A Contrarian View of World Water Day

Today is World Water Day.  Are you excited yet?

I’ve arranged a little party tocelebrate this world wide event (click on the link that follows).  After you’ve had your fun, please come back to finish my little diatribe.  Let’s celebrate together.

Welcome back.  Did you have fun?   Well that’s great.

Personally, I think World Water Day is a big steaming pile of bureaucratic bullshit!!  If you think I’m losing it that’s fine, simply stop reading right now. I don’t want you think that I am telling you to not participate in the annual, feeble, “celebration of water.” Just understand the reality of the UN’s promoted themes with regard to water use and conservation.

The history of World Water Day dates back to 1992 when it was recommended at the United Nations Conference on Environment and Development (UNCED) that a day be designated to celebrate freshwater.  So the following year, the UN General Assembly designated March 22, 1993 as the first World Water Day.  That’s great.  Everybody has a feel good moment, pat’s themselves on the back and officials proclaim all the all the good work that is being done and that we are now drawing much needed attention to the world’s freshwater resources.

Here is a very bright and cheery info graphic on this year’s World Water Day providing a mixed bag of interesting water facts and demographics blended together with a few pieces of misleading language designed to scare the hell out of you.  Let me state that there are legitimate facts here but the way some of information is presented is misleading and not based in real science.

Some of these facts are scary and we all need to do more to use water wisely.  But I have a problem with the traditional UN approach to solving the problem.   Are fresh solutions brought forth that save water and are economically viable in regions with limited infrastructure and economic base?   Absolutely not!  They make matters worse.  The UN espouses misleading and sometimes false information about water scarcity and promotes contradictory and monopolistic solutions that disincentivize sustainable water conservation programs.

As a scientific fact, the world cannot run out of water. Water is a renewable resource. With good management practices, water can be used, treated and reused, and this cycle can continue many times.

While it is true that there are many who face hardship in getting water, the notion of water stress has no scientific basis. Some international institutions have decided arbitrarily that a region becomes water stressed when per capita water availability falls below 1,700 cubic meters per year. Others use 1,000 cubic meters per year. The two figures differ by 70%. Yet there are countries that have half this amount, and feel no water stress because of good management practices.

Water is not priced as it should be!  Water is the the world’s most valuable resource yet we price it like its worthless.  The paradox of value (also known as the diamond–water paradox or simply water paradox) is the apparent contradiction that, although water is vital to our survival than diamonds, diamonds command a higher price. The philosopher Adam Smith is often considered to be the classic presenter of this paradox.  We need to break away from this paradox and price water based upon its value and to control its use and abuse.

The centralized approach to water and wastewater treatment is, in many cases, not the best technically and certainly not the most economically viable solution.  It has been demonstrated numerous times that decentralized treatment approaches are many, many time the best, but are often overlooked or not even considered.  A pattern of behavior has been established where the only accepted solutions come from the largest engineering firms, equipment and service providers.  There are numerous emerging treatment technologies, novel management practices, and smaller firms that have economically superior solutions to today’s water challenges but they are never given a chance because it doesn’t fit into the established models.  Bigger is not always better.

We absolutely need a fresh approach to water treatment and management that separates itself completely from conventional thinking, voodoo science, universal panaceas and false paradigms.

A vast majority of the world’s urban water problems could be solved within a decade, with good governance, appropriate application of technology and the  investment resources already in place. The fact that we will likely fail do so is a damning indictment of the way utilities are run, the lack of political will to consider water as an important public policy issue and the apathy of the public who have become accustomed to and acceptance of poor service.

OK, I’m done ranting now and throwing stones.  Enjoy your day and have a drink with me as I toast all those who work hard everyday to supply us with clean water.

3 in 4 Asia-Pacific Nations Facing Water Security Threat – Study

Source: Asian Development Bank

MANILA, PHILIPPINES — More than 75% of the countries in Asia and the Pacific are experiencing a serious lack of water security, with many of them facing an imminent water crisis unless immediate steps are taken to improve management of water resources, says a new study prepared jointly by the Asian Development Bank (ADB) and Asia-Pacific Water Forum (APWF).

“While the Asia-Pacific region has become an economic powerhouse, it is alarming that no developing country in the region can be considered ‘water-secure’,” said Bindu Lohani, ADB’s Vice President for Knowledge Management and Sustainable Development. “Countries must urgently improve water governance through inspired leadership and creative policymaking.”

Asian Water Development Outlook 2013 provides the first quantitative and comprehensive analysis of water security on a country by country basis in the region. It examines all dimensions of water security from the household level to water-related disasters, and uses indicators and a scaling system to rank the progress of each of the 49 countries under assessment.

