EPA'S ROLE IN THE DEVELOPMENT OF
INNOVATIVE TECHNOLOGIES FOR MUNICIPAL
WASTEWATER TREATMENT
A.F. Moscati
S.P. Rochereau
D.W. Weiss
Office of Research and Development
Environmental Protection Agency
Waterside Mall, RD-682
401 M Street, S.W.
Washington, D.C. 20460
Attention: Mr. James Basilico
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Report No. 9075-052-Otfl!
Contract No. 68-01-2942
Task Order No. 019
May 5, 1977
EPA'S ROLE IN THE DEVELOPMENT OF
INNOVATIVE TECHNOLOGIES FOR MUNICIPAL
WASTEWATER TREATMENT
A.F. Moscati
S.P. Rochereau
D.W. Weiss
Office of Research and Development
Environmental Protection Agency
Waterside Mall, RD-682
401 M Street, S.w.
Washington, D.C. 20460
Attention: Mr. James Basilico
BOOZ - ALLEN & HAMILTON inc.
BOOK • Allen Applied Research Division
4733 BETHESDA AVENUE
BETHESDA,MARYLAND 2OOW
656-22OO
AREA CODE 3OI
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INTRODUCTION
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INTRODUCTION
This study, performed for the Office of Research and
Development (ORD) of EPA, centers on the development of in-
novative technologies for municipal wastewater treatment,
Although ORD has been substantively involved in other tech-
nology development programs for water pollution control,
notably stormwater treatment and combined sewer overflow,
the study’s scope was limited to wastewater treatment tech-
nologies. This limitation was imposed in order to illustrate
the complexity of coordinating diverse EPA programs to sup-
plant conventional processes with more cost-effective in-
novative technologies in the conservative municipal waste—
water treatment field.
In keeping with this approach, “innovative” technologies
as referred to throughout the text are those considered not
to be in common use about the country although some concepts,
such as land spreading of wastewater, may have been developed
a century ago. The material presented in the report’s five
chapters reflects the results of interviews with consulting
engineers, municipal officials, equipment manufacturers and
state and Federal regulatory personnel. In conjunction with
a preliminary study on this tOpjCl over 125 individuals have
been interviewed to date.
The report is broken down as follows:
Chapter I identifies the role that innovative
technologies can play in facilitating attainment
of the goals of PL 92-500.
Chapter II presents a brief discussion illustrat-
ing the complexity of the new technology “buying”
process.
1 Booz, Allen & Hamilton Inc., “A Survey of the Use of Innovative
Technology in Municipal Wastewater Treatment,” February 19, 1976.
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• In Chapter III the role of full scale process
demonstrations in the commercialization of in-
novative technologies is detailed.
• A major barrier to the adoption of innovative
technologies, i.e., inadequate cost—effectiveness
analysis, is identified in Chapter IV.
• Chapter V discussed the appropriateness of com-
mercialization efforts made to date and suggests
some methods of coordinating EPA resources to
achieve successful implementation of innovative
technologies.
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SUMMARY OF FINDINGS
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SUMMARY OF FINDINGS
CHAPTER I Page
Number
TIMELY IMPLEMENTATION OF INNOVATIVE WASTEWATER
TREATMENT TECHNOLOGIES IS IMPORTANT TO THE
ATTAINMENT OF THE GOALS OF PL 92-500
1. Innovative Technologies Offer Potential
Advantages in Cost-Effectiveness Through
Improvements in Performance, Reliability
and Resource Use Over Conventional Alter-
natives. 1—2
2. Innovative Technologies Can Be Implemented
in Time to Facilitate Attainment of the Goals
of the Federal Water Pollution Control Act
Amendments of 1972. 1—8
CHAPTER II
FULL-SCALE DEMONSTRATION IS CENTRAL TO THE GEN-
ERAL ACCEPTANCE OF INNOVATIVE WASTEWATER TREAT-
MENT TECHNOLOGIES BY KEY DECISIONMAKERS IN THE
TECHNOLOGY SELECTION PROCESS
1. Full Scale Demonstration Provides the Regula-
tory Agency With the Jurisdictional Basis for
Accepting an Innovative Technology. u-i
2. The Municipality Needs Full Scale Demonstra-
tions to Determine if an Innovative Tech-
nology Is the Least-Cost Alternative for
Meeting Regulatory Standards With Assured
Reliability. 11—2
3. Full Scale Demonstrations Provide the Con-
sulting Engineer With the Most Reliable
Information for Judging the Suitability
of an Innovative Technology for His Client’s
Needs. 11—3
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CHAPTER III Page
Number
EPA’S DEMONSTRATION GRANT PROGRAM IS A KEY COM-
PONENT OF A MANUFACTURER’S STRATEGY FOR MARKETING
INNOVATIVE MUNICIPAL WASTEWATER TREATMENT
TECHNOLOGIES
1. A Successful Demonstration Project Signifi— 1 1 1—1
cantly Reduces a Manufacturer’s Commerciali-
zation Risk in the Wastewater Treatment Market.
