleick of the Pacific Institute put it in a recent report, “there is a vast amount of water on the planet – but we are facing a crisis of running out of sustainably managed water.”

Increasing prices may help to improve the allocation of water. But this must be combined with smarter policies and more innovative management approaches.

Global perspective, local action
Pondering how to deal with the world’s water problems increasingly brings to mind the old political bumper-sticker – ‘Think Globally, Act Locally.’ While technologies, conceptual solutions and broad policy approaches may be similar and applicable around the globe, implementation of those policies and approaches need to be much more location-specific.

We need to increasingly look at water challenges and issues from both perspectives. Perhaps said another way, we need to view challenges and evaluate solutions from both the policy level and the implementation level.

As opposed to other broad environmental problems – such as air pollution and global climate change – water challenges and solutions tend to be regional or even local in nature and, in many cases, are specific to the individual watershed basin. If China burns less coal, air pollution problems in Japan may improve; however, better water conservation practices in Arizona aren’t going to help to alleviate water shortages in southern India.

Some areas don’t yet have serious water problems, while others face severe and immediate water availability or water quality challenges. More arid regions generally face nearer-term and more serious supply issues – though that is not always reflected in current pricing today.

Water quality issues may vary extensively from one basin to another, based upon levels of industrial activity, historical population patterns and other growth perspectives. Technological solutions such as desalination may be economically feasible in one area but not another, depending upon alternative supply sources, local energy costs or distance to the sea.

This ‘local’ perspective is most likely to reflect the form of a single river basin area or watershed region. Within a river basin, all users tend to have a common problem or set of circumstances and hopefully a similar set of objectives in water resource usage and management.

The concept of ‘distributed water’ treatment systems will probably also enjoy increasing focus; this involves the construction of a new and different type of water infrastructure focused on local sources and point-of-use treatment – and treatment of the water to the level appropriate for the intended use. This should be an important potential future driver of revenues for the POU/POE industry.

Promoting Greater Efficiency
Even without higher prices, we can all do much more to conserve water and improve efficiency both in how we produce and how we consume water. As we have discussed, there remains much ‘low-hanging fruit,’ and governments, businesses and individuals must all work to exploit these potential savings.

Most significantly, there are numerous means by which we could begin to conserve and use agricultural water more efficiently. Better soil-moisture monitoring and smart irrigation are just two obvious ways that we could save on some of this vast volume of water usage.

Storing water in underground aquifers instead of in surface reservoirs to eliminate loss through evaporation and lining earthen irrigation ditches could also save large amounts of water. When one considers that in many arid states over 80 percent of total water consumption is attributable to agriculture, it is clear that small percentage gains here can free up massive percentage gains for potential municipal and industrial usage.

At the level of the individual user, low-flow toilets and shower-heads, low-water landscaping practices or wiser lawn-watering practices and other home conservation techniques have already begun to show considerable per-capita usage declines. Some newer areas are encouraging housing and construction codes that allow the collection of used household water to irrigate lawns or outside plants.

Rapidly growing southwestern US cities such as Denver and Albuquerque have shown that is fairly easy to cut individual water consumption by as much as half without severe hardship. There seems to be no reason why other parts of the country can’t begin to do the same thing, even though droughts or high prices are not yet forcing the issue.

Virtual water concepts
We need to start incorporating the concept of virtual water into our trade and commerce patterns. In the absence of higher prices, there is progress that can be made.

An international system to promote export of more water-intensive foodstuffs such as rice to relatively drier countries can free up water there for other more critical uses – and perhaps create a more stable political situation in the process. The liberalization of agricultural trade policies and tariffs is obviously a vexing political challenge, but progress here could well contribute to better production decisions and, ultimately, to the individual competitive advantage of nations.

Technological fixes
There don’t seem to be many ‘silver bullets’ out there ready to miraculously solve all our water problems. However, technological advance is ubiquitous and we can do much better in terms of applying advanced technology, new scientific understanding and breakthroughs to manage and utilize our scarce water resources more efficiently.

The broader application of new and advanced technologies also depends on price. As water continues to become more scarce and expensive, new treatment, distribution and consumption technologies will inevitably emerge.

Distributed or localized treatment approaches may gain additional traction and offer competitive cost advantages. This should further increase the popularity of on-site treatment and point-of-use treatment technologies.

