The municipal water and wastewater industry is conservative and not easily open to technological innovation, but huge opportunities exist for companies and their investors, says Dr. Bertrand Dussert, a technology and business professional in the water and wastewater treatment industry and former Global Treatment Strategy Manager at Xylem, Inc.
To learn more, Monica Dealy of GLG’s Private Equity content team spoke with Dussert. Below are a few select excerpts from the teleconference.
What are the market trends that represent major growth opportunities in municipal water and wastewater?
Digital water solutions are here to stay, representing major opportunities in the marketplace. With COVID, there is significant pressure on the bottom lines of utilities, water, and wastewater. That will lead to a shift to third-party services, especially for smaller utilities. Companies that can provide services that give an incentive to those facilities will have an advantage.
Infrastructure issues will represent a lot of opportunities for technology innovation. For example, pipes are beyond their life expectancy. The industry has seen a huge shift in materials for pipes, whether it’s different types of plastics or prestressed concrete. There will be lots of opportunities for different types as we deal with infrastructure.
Then there are opportunities to address many issues currently faced in water treatment:
- We’re dealing with water scarcity in many parts of the world. Desalination, despite its many drawbacks, will continue to grow for seawater and brackish groundwater. Water scarcity will also be addressed by increasing water reuse, the practice of treating wastewater to make drinking water. Water reuse is cheaper and frankly better than desalination, and also cheaper than transporting water hundreds of miles.
- The presence of endocrine-disrupting chemicals in wastewater presents an opportunity. These chemicals will need to be removed before wastewater is discharged. Switzerland is leading the field with regulations for that purpose. The rest of Europe will follow, and eventually North America.
- Another is decentralization in water — getting away from pipes by having small on-site water and wastewater treatment plants, for, say, a community or residential area.
- There’s the overall trend toward lower-energy-consumption technologies. With water treatment — and especially wastewater treatment — being a major emitter of greenhouse gases, utilities are working to lower its carbon footprint. Companies are addressing this need by developing systems that consume less energy.
- Along the line of a lower carbon footprint, we can expect to see greater use of alternative sources of energy, e.g., renewable sources.
- In line with water reuse and the overall concept of a circular economy, resource recovery will be big with regards to nitrogen and phosphorus.
- Sludge, a byproduct from treating wastewater, is a huge opportunity. Biogas energy created from sludge can be converted into heat or electricity, which could be used on-site to make plants energy neutral or could be sent back to the grid to make money. The biomethane generated from a wastewater plant could be used as a transport fuel.
- Biosolids, a product from wastewater, have tremendous value. There are many cases where they are used for agricultural purposes rather than being disposed in landfills. This beneficial use will continue to grow.
- Finally, there is an opportunity that is more “out there” and longer term: wastewater’s use in epidemiology is an opportunity. You can measure how a community is dealing with a pandemic by taking a sample of the pretreated wastewater and measuring the amount of COVID-19 in it. The same can be done with drugs.
Are there any emerging concerns that represent opportunities for industry players?
The elephant in the room today is PFAS, per- and polyfluoroalkyl substances, a group of synthetic chemicals that have been used since the 1940s and stay in the environment forever. Once they get into your body, they stay there forever as well. They have major health effects, including cancer and birth defects.
Another issue is harmful algal blooms. Due to climate change and too much nitrogen and phosphorus in water, there are algal blooms that kill fish and wildlife that come near the water and drink it.
One that could be medium- to long-term is microplastics. At some point, as we understand the health effects of those microplastics more, there will be a need to remove them from drinking water before discharging it to the customer, and/or from wastewater.
New and “old” waterborne pathogens remain an issue. While Legionella is not an emerging issue, it’s a growing concern and we don’t have a good solution for it. The fact that now we are finding antibiotic-resistant bacteria in water and wastewater is an emerging concern.
Lead remains a huge issue in the industry.
What are you seeing in terms of technology innovation?
Technology innovation covers both physicochemical and biological processes. I will mention a few.
- For wastewater, biological processes are what do most of the treatment work. Now we use naturally occurring bacteria to purify the water. That’s great, but if you want to improve that, seeded bacteria can go after specific contaminants such as ammonia. Seeded bacteria may be more expensive than naturally occurring bacteria, but by using them, you end up with a more compact footprint, hence lower capital costs. The seeded bacteria are specific to contaminants to be removed — hence, they’ll operate better and lead to a lower operating cost.