2. The Need for Demonstration Varies Extensively
According to Process Characteristics, Market
Segments, and the Manufacturer’s Position in
the Pollution Control Market. 111-4
CHAPTER IV
INNOVATIVE TECHNOLOGIES ARE PENALIZED BY THE LACK
OF TRUE COST-EFFECTIVENESS IN THE TECHNOLOGY
SELECTION PROCESS
1. Despite EPA’s Emphasis on Cost-Effectiveness
Analysis, a Recent Survey Published by EPA
Suggests That Costs Are Still a By—Product
Rather Than a Key Indicator in the Technology
Selection Process. IV-l
2. The Overall Cost-Effectiveness of New Tech-
nologies Is Conditioned by the Legal Frame-
work of PL 92-500 and the Structure of EPA’s
Cost-Effectiveness Guidelines. IV-2
3. EPA’s Efforts to Implement Cost-Effective-
ness in the Technology Selection Process
Overlook Some of the Key Factors Required
for the Performance of Such an Approach. IV-6
4. A Management Framework Within Which a Rigor-
ous Comparison of Treatment Alternatives Can
Be Made Does Not Yet Exist. IV-12
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CHAPTER V Page
Number
PROCESS DEVELOPMENT HAS PREEMPTED COMMERCIALIZA-
TION AS THE FOCUS OF EPA’S CURRENT RD&D EFFORTS
1. EPA’s RD&D Efforts Have Not Fully Satisfied
End-Use Market Requirements. v-i
2. EPA Has Not Conducted the Front End Market
Analysis Necessary to Guide Process Develop-
ment Decisions. V—7
3. Downgrading of the Demonstration Grant Pro-
gram Has Seriously Retarded the Commercial-
ization of New Technologies. v-ia
4. EPA’s Regional Offices Could Facilitate Joint
Commercialization Efforts but Lack the Resources
to Do So. V-13
5. Greater Coordination of EPA Resources Is
Required for the Successful Commercialization
of Innovative Technologies. V—14
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RECOMMENDATIONS
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RECOMMENDAT IONS
1. EPA’S GUIDELINES ON COST—EFFECTIVENESS SHOULD BE
S’rRENGTHENED TO ENSURE A TRUE COMPARISON AMONG
COMPETING ALTERNATIVES FOR MUNICIPAL WASTEWATER
TREATMENT
In particular, the Guidelines should require:
(1) Identification of the functional measure of effec—
tiveness to be used in comparing alternatives
(2) Adherence to system performance and reliability
factors acceptable to EPA
(3) Identification and comparison of total treatment
systems rather than individual unit processes
(4) Comparison of cost and reliability trade—of fs
between add-on and front-end investment approaches
(5) An assessment of the flexibility of treatment al-
ternatives with respect to seasonal variations
and changes in influent characteristics over time
(6) Analysis of the relationship between capital and
O&M costs and EPA’s ultimate financial commitment
(7) Utilization of a consistent design basis for con-
trasting alternatives
(8) Evaluation of non-monetary factors in the cost—
effectiveness analysis, (i.e., energy savings,
land use, Induced growth, resource recovery)
(9) Linking the discount rate selected and the plan-
fling period used to the characteristics and con-
straints of the wastewater treatment market
(10) Use of an accounting format that will standardize
the breakdown of the treatment system proposed
for effective indepth comparisons and review.
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2. ) $ITHIN EPA’S MUNICIPAL WASTEWATER RESEARCH AND DEVELOP-
MENT PROGRAM GREATER EMPHASIS SHOULD BE PLACED ON MARKET-
RELATED ASPECTS OF THE TECHNOLOGY DEVELOPMENT PROCE j
(1) Technologies selected for development should re-
spond directly to end—use market conditions de-
termined by current regulations, anticipated re-
quirements and regional needs.
(2) To ensure the eventual commercialization of tech-
nologies selected for development, EPA should
elicit the participation of potential industrial
sponsors through appropriate policies and
incentives.
(3) As the pivotal point in the commercialization ef-
fort, an aggressive program for the full—scale
demonstration of developed technologies should be
reinstated in ORD.
(4) Greater attention needs to be focused on the
analysis of wastewater treatment needs, the selec-
tion of processes for development and the timely
dissemination of technical information at all
stages of process development.
(5) EPA’s regional offices should input to the delinea-
tion of the wastewater treatment market by identi-
fying regional needs and priorities.
(6) EPA patent policy should recognize the special
risks borne by small equipment manufacturers in
setting the groundrules for their participation
in the program.
(7) Incentives to encourage the timely adoption of
innovative technologies by municipalities need to
be identified.
3. \ A MAJOR TECHNICAL INFORMATION SYSTEM SHOULD BE ESTABLISHED
L j j TRACK ON-GOING R&D PROJECTS AND TO PROVIDE UPDATED
INFORMATION TO CONSULTING ENGINEERS, MUNICIPAL OFFICIALS,
EQUiPMENT 1ANUFACTURER3, EPA REGIONAL PERSONNEL AND
OTHERS IN THE TECHNOLOGY SELECTION PROCESS
Features of this information system could include:
(1.) Service offered to groups identified above on a
subscription basis, if appropriate
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(2) Technical reports, design manuals, capsule re-
ports, etc., provided as done currently
(3) Quarterly updates of status of R&D projects pro-
vided along with names of contacts in a quarterly
or monthly publication
(4) Progress of Step 1 Construction Grant Projects
involving pilot plants tracked
(5) Technological design bases and performance and
reliability data provided
(6) Cost estimates and guides specific to design bases
made available.