Video: Asian Water Development Outlook 2013

The study found that 37 developing countries in the region are either suffering from low levels of water security or have barely begun to engage in the essential task of improving water security. Twelve countries are shown to have established the infrastructure and management systems for water security, while no country in the region was found to have reached the highest model level of water security.

South Asia and parts of Central and West Asia are faring the worst, with rivers under immense strain, while many Pacific Islands suffer from a lack of access to safe piped water and decent sanitation and are highly vulnerable to increasingly severe natural disasters. By contrast East Asia, which has the highest frequency of hazards in the region, is relatively better off due to higher levels of investment in disaster defenses, but urban water security remains poor in many cities and towns.

The study highlights two stark realities ― sharply rising inequality in access to water and sanitation, and the increasingly precarious state of rivers. It presents options for measures that can be adopted to improve water security to mitigate the growing pressure from booming populations, urbanization, pollution, over-extraction of groundwater, climate change and other factors.

“Water supports health and livelihoods, grows our food, powers our industry, and cools our generating plants, and these different uses can no longer be seen in isolation from each other,” said Ravi Narayanan, Vice-Chair of the APWF Governing Council. “Unless these competing needs are balanced, water security  will remain elusive, undermining development gains and the quality of life for billions of people in the region, especially the poor.”

Current levels of investment, coupled with outdated policies and institutions, have failed to deliver water security. The study highlights the importance of a more productive use of water, including greater recycling of ‘used water’. Corporatizing water utilities to improve their efficiency; increasing sanitation investment; encouraging more productive water use by food and energy producers; imposing more regulations on groundwater use; upgrading irrigation services; strengthening management of river basins; mobilizing more private sector investment to clean up rivers; and improving disaster risk management; are all essential for a more secure water future.

Significant Desalination Market Points

As a follow-up to my last post about the desalination market, I thought those who were actually taking the time to read my blog (the 4 of you), would like to read some bullet points on the regions and factors driving growth in the desalination market.

• Over the next 5 years, the desalination market is poised to double in capitalization to over $16 billion and increase in capacity by over 50 million m3/d.

• The largest market will continue to be the Gulf area.  A lack of water resources, growing population and an aging desalination base built during the oil boom period of the 70s and 80s will demand an increase in capacity that will nearly double the current production.

• Greatest growth market will occur in the Mediterranean Rim  in the countries of Algeria, Israel, Spain and Lybia.

• China, India and the US markets are set to make the break-throughs into large scale seawater desalination projects.

• The membrane process, particularly reverse osmosis, will continue to take market share from thermal desalination, with 59% of the total new build capacity being membrane based.

• Emerging technologies focussing on novel membrane processes, energy savings and minimization of potential environmental impacts from brine discharge, will assist in driving the growth in market share by membrane processes.

• Energy consumption is the number one cost factor associated with desalination process and technological advancing will be required for the market to continue double digit growth rate.

•  As a whole, the desalination industry is unconsolidated, with a large number of small and medium sized players serving different niches. The strongest players can expect strong market growth as well as increases in market share.

Desalination Market Outlook

The future looks bright for the desalination market.  A number of key factors, changes in the desalination market and some particularly interesting emerging technologies are driving growth, and creating investment opportunities.

For example, the largest desalination plant in Europe the Barcelona-Llobregat desal plant provides drinking water to 20% of the population in the region, nearly 1.3 million people.  Inaugurated in July 2009 it is an example of the scale and type of projects growing the desalination market.

Reverse osmosis desalination plant in Barcelona, Spain
Source Wikipedia

Background and History

Desalination is the process of removing salt and a variety of minerals from saline water.  We use desalination treatment processes to generate water suitable for irrigation, a number of industrial uses and most importantly, drinking.  Some of the earliest reported claims of desalination date back to the fourth century, B.C. when Aristotle writes of Greek sailors boiling water to evaporate the fresh water away from the salt and in the first century A.D. Romans used clay filters to trap salt.

While evaporation and filtration treatment mechanisms have been used to desalinate water for hundreds of years, it was a daring gamble by Polymetrics  co-founder Dave Grunaureally in 1974 that demonstrated the viability of membranes as an effective desalination process.  From this first single pass sea water reverse osmosis plant on Bermuda the desalination market has grown to $10 billion annually in capital spending.  The figure below clearly demonstrates the tidal wave of change membranes have had on the desalination market.

 

Today’s Desal Market

Today only 1% of the world’s population receive their water from desalination  – 78.4 million m3/d (19.8 billion US Gallons), but the UN expects that 14 % of the world’s population will receive their water from desalination by 2025.  In 2010, the world-wide installed desalination capacity was 76 million m3/d (20.1 billion US Gallons).  The  International Desalination Association (IDA) anticipates this will reach 126 million m3/d (33.3 billion US Gallons) by 2016.  The global desalination investment will rise from $8.3 billion in 2010 to $16.6 billion per year by 2016. 