- Solar-powered systems are being developed to address energy-intensive systems, such as those used to treat wastewater or desalination for drinking water.
- Biofiltration is another innovation to treat drinking water. European countries lead the way, while the North American market has not been open to it, but that’s changing.
- A lot of work is being done to come up with new disinfection technologies for water and wastewater, such as UV disinfection with the use of light-emitting diodes. You also see the use of chemicals such as peracetic acid for wastewater disinfection.
- One that seems extremely expensive, but in some cases we may not have a choice about, is making water from air dehumidification. This is especially true for some parts of the Middle East with no sources of water. With technology improvements, it could be an order of magnitude cheaper in 10 to 20 years.
How will COVID-19 create lasting impacts on water projects volume?
The short- to medium-term impact of COVID is mostly known with regards to supply chain issues, delays in implementation of capital projects. In terms of long-term problems, but also opportunities, what we’ll see is a focus on increases in operating efficiency. Utilities will focus on extending the life of their equipment because they currently do not have the bandwidth to buy major new capital expenditures. They’ll focus on opex, extending the life of the equipment, rather than capex, major capital equipment upgrades.
This is also an opportunity for suppliers to provide services, to say, “I’ll come see your plant once every three months or six months to make sure this thing is running for another five years after its expected life.”
We’ll also see the acceleration of the adoption of digital systems. Software tools are used for so many applications, including off-site monitoring, effective workforce management, and leak detection. Remote operation of water and wastewater treatment plants will become a necessity. There will be a greater focus on cybersecurity. These are opportunities for niche providers of software.
I do expect industry consolidation. As a result of the pandemic, there’ll be significant merger and acquisition activity. There are financial pressures on smaller companies, and that should create a wave of purchases by larger companies.
Finally, hype or reality, many governments, including the European Union and the Biden administration, are saying, “This is a time to move toward a green economy.” Utilities should reset and say, “Let’s take advantage of this pandemic to move toward sustainability.” COVID-19 will drive environmental, social, and governance investing skyward.
About Bertrand Dussert
Dr. Bertrand Dussert is a technology and business professional in the water/wastewater treatment industry. He is currently president of Dussert Consulting, LLC, which provides a wide range of consulting services on water/wastewater treatment technologies used for municipal, industrial, and commercial/residential applications. Prior to this, he held various management positions with Xylem, Inc., including Global Strategy Manager, Global Business Development Manager, and Manager of Product Management and Sales Support. Prior to his tenure with Xylem, he was Global Product Manager of UV Technologies at Siemens Water Technologies (formerly USFilter and Veolia Water) and held various management roles at Calgon Carbon Corp., ranging from R&D Senior Group Leader for Advanced Ultraviolet Technologies, Manager of Marketing for Advanced Oxidation Technologies, and Technology Manager for Potable Water. Dr. Dussert is first-named inventor or co-inventor in five water technology patents and is the author of over 60 technical papers. Dr. Dussert also has extensive teaching experience, having served as Adjunct Professor of Wastewater Treatment at the University of Pennsylvania and Adjunct Assistant Professor of Environmental Science at Temple University.
This water treatment industry article is adapted from a GLG teleconference. If you would like access to events like this or would like to speak with water treatment industry experts like Bertrand Dussert or any of our more than 900,000 industry experts, contact us.
Complete Questions Asked During the Teleconference
- What are the key challenges and opportunities prevalent in the water and water treatment market today?
- What are the market trends that are representing major growth opportunities in municipal water and wastewater?
- Are there any emerging concerns that represent opportunities for the players who are in the industry?
- Are there certain areas geographically where there is faster growth?
- How do you see COVID-19 creating long-lasting impacts on water projects, volume, and more?
- What is the current regulatory environment?
- Please comment on the infrastructure bills that are currently being discussed and that the U.S. government may pass.
- What are the environmental challenges to overcome and how is that being done?
- What are key trends in industrial water and wastewater?
- Is there competitive pressure in the market?
- What are you seeing in terms of technology innovation?
- Where are there operational savings in the market?
- Where do you see opportunities for private equity within water and wastewater?
- What are your thoughts on consolidation in the industry? Where do you see some logical combinations or even divestitures?