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I. TIMELY IMPLEMENTATION OF INNOVATIVE WASTEWATER
TREATMENT TECHNOLOGIES IS IMPORTANT TO
ATTAINMENT OF THE GOALS OF PL 92-500
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I. TIMELY IMPLEMENTATION OF INNOVATIVE WASTEWATER
TREATMENT TECHNOLOGIES IS IMPORTANT TO
ATTAINMENT OF THE GOALS OF PL 92-500
In order to achieve secondary treatment of wastewater
flows nationwide by July 31, 1977 and water quality con-
ditions suited for swimming and fish propagation by 1983,
a huge Federal investment is being made in municipal waste—
water treatment facilities. Approximately $18 billion is
presently allocated to the effort in the form of 75 percent
capital cost subsidies and it is likely that an additional
annual outlay of about $4.5 billion over the next 10 years
will be approved by Congress this year. Impressive as
these expenditures are, they pale in comparison to the
estimates made to date of the funds required to attain the
goals of the Water Pollution Control Act Amendments of 1972.
The realities of this situation have placed increased em-
phasis on the development and implementation of innovative
technologies that offer significant advantages over con-
ventional alternatives in cost, performance, reliability,
resource utilization or other factors. However, incorpora-
tion of developed technologies into the traditional municipal
wastewater treatment practice has seriously lagged.
Within the municipal wastewater treatment field the
time lag for introduction of new technologies is sometimes
measured in decades. Conventional wastewater treatment
technologies in widespread use across the country today,
including the activated sludge process and various fil-
tration technologies, have taken 20 years or more to gain
their current level of acceptance. In order to accelerate
the introduction of needed processes in support of the goals
of PL 92-500, EPA ’s Office of Research and Development was
given responsibility for the development, demonstration and
transfer of innovative technologies. Since 1972, however,
this program has been funded at a minimal level. Within the
context of the on-going program for the construction of
municipal treatment plants, ORD’s work on innovative tech-
nologies is particularly important in terms of:
The advantages offered by innovative technologies
over their conventional counterparts
I—1
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The ability of innovative technologies to aid in
attainment of the goals of PL 92—500.
These two points are developed further in the sections
below.
1. INNOVATIVE TECHNOLOGIES OFFER POTENTIAL ADVANTAGES IN
COST-EFFECTIVENESS THROUGH IMPROVEMENTS IN PERFORMANCE
RELIABILITY AND RESOURCE USE OVER CONVENTIONAL ALTER-
NATIVES -
Technologies currently under development within ORD offer
many potential advantages over their conventional counterparts
in terms of improved performance reliability and conservation
of scarce resources. Those technologies examined in this
study and the tradeoffs that they offer relative to conven-
tional alternatives are discussed briefly in the sections
below. For a more detailed description of the technologies
the reader is referred to the Metcalf and Eddy, Inc., report
to the National Commission on Water Quality. 1
(1) Pure Oxygen Activated Sludge
In this process the conventional activated sludge
process is modified by substituting pure oxygen for
air in order to promote the oxidation of organics
in domestic wastewater by bacterial organisms. Pure
oxygen systems can utilize either open or closed tasks
and oxygen can be either stored or generated on site.
The advantages of pure oxygen systems are hotly
debated. While the increased concentration of oxygen
in the wastewater enables the limited upgrading of
existing overloaded treatment plants, it is in new,
large capacity treatment plants that pure oxygen systems
seem to be most competitive with aeration. The success-
ful penetration of pure oxygen systems into the waste-
water treatment market is described in a later section,
however, it may be that the signal achievement of the
company that pioneered this technology lies in the corn-,
petition it has spawned among other innovators in the
wastewater field within the brief span of about 5 years.
Today several oxygenation systems are offered by
various firms in tight competition with much-improved
aeration systems. The net result of the pure oxygen
Metcalf and Eddy, Inc., “Report to the National Commission on Water
Quality on Assessment of Technologies and Costs for Publicly Owned
Treatment Works,” Vols. 1-3, September 1975.
1—2
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experience has been the stimulation of further innova-
tions aimed at refining system efficiency and the
encouragement of the most thorough debate on this
topic since Malcolm Pirnie Sr. first began experimenting
with the oxygenation of wastes in the 1950s.
(2) Independent Physical/Chemical Treatment (IP/C)
Utilizing Granulated Activated Carbon
In this system chemically clarified primary
effluent is passed through a columnar bed of granulated
activated carbon where, due to the micropore structure
of the carbon, some soluble organic species are phy-
sically and chemically adsorbed. Recent pilot and
full-scale studies have shown that biological activity
also takes place within the carbon column enabling the
removal of both soluble and suspended organic material.
Thermal regeneration in a multiple hearth furnace is
performed periodically to enable recycling of the carbon.
The IP/C system usually produces an effluent superior
to that required for secondary treatment.