Source Desalination
Volume 287, 15 February 2012

Currently, about 56% of the present desalination capacity of 78.4 million cubic meters per day is produced from seawater, 24% from brackish water, and 6% from waste water sources. In the future though, much of the expected growth will come from seawater, due to continued development of the market in coastal-based water poor regions.  Regions such as the Arabian Gulf, the Mediterranean Sea, and the Red Sea.

Source Sustainability Science and Engineering, Volume 2, 2010

The past five years has seen a 57% increase in the capacity of desalination plants on-line according to the latest data published by the IDA. This recent boom in desalination construction (Australia, Israel, Saudi Arabia) will result in a short term market lull.  Desalination growth is linked to many factors, including the price of oil and certain commodities and the availability of financing.  But as Patricia A. Burke, Secretary General for the IDA, states “the underlying factors that have driven the growth of desalination remain in place, including population growth, industrial development, pollution of traditional water resources, and climate change. At the same time, the desalination industry has done much to lower the cost of desalination by developing technologies that lower energy requirements, implementing practices that achieve greater operational efficiency, and adopting measures to enhance environmental stewardship.”  

The indicators for continued long term growth are quite strong and coupled with significant technological improvements lead me to believe that the market will be strong for the next few years.

 

I will spend the next few weeks examining the market forces, players and the emerging technologies that will drive this growth and quite possibly increase the rate at which desalination is used worldwide.  Until then, enjoy your water, one drop at a time.

About the International Desalination Association

The International Desalination Association (www.idadesal.org) is a non-profit association that serves more than 2,400 core members in 60 countries and reaches an additional 4,000 affiliate members. Its membership comprises scientists, end-users, engineers, consultants and researchers from governments, corporations and academia. IDA is associated with the United Nations as part of a growing international network of non-governmental organizations (NGOs).

Consolidated Water – Buy and Hold

Consolidated Water Co. Ltd. (the “Company”, or “CWCO”) designs, builds, operates, and in some cases finances seawater reverse osmosis (SWRO) desalination plants and water distribution systems in several Caribbean countries, where the supply of drinking water is scarce and the use of SWRO is economically feasible.  The Company was established in 1973 as a private water utility in Grand Cayman, the largest island in the Cayman Islands group, and obtained its first public utility license in the Cayman Islands in 1979. The Company is listed on the Nasdaq Global Select stock market under the symbol “CWCO”.

Consolidated Water is a small cap company, with a current market cap just north of $130 Million, trading at a P/E of 21.43.  The company has $9.15 of book value per share, and $2.76 of cash per share against a current price of $8.90 and pays dividend yielding 3.33% at the current price.

I consider CWCO a buy and hold for several reasons.

1. The company has large cash reserves and low debt.  CWCO currently has in excess of five times the cash on hand available than debt obligations. Aside from their ability to quickly meet any debt commitments, the available cash can be used to finance future expansions.
2. The management team has an ownership stake over 10%.
3. A decade long rise in dividends, from  5.25 cents per quarter in 2003 to 7.5 cents per quarter in 2012.

Trading Snapshot

Investment Profile Data

 

 

Investing in Water

Water, the one commodity on the planet that everyone must have to in order to live.  Simply put, no water means no life. You would think that something so important would be thought of in much higher regard.  But for many of us in the developed world, we simply take water for granted.  Its always there when we turn the handle on the faucet.  This is not the case however for nearly 800 million people who lack access to clean water.  For these people water is a daily concern – will I get enough water today to drink and cook with and will it be clean?  So why does it not receive more attention and a top-billing status like other commodities and investments?

There is a finite amount of water on the planet and an ever increasing demand is starting to outstrip the current fresh water supply.  Great disparities exist between water rich and water poor regions.  There are those predicting that future wars may be over access to water.  These concerns have driven an increased awareness of water.  So what is the best approach to investing in water?  In my opinion, investment opportunities abound if you go with the flow.  So what do I mean by go with the flow?  Simply put, I break down water investing into three categories based upon how we get our water, use water and clean up dirty water.

WATER INVESTMENT CATEGORIES

• Infrastructure: Moving water around
• Water Treatment: Making more fresh or drinkable Water
• Wastewater Treatment: Cleaning water used by people and companies

Infrastructure

This category covers all aspects of transporting water to homes and companies and the subsequent transport of wastewater to treatment plants.    Items in this category include pumps, piping systems, and storage tanks.

Water Treatment

Treatment technologies and services that pertain to the treatment of water for human consumption (drinking), food & beverage preparation, and manufacturing or industrial processing requirements.  Treatment areas include, but not limited to, filtration, reverse osmosis systems, multi-process treatment systems,  disinfection equipment, chemicals and providers of treatment services.

