Challenges and Opportunities in the Water Treatment Industry
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From global warming to the COVID-19 pandemic, the water treatment industry faces several long- and short-term challenges — which are also creating opportunities. GLG recently explored both with Tom Stanley, formerly the Vice President and Chief Technology Officer at Suez Water. Following are a few select excerpts from our broader discussion.
What key trends or themes have you been seeing in the water treatment industry over the past 6 to 12 months?
As the COVID-19 pandemic continues, it’s worth noting a few trends. First, customers are leveraging services offered by water companies to focus on their core competencies. I think that will continue. Second is the continuing move to “smart” water, or using data and analytics to better understand what’s going on in plants in order to manage them more efficiently.
Are there other ways the pandemic has affected the industry?
As in every business, it’s been disruptive. Water and wastewater plants, especially in the municipal space, have been designated critical services and have been running through the pandemic. This has brought several challenges, first and foremost being a huge focus on worker safety and trying to ensure sufficient numbers of healthy staff are available to run the plants.
Another big challenge has been loss of revenue due to financially strapped customers who have not been paying their water bills and commercial customers who have failed and shut down, closed facilities, or cut back consumption significantly due to slower business.
Finally, the pandemic has been a strain on municipal budgets. But the long-term need to upgrade municipal water and wastewater plants hasn’t gone away. After the pandemic is under control or goes away, the infrastructure issues will remain; budget problems will make prioritizing these investments even harder.
One last point on COVID that is interesting is that while there’s no significant COVID-19 transmission risk through wastewater, there have been a number of efforts to measure the level of the virus in wastewater streams as a way to help epidemiologists understand COVID occurrence in particular communities. As a result, we’re seeing wastewater treatment plants becoming a source of data.
What’s your growth outlook for the industry?
The long-term macro trends are positive. The population is growing, and there are concentrations of people in areas where water is becoming scarcer, especially as climate change affects supply in arid regions. Even if important and necessary conservation efforts are successful, demand for water and the need for water and wastewater investments will clearly increase. Seawater desalinization, which is very expensive and a last resort, will become a bigger part of the equation in the future in coastal areas because demand will be so great. And greater demand will come from fast-growing, less-developed economies as governments will become more able to afford investments in clean water and pollution control.
What’s being done to achieve more green or sustainable solutions?
I can’t stress enough how much needs to be done on the demand side. A great example of how effective this can be is California, where a big drought a few years ago led to surcharges on water to drive conservation. The results were amazing. California saw something like a 20% reduction in consumption very quickly and without investment, just from things like replacing lawns with rock gardens, using low-flow toilets and washing cars less — all very easy to do.
On the supply side, there’s a lot to do too. Fixing our leaking water infrastructure is most important, especially on the high-pressure side. It’s a real tragedy to treat water and then lose 20% to 25% through leakage, which is typical in municipalities, even in the developed world. The problem is hard to fix, but it’s one that must be addressed.
A second example is capturing energy from wastewater by using anaerobic digesters to treat solids. Something like 3% of the energy consumed in developed economies goes to drive oxygen into wastewater treatment plants to support the bacteria that do their thing to treat wastewater. But anaerobic digesters don’t need oxygen, and they create a biogas that can be burned to generate electricity.
Any changes in the competitive landscape recently?
This continues to be a very fragmented market. There’s something like 15 or 20 big global suppliers of technology as well as many regional players. One interesting player is the new DuPont water business formed in 2019 as a result of the Dow-DuPont merger. It has added new membrane offerings and some service offerings, and I think they’ll continue to do more. At the end of the day, this is a fairly competitive space, but one that is largely commoditized, with some limited exceptions.
Where do you see the most innovation?
There is clearly a lot of innovation in the smart-water area. Many smaller companies are bringing forward ideas related to sensor technology. There is also a lot of effort around leak detection and repair strategies that would allow people to quickly identify a leak, isolate it, and then be able to go in and repair it. The big problem is that leaks are hard to detect and locate, so there is room for innovation on that front. A third area is distributed water and wastewater plants, which are small facilities designed to serve just a local community, avoiding the need to pump water and waste through long stretches of pipe between users and a big, centralized facility. It’s a newer approach, and it clearly makes sense in some areas.
About Tom Stanley
Tom Stanley was the Vice President and Chief Technology Officer at Suez Water Technologies from October 2017–October 2018, where he was responsible for guiding the company’s R&D team and new technology. Before Suez’s takeover of GE, Tom held the position of General Manager and CTO, GE Water and Process Technologies between April 2011 and October 2017. Previously, Tom held the position of Vice President of Technology while working at Saudi Basic Industries Corporation from September 2007–April 2011. Tom previously worked at GE in several senior technical positions starting in 1998.
This article is adapted from the September 30, 2020, GLG teleconference “Water Treatment Industry Update: Private Equity Investing.” If you would like access to this teleconference or would like to speak with Tom Stanley, or any of our more than 700,000 experts, contact us.