Potential advantages to the use of IP/C systems
include:
Reduced land requirements relative to acti-
vated sludge plants due to the compact size
of the carbon columns
• More reliable operation since the system is
resistant to the shock loadings that often
upset conventional biological systems
• Easier operation since the system can be
readily automated
• Better performance in terms of effluent
quality
• Possible cost effective synergism when tied
in with ozone disinfection in that ozone may
also be used to knock down the suspended
solids concentration entering the carbon
columns. This application has not been fully
demonstrated yet
• Lower capital cost relative to conventional
activated sludge above about 10 million
gallons per day (MGD) capacity.
1—3
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(3) Land Treatment of Wastewater by Irrigation
Irrigation is the most common technique for the
application of wastewater to the land. Through inter-
action with the soil and plants wastewater is purified
physically, chemically and biologically. Wastewater
can be applied to the land either by spraying (as at
Muskegon, Michigan) or by surface techniques.
Advantages of land treatment include:
Absence of a discharge of nutrients to sur-
face waters
• Production of a marketable crop through use
of nutrients and water thus reducing the
cost of treatment
• Possible conservation of water resources
through the irrigation of lawns, parks, and
golf courses
• Maintenance of greenbelts and open spaces.
Drawbacks often cited are the large amounts of land
required for treatment and for a buffer zone, and the
heavy and often arbitrary regulatory requirements
placed on land treatment projects by state agencies.
In enabling the conversion of a waste product
into a valuable resource, land treatment can be a
cost—effective treatment alternative in many cases where
land costs are not high and the soil is amenable to rea-
sonable irrigation rates.
(4) Biological-Chemical Phosphorus Removal
This innovative process consists of three basic
steps:
Removal of phosphorus from primary effluent
by phosphorus-deficient microorganisms
in aeration tanks
Anaerobic stripping of sludge containing
absorbed phosphorus with return of phosphorus-
deficient microorganisms to aeration tanks
1—4
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• Treatment of phosphorus-rich supernatant
with lime to precipitate phosphorus.
Biological—chemical phosphorus removal greatly
reduces the amount of lime required to reach a given
phosphate concentration in the effluent over that
needed for competing phosphorus removal methods. In
phosphorus removal schemes utilizing lime, this system
is expected to be more cost-effective than existing
conventional alternatives above a certain, and as yet
undetermined, capacity.
(5) Secondary Treatment by Rotating Biological Con-
tactors (RBCs )
RBCs consist of a series of closely spaced cir-
cular discs, usually of polystyrene or PVC, which are
partially submerged in and rotated slowly through
the wastewater. Disc rotation allows oxygen transfer
and maintains aerobic conditions for the biomass.
Biological growths become attached to the discs
enabling nitrification of the wastewater in certain
applications as well as secondary treatment.
RBCs are competitive in small capacity plants
with activated sludge systems both for secondary treat-
ment and for nitrification because of:
• Good reliability
• Moderate power requirements
• Relatively simple operation
• Elimination of return sludge equipment.
EPA’s involvement in the early stages of the devel-
opment of this technology was critical to at least one
major manufacturer of RBC systems and facilitated the
commercialization of this biological treatment tech-
nology, a process that consumed about 10 years.
(6) Ozone Di’sinfectjon
The use of ozone for disinfection of sewage
effluent is an attractive alternative to chlorination
in view of the concern being voiced today over the
presence of potentially carcinogenic chioro-organic
compounds in public water supplies. Since residual
ozone breaks down in water to form dissolved oxygen,
1—5
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there is no persistent ozone residual that may require
removal as is the case with chlorine residuals. In
addition, ozone is as good a bactericidal agent as
chlorine and is probably a better viricide. EPA is
currently attempting to identify and evaluate by-pro-
ducts from the ozonation process that may be harmful
to public health.
Historically, ozone has been much more expensive
than chlorine with cost estimates ranging as high as
seven time that of chlorine. 1 Conventional ozone
generation systems generally are cryogenic units using
pure oxygen made from dry air, an expensive process.
EPA is currently demonstrating at Marlboro,
Massachusetts an innovative ozone generation process
that employs an electron beam to generate ozone from
air of ambient humidity. This process has the poten-
tial for reducing the cost of ozone disinfection be-
low that of chlorination with only moderate consump-
tion of energy.
(7) Fluidized Bed Technology
This is a biological process in which wastewater
flows upwards through a reactor partially filled with
sand at a velocity sufficient to “fluidize” the sand.
Microorganisms which become attached to the sand
particles cleanse the wastewater. Pilot plant tests
to date performed at Nassau County’s Bay Park Water
Renovation Plant on carbonaceous BOD removal from pri-
mary effluent indicate that this technology can ac-
complish the same degree of treatment as conventional
activated sludge in less than 5 percent of the space
and 10 percent of the treatment time. This technology
can also accomplish nitrification and denitrification
with similar results.
Based on the pilot studies to date Nassau County
feels that the fluidized bed technology (FBT) has the
potential of saving about 15 percent in capital costs
over conventional alternatives for water renovation.
In another example, the cost of employing FBT for
Dr. Cecil Lue—Hing, Director of Research and Development, Metro-
politan Sanitary District of Greater Chicago, personal communication.