Wastewater Treatment

Any treatment technology and service associated with the clean up of dirty or wastewater. This category would include things like the treatment of human waste, water treatment from factories, treatment of water generated from the production of oil & gas.

Researching trends, technologies, companies and people in these categories will allow you to invest with more confidence and provides diversification wtihin the overall water category.  Future posts will provide in-depth analysis of specific companies and market segments for each of these categories.  But this short introduction should get you thinking about how to approach your personal water based investments.

What experiences have you had with investing in the water industry?   

Winery Water Management

I live in the Pacific Northwest at the doorstep to Washington’s wine region.  I enjoy wine and have gained a much greater understanding of the wastewater challenges facing winery operators.  Winery wastewater streams can be very difficult to treat as the flows and concentrations swing widely and for a small winery, the treatment costs can be substantial.

The optimal approach for a winery is to not focus solely on the wastewater but consider all aspects of the winery and what I like to call the “Winery Water Cycle”.   This type of evaluation considers the wine making process, the wastewater treatment system and the discharge or reuse requirements as an integrated water cycle.  Each step effects the other and cannot be evaluated without fully understanding how changes will effect the other.

 INTEGRATED APPROACH

One of the keys to a successful water management plan is the adoption of an integrated approach.  An integrated approach considers the relationship between each step in the winery water cycle and incorporates site specific operations, treatment design and environmental compliance standards.

Winery operations
Minimize the generation and decrease the strength of wastewater through modifications and improvements in process steps and analysis.  Enhanced winery operations with lead to water savings and lower operational costs.

Wastewater Treatment
The treatment system should operate to minimize water discharge volumes and operating costs while achieving high quality standards required to reuse the treated water in a variety of applications at the winery.  Treatment systems that meet reuse quality standards operate more efficiently and at lower costs.

Water recycling or discharge
Incorporating a site wide recycling and reuse program will reduce potential environmental impacts and lower costs through more efficient water use.  Improvements to the wastewater treatment system, water reclamation steps and conservation measures all contribute to the stated goals.

 PLANNING PROCESS

The planning process will consider the winery’s water cycle and the operational aspects related to each step in the cycle.  This approach establishes a holistic treatment process that utilizes the best available and cost effective technologies to recycle water streams or treat wastewater generated from the winery.  The result is the development of an overall water management plan that considers the interactions of each phase of the winery’s operations while minimizing costs and preserving the integrity of the wine making process.

Water, water everywhere…

Water, water everywhere nor any drop to drink.
Samuel Taylor Coleridge, The Rime of the Ancient Mariner, 1798

Many have heard this quote and understand its reference to a mariner on the open ocean surrounded by saltwater he cannot drink.  But have you ever considered that the essence of this quote can apply to the drinking water supply of 780 million people on the planet¹?  We cannot live without water.  It is the single most essential nutrient needed for human survival and accounts for up to 75 percent of our body weight.  A lack of water causes major body functions to begin shutting down in as little as three days and occur within a week.  Face it, you need water or your up a creek, so to speak.

Unfortunately, millions of people in the world do not have access to safe water sources.  As a result there are 3.4 million deaths annually from water borne illness².  In developed countries we are insulated from a lack of clean water or poor sanitation.  We take water for granted.  Its always there, simply go the facet and fill your glass. Think I’m wrong, then ask yourself how much water we use on lawns?

The gap between the water haves and have nots is significant.  Just consider that a typical 5 minute shower sends more water down the drain than is used by a person living in a slum of an undeveloped country for an entire day to understand this discrepancy³.  This graphic (courtesy of water.org) does an outstanding job of illustrating this point.

So what can be done to help those in water need?  Some very simple ways for individuals and groups to get involved are outlined by water.org.  Visit any or all of the following links to learn more.

DONATE YOUR VOICE
RAISE FOR THE CAUSE
SUPPORT A COMMUNITY

1. WHO/UNICEF Joint Monitoring Programme (JMP) for Water Supply and Sanitation. (2010). Progress on Sanitation and Drinking-Water, 2010 Update.
2. World Health Organization (WHO). (2008). Safer Water, Better Health: Costs, benefits, and sustainability of interventions to protect and promote health; Updated Table 1: WSH deaths by region, 2004.
3.  United Nations Development Programme (UNDP). (2006). Human Development Report 2006, Beyond Scarcity: Power, poverty and the global water crisis.

Welcome to my wet world

Welcome to One Drop at a Time.

My goal is to provide insights into the science, politics and trends of the water and wastewater markets.  Topics discussed will range from singe family water conversation techniques to the treatment of wastewater generated by oil and gas fracking operations.

I hope you enjoy what you discover and I welcome your feedback and comments for topics you would like me to cover.