Smarter laws and policies
We must begin to critically refashion long-standing policies, regulations and laws – indeed, our whole way of thinking about water. Some of the current regulatory structure, while well intended, may create conflicts or unnecessary hardships and may actually not protect us against many of the contaminants and health risks it was designed to avoid.

Government subsidies, major Federally funded dams and interstate water distribution and irrigation programs over the past hundred years were all undertaken for sound political or economic reasons at the time. However, they have also seriously distorted the workings of local market systems and have led to usage and allocation decisions that may not now be in the best interests of the country.

The whole arena of water resource ownership – the legal framework of both the prior appropriation and riparian water-rights doctrines – is coming more and more to the forefront of water resource usage and management. This is particularly true in the west.

This type of broader policy and legal review must be done at the Federal or even the international level. At the moment, however, the sheer number of different US federal agencies involved one way or another with water tends to make policy coordination or change an almost impossible challenge.

Presently, there are more than twenty US federal agencies and entities that have authority over water issues – six cabinet departments, directed by 13congressional committees with some 23 subcommittees and five appropriations sub-committees that are in one way or another responsible for water-resource management. Hence, it is no wonder that federal water regulations and policies are sometimes confusing or contradictory.

Consolidation of these responsibilities into some sort of coordinated US department or commission would make the job of managing water resources easier. A more likely approach might involve coordination of partnerships between Federal agencies and with state and local agencies to create integrated water policies as part of a US national framework.

Holistic issues
Water does frequently fall out of the sky, three-quarters of our planet is covered with water and fresh water is abundant in many parts of the globe. But all that water is not always clean, it’s often not where we need it and it costs the world hundreds of billions of dollars a year to collect, clean and move around.

The world’s population has increased four-fold over the last hundred years, far outweighing new sources of water. Inefficient use and profligate waste of water thus continues. But this status quo cannot continue indefinitely.

We need to start thinking about water in a more holistic way. We need to look at our planet like the NASA astronauts were able to do – and view the earth as a self-contained and solar-powered desalination unit quietly floating through space. We need to better understand and respect the natural hydrologic cycle, and remember that we are a closed system – we can neither create nor destroy water.

We can desalinate increasing volumes of salty seawater at high expense and marginally increase the amount of freshwater available for human consumption. And, we can minimize our over-pollution and depletion of some sources of freshwater, which makes some virtually unusable.

But in the big picture – as viewed by those astronauts – the earth is a closed system. We need to get smarter about water usage and we need to do it in a hurry.

Water prices will rise and, over time, water will come to be viewed more and more as a true economic commodity – one that can be bought, sold, moved around like other commodities. At the same time, the ’commoditization’ of water obviously has to be balanced by equity and fairness concerns – everyone needs water to live and there will always be some who will have difficulty affording it.

Finding the right balance to this dilemma – water as an economic commodity versus water as a human right – will be one of the great economic and political challenges of this century. And we must develop new and more creative financial mechanisms that will allow investors to put their money to work for the public good – better ways to connect growing investment interest with the huge capital requirements that are staring us in the face.

Water is an essential prerequisite of life, to sustain and improve our standard of living and our modern industrial economy – and we are not going to find a substitute for water. As the global water crisis intensifies, we face numerous and daunting political and economic challenges.

The flip side of this coin represents virtually limitless opportunities for creative and innovative firms to help provide those needed solutions – and the residential and commercial POE/POU segment of the industry has a major role to play in this future. As localized and on-site treatment alternatives are increasingly considered as a way to both reduce costs and improve water quality, many users and many applications will increasingly evaluate POE/POU technologies as a means of achieving that objective.

About the  author/company
Steve Maxwell is Managing Director of TechKNOWLEDGEy Strategic Group, a Boulder, CO-based management consultancy specializing in merger and acquisition advisory services and strategic planning for the water and broader environmental industries. Maxwell is also the Editor and Founder of “The Environmental Benchmarker and Strategist,” the environmental industry’s most comprehensive source of competitive and financial data. He is also the Editor of a recent book published by the American Water Works Association, entitled “The Business of Water,” a collection of past business and commerce related articles from the “Journal AWWA.” He has advised dozens of water firms on strategy and transactional issues and can be reached in Boulder at (303) 442-4800 or via e-mail at maxwell@tech-strategy.com.

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