1—6
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denitrification at a new 16-MGD plant in Region II was
recently estimated by the FBT manufacturer to be $3 mil-
lion less in capital costs and about 5 percent less in
energy costs than conventional alternatives.
An application for R&D funding to evaluate BOD
removal by FBT at a Nassau County pilot facility is
currently under review by EPA.
(8) Pressure Sewers
While pressure sewers constitute a conveyance
alternative rather than a treatment process, this
innovative technology was considered in this study
since it addresses on—site disposal problems partic-
ularly important to small communities. These small
diameter (3—4”) plastic or PVC sewer lines are kept
pressurized by pumps collecting from housing units
ranging in size from individual dwellings to apart-
ment houses. Pressure sewers are being planned today
for communities comprising up to 2,000 lots.
Pressure sewer lines can be tied in to existing
and new septic tank systems and are often used in
areas where a high water table or poor drainage con-
ditions has caused the failure of septic tank systems.
Advantages of pressure sewer systems include:
• Elimination of infiltration/inflow problems
due to pressurized lines. Because of this,
pressure sewer systems can be sized for low-
er flows than conventional gravity sewer
systems, thus reducing the treatment capacity
required at the plant.
• Ease of installation relative to conventional
sewers. Depending on the material of con-
struction, pressure sewer lines can be plowed
directly into the ground in a fraction of
the time required for the installation of
conventional sewer systems.
Control over induced growth. Because of their
small diameter, pressures sewer lines, once in-
stalled, are impractical to tie into by com-
munities that spring up along the trunk line.
1—7
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Thus, pressure sewer lines could be used
to service small rural communities in areas
that cannot support induced growth.
• Pressure sewer systems are construction grant
eligible from (and including) the pump on the
homeowner’s property to the Street hook-up.
2. INNOVATIVE TECHNOLOGIES CAN BE IMPLEMENTED IN TIME TO
FACILITATE ATTAINMENT OF THE GOALS OF PL 92-500
While many of the innovative technologies developed and
demonstrated by EPA are ready today for implementation within
the Construction Grant Program, they have not been adopted
quickly enough to impact the July 31, 1977 deadline. How-
ever, since it is likely that funding of the Construction
Grant Program will continue for the next 10 years, innovative
technologies can yet play a substantial role in enabling
attainment of the goals of PL 92-500 in a cost-effective
manner.
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II. THE DEMONSTRATION PHASE IS CENTRAL TO THE GENERAL
ACCEPTANCE OF INNOVATIVE WASTEWATER TREATMENT
TECHNOLOGIES BY KEY DECISIONMAKERS IN THE
TECHNOLOGY SELECTIC PROCESS
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II. THE DEMONSTRATION PHASE IS CENTRAL TO THE GENERAL
ACCEPTANCE OF INNOVATIVE WAS TEWATER TREATMENT
TECHNOLOGIES BY KEY DECISIONMAKERS IN THE
TECHNOLOGY SELECTION PROCESS
Three key decisionmakers, the state regulatory agency,
the municipality and the consulting engineer, are likely to
base their evaluation of innovative processes on information
developed in full-scale demonstration. The importance of
demonstration to each of these “buyers” of innovative tech-
nology is discussed in the section below.
1. FULL-SCALE DEMONSTRATIONS PROVIDE THE STATE REGU-
LATORY AGENCY WITH THE JURISDICTIONAL BASIS FOR
ACCEPTING AN INNOVATIVE TECHNOLOGY
The state regulatory staff must be convinced that a
new process has been proven to the point where its viabil-
ity can be upheld in court in case of litigation. In the
absence of full-scale demonstration, the jurisdictional
basis for a “proven” technology does not exist; to the
state regulatory staff, proven means:
• There is a sufficiently large data base to dis-
courage any attempt to contest the viabiliti’
of the technology.
That if anyone were to contest the viability of
the technology, they would lose in court.
The state regulatory agency occupies a critical posi-
tion in the commercialization process on three counts:
• State regulations can be more stringent than
Federal standards (viz, the drinking water re-
quirements of the State of California) and
therefore foster the introduction of new pro-
cesses.
A large portion of regulatory actions are based
on the status of technology; state agencies
usually have a keen interest in new technologies
likely to provide cost-effective solutions to
their regulatory requirements.
11—1
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• A state agency can positively influence local
regulations (i.e. building codes, materials
specifications) that would otherwise affect the
the introduction of innovative technologies.
2. THE MUNICIPALITY NEEDS FULL-SCALE DEMONSTRATIONS TO
DETERMINE IF AN INNOVATIVE TECHNOLOGY IS THE LEAST-
COST ALTERNATIVE FOR MEETING REGULATORY STANDARDS
The municipality is chiefly preoccupied with the safe
commitment of public funds and is oniy willing to buy the
cheapest, and most reliable wastewater treatment alterna-
tive that will meet state and Federal requirements. In the
absence of a full scale demonstration, the municipality is
difficult to convince that the potential benefits of an
innovative technology outweigh the additional risks incurred
in selecting a technology of largely unknown reliability.
The general tendency of the municipality is therefore:
• To encourage state regulatory bodies to maintain
a conservative posture in establishing require-
ments for compliance with regulatory policies.
• To rely, in many cases, on the professional
judgement of the consulting engineer in selecting
a “proven” technology.
3. FULL-SCALE DEMONSTRATIONS PROVIDE THE CONSULTING
ENGINEER WITH THE MOST RELIABLE INFORMATION FOR
JUDGING THE SUITABILITY OF AN INNOVATIVE TECHNOLOGY
FOR HIS CLIENT’S NEEDS
Because of the consulting engineer’s central role in
assisting the municipal official to identify the technology
that will best satisfy his needs, full-scale demonstration
projects must meet the consultant’s primary information
requirements. The consulting engineer is the most difficult
decisioninaker to convince since his reputation and professional
judgment are at stake when selecting an innovative treatment
process. The consulting engineer and his client tend to
scrutinize the technology and generally demand more stringent
evidence than state regulatory agencies until the technology
meets their definition of “proven” technology. To a con-
sulting engineer this usually means:
11—2
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• The technology is operating satisfactorily in a
commercial or full—scale installation under con-
ditions representative of those experienced by
his client.
Long term operating information on the process
demonstrates that it can meet the projected regu-
latory requirements under the variable (environ-
mental, economic) conditions likely to be faced
in actual operation.
• In meeting the specific needs of a situation
similar to that of the client, the innovative
alternative has proved to be consistently more
reliable than the conventional option.
In addition, if an innovative technology is to be sold
it must be economical in the consulting engineer’s and the
municipality’s viewpoint. The consulting engineer looks
for two parameters in his economic assessment:
• The municipality’s capital availability is the
first initial factor; every potential user has a
limit on the amount of capital he will be willing
to spend. If the cost of the technology exceeds
this limit, it will be extremely difficult to
implement such an alternative.
The municipality’s total future annual costs
(i.e. capital and O&M costs) are the second
critical factor. Of all alternatives, the
one that the municipality will prefer will be
the one that minimizes the municipality’s fi-
nancial commitment over time, generally at the
expense of federal dollars.
Therefore, a technology is economical to the consult-
ing engineer when it has the most advantageous effect on
the municipality’s finances, the designer’s profit and
when it falls within the limits of available capital.
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III. EPA’S DEMONSTRATION GRANT PROGRAM IS A KEY COMPONENT
OF A MANUFACTURER’S STRATEGY FOR MARKETING INNOVA-
TIVE MUNICIPAL WASTEWATER TREATNENT TECHNOLOGIES
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III. EPA’S DEMONSTRATION GRANT PROGRAM IS A KEY COMPONENT
OF A MANUFACTURER’S STRATEGY FOR MARKETING INNOVA-
TIVE MUNICIPAL WASTEWATER TREATMENT TECHNOLOGIES
The equipment manufacturer needs EPA’s “Seal of Ap-
proval” to approach successfully the consulting engineer,
the municipality, and the state regulatory agency. EPA’s
official participation in the demonstration phase addresses
this need. It is a clear indication to the other parties
that the innovative process has been fully, and objectively
assessed by EPA’s research staff. Moreover, successful
completion of a demonstration project is a strong indica-
tion to the other parties that the technology is acceptable
to EPA, and may be more cost-effective than the conventional
alternatives it is designed to supplant. The degree of
involvement required of EPA in the demonstration phase,
however, varies according to the characteristics of the
process, and the equipment manufacturer’s own visibility
in the pollution control market. For these reasons EPA’s
Demonstration Program is:
• The most efficient starting point from which any
commercialization effort can develop.
• The mechanism that can respond most appropriately
to specific commercial requirements.
These points are developed in more detail in the sections
below.
1. A SUCCESSFUL DEMONSTRATION PROJECT SIGNIFICANTLY
REDUCES A MANUFACTURER’S COMMERCIALIZATION RISK IN
THE WASTEWATER TREATMENT MARKET
EPA’s regulatory and enforcement actions provide the
basis for private RD&D and commercialization efforts but
EPA must rely on the private sector’s commitment to ensure
a successful commercialization program. An in—depth under-
standing of the equipment industry’s commercialization con-
straints is therefore needed. To reduce the commercializa-
tion risk associated with the introduction of a new product
in a regulated market, the equipment manufacturer seeks
EPA’s early participation before launching a marketing ef-
fort. Details and examples of the way in which EPA and
the supplier work at this stage are presented in the three
following subsections.
“I—i
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(1) EPA’s Regulatory Policies Govern the Creation,
Growth, and Phasing of the Innovative Wastewater
Treatment Market
The introduction and acceptance of innovative
technologies are particularly sensitive to EPAtS re-
gulatory and enforcement policies. For instance, by
requiring secondary treatment nationwide, EPA estab-
lished a very large and stable market. In response,
equipment manufacturers have been able to prioritize
their RD&D efforts, identifying their most appropriate
marketing targets (overall size, timing, and clientele),
and to estimate their potential return on investment,
payback periods, and financial risks for various levels
of RD&D efforts. With effluent quality standards set
at 30 milligrams per liter (mg/i) for biological oxygen
demand (BOD) and suspended solids (SS), EPA has main-
tained conventional activated sludge (CAS) systems as
viable, cost effective alternatives. As a result, CAS
has become the reference system for secondary treat-
ment against which other innovative alternatives are to
be assessed. The existence of such a large and stable
market, however, encouraged pure oxygen manufacturers
to market pure oxygen activated sludge systems aggres-
sively since the pure oxygen technology related most
directly to the regulatory requirements for secondary
treatment, and was perceived as a more cost-effective
alternative than CAS systems above the 10 MGD capacity.
In contrast, the 1977 water quality standards, as
well as pretreatment guidelines have put Independent
Physical/Chemical (IP/C) treatment at a disadvantage
in terms of potential market share. IP/C is viewed as
a sophisticated system which is capable of producing a
better effluent than generally required. Its use has
therefore been limited to municipalities having an in-
dustrial component in their wastewater inf].uent, wide
variations in inflow, or specific needs such as nutri-
ent or retractory organic removal. The municipal market
for IP/C was therefore highly fragmented and specialized
and the carbon industry has hesitated to launch an
aggressive commercialization effort. In addition, the
manufacturer’s desire to capitalize on RD&D efforts
has been reduced since a major part of the IP/C research
activity was undertaken by EPA, and since the private
sector currently enjoys a good return on investment
from the industrial market share it has developed.
111—2
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In a similar case the ozone industry expects that
the establishment of regulatory standards for chlorinated
organic compounds would put ozone generation technology
in a similar position to that of pure oxygen.
(2) In Responding to the Special Requirements of the
Wastewater Treatment Market, Equipment Manufac-
turers Incur Significant Costs and Risks
To overcome conservative attitudes toward innova-
tive treatment processes, the equipment manufacturer
generally has to commit significant resources. For
example, in the case of pure oxygen, an aggressive
sales effort was necessary to penetrate the most luc-
rative segment of the market (large municipalities).
This was accomplished with a tailored-to—the-needs
sales force (mobile demonstration plants), and a major
back-up marketing strategy at the consulting engineer’s
level.
In another example, educational costs have been
extremely high for the small businesses in the pres-
sure sewer industry. After seven years of marketing
efforts, and attendance at over 200 technical society
meetings, one small enterprise maintains that its
critical marketing coverage has not yet been attained.
The spread of the pressure sewer technology has been
limited by the small number of systems installed todate
and by the proximity of the installed systems to newly
planned projects. Commercialization efforts in this
case cannot be sustained on a nationwide basis, but
rather must be tailored, at a high cost, to regional
needs and experience.
(3) Association With EPA in a Demonstration Project
Lends Credibility to a Manufacturer’s Claims
Regarding an Innovative Process
In an EPA-subsidized market, the equipment manufac-
turer cannot reasonably expect to sell his technology
if the concept itself has not been approved by EPA for
demonstration. Demonstration funding indicates EPA’s
interest in the process or concept. The demonstration
step is therefore desirable before the equipment
manufacturer invests in independent laboratory studies
111—3
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for refining equipment, materials and design specifica-
tions. This additional step is particularly important
for small firms which do not have the engineering
credentials or visibility of the larger companies. For
instance, a small equipment manufacturer in the pres-
sure sewer industry commissioned Battelle’s Columbus
Laboratories to review the engineering feasibility of
its technology prior to mounting a marketing effort.
After obtaining EPA’s approval for demonstration,
and the favorable results of an independent materials
specification study, the equipment manufacturer is in
position to launch his marketing strategy aimed at the
consulting engineer. When the two above conditions
are not satisfied, the small equipment manufacturer
incurs considerable marketing risk (i.e., inability
to convince the consulting engineer), and generally
defers his marketing plans for the United States mar-
ketplace. For its own part, EPA must be careful to
warn potential users of process failures. Too many
times EPA association with a process is interpreted
as EPA approval of the technology, often with sad re—
suits.
2. THE NEED FOR DEMONSTRATION VARIES EXTENSIVELY ACCORD-
ING TO PROCESS CHARACTERISTICS, MARXET SEGMENTS, AND
THE MANUFACTURER’S POSITION IN THE POLLUTION CONTROL
MARKET
In helping the equipment manufacturer to introduce
his innovative technology, EPA’s demonstration program can
respond most adequately to specific commercialization needs
determined by:
• Process characteristics
• Market characteristics
The size and reputation of the equipment manu-
facturer.
The importance of these factors is illustrated in the sub-
sections below.
111—4
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(1) A Concept That Departs From Conventional Treatment
Alternatives Incurs a High Commercialization Risk
and Requires Full-Scale Demonstration to Assure
Acceptance
For the consulting engineer, an innovative process
that relies on conventional technologies is more reli-
able than processes requiring entirely different waste—
water treatment options with which his experience is
minimal. This point is borne out in the discussion
below of pure oxygen activated sludge, independent
physical/chemical treatment, pressure sewers and ozone
disinfection.
Pure oxygen activated sludge relies on the widely
used, and well-known activated sludge technology. The
pure oxygen technology was perceived by the consulting
engineer as a potentially cost effective modification
to conventional activated sludge, and not as a substi-
tute for the technology. EPA’s participation in demon-
stration satisfied the consulting engineer’s need for
independent verification.
On the other hand, IP/C constituted a more radical
alternative to the consulting engineer, and EPA’s
participation in demonstration was sought by the in-
dustry to validate the approach as well as to provide
further documentation through EPA’s independent evalua-
tion. To the consulting engineer, IP/C still repre-
sents a radically new concept in wastewater treatment:
• The system has not yet been fully developed
(the implications of biological activity in
the carbon columns have not been completely
investigated and septicity problems have not
been fully resolved)
The system’s financial risks remain high
and uncertain (system reliability and cost
of carbon)
• The process cannot readily be compared to
more familiar technologies.
The need for demonstration is therefore much more pro-
nounced for IP/C than for pure oxygen. The commercial-
ization problems encountered by the pressure sewer tech-
nology illustrates the need for a large, geographically
diverse demonstration program as well as thorough
111—5
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independent laboratory testing efforts. The spread of
the technology to date has been constrained by the small
number of communities in which the system has been in-
stalled, and by the closeness of the demonstration
projects to the newly planned ones. The consulting
engineer now seeks to ascertain whether the pressure
sewer technology can adapt itself to various, specific
physical/environmental conditions. Extensive indepen-
dent laboratory testing is also likely to be required
to demonstrate its suitability for use under the widely
diverging state/local regulations covering plumbing
codes (no plastic pipes are allowed in Albany), health
regulations, and safety standards (redundant circuitry
is required in California to avoid possible ignition
of a methane atmosphere.
Attempts to commercialize the use of ozone for
disinfection point up the value of full-scale demon-
stration in overcoming the routine selection of a
well-entrenched conventional technology. So complete
is the identification of chlorination with disinfec-
tion that the two terms are often used interchange-
ably; disinfection is chlorination. In order for
ozonation to be perceived as a cost effective alternative
to the chlorination-dechlorination process by most
state regulatory agencies, the ozone demonstration pro-
gram must be centered around a limited number of projects,
and aimed at satisfying the information needs of these
agencies.
As opposed to the introduction of pressure sewer
systems, the ozone equipment manufacturer needs rela-
tively few demonstration projects to achieve a signifi-
cant level of market penetration. The current ozone
demonstration program supports one project per type
of ozone generation technology involved (i.e., cryogenic
system, electron gun generator, and ultrasonic system).
Each equipment manufacturer has his own particular
economic/technical objective for the demonstration phase.
For example, the cryogenic system manufacturer aims at
proving that ozonation is cost-competitive when de-
chlorination is required. The electron gun generator
supplier aims at proving that ozone is more cost-effec-
tive than chlorination alone and is as efficient as the
cryogenic system. -
The ozone equipment manufacturer’s primary objec-
tive is to get state regulators conversant with the
technology. The consulting engineer is recognized
111—6
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as a key element in the diffusion/acceptance of the
technology; yet, the manufacturer has noticed that
the consulting engineer tends to leave the responsi-
bility for the selection of ozone to the state regula-
tory decisionmakers.
(2) EPA’s Demonstration Program is Essential for
Technologies Having a Limited Market Base
Technologies that have not been developed to meet
secondary treatment standards directly generally have
a small, geographically split, and loosely defined
market base which substantially increases the normal
risk associated with the commercialization of innova-
tive processes. This situation typifies technologies
developed to meet treatment needs along water quality-
limited stream segments. Under these circumstances,
EPA’s participation in the demonstration phase is crit-
ical for the equipment manufacturer, irrespective of
his size or reputation.
Technologies having a limited market base involve
a high commercialization risk for the equipment manu-
facturer since risk cannot be spread over a large mar-
ket or over various segments of the markets, and because
of great uncertainty over return on investment and pay—
back periods. For the equipment manufacturer a “suc-
essful first entry” into the market segment is a pre-
condition to the overall profitability of his RD&D
venture. No technologies having limited applicability
have so far been introduced to the market without the
support of a well-documented, successful demonstration
operation. For instance:
The PhoStrip technology for phosphorus
removal is now being aggressively marketed
in conjunction with the on-going Reno-Sparks,
Nevada demonstration.
IP/C is not actively being marketed as a
means of meeting needs along water quality—
limited stream segments pending further
developments with ongoing IP/C projects.
The market base of such technologies is generally
split over several distant regions, highly fragmented,
and subject to potentially reversible state regulatory
policies. With the exception of the market for phos-
phorus removal, which is fairly well delineated, the
111—7
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manufacturer of technologies having limited applicability
sees no solid, predictable market.
For example, the market share for nitrogen re-
moval depends on the number and extent of water quality-
limited stream segments. Given the seemingly arbitrary
mapping of designated water quality limited stream seg-
ments the equipment manufacturer cannot be certain that
segments designated as such will remain so in the future.
For example, Figure 111-i shows that virtually all water
quality-limited streams in Arkansas become effluent-
limited merely in crossing the state boundary into
Louisiana.
Also the adoption of land treatment alternatives
is subject to state requirements which can be arbitrary
and restrictive and to land—use controls at the com-
munity level. Since the capital cost of soil treat-
ment is often dependent on the cost of land, zoning
restrictions can greatly influence the cost—effectiveness
of the technology.
The market base for a limited application tech-
nology may not be particularly attractive for the in-
dustry and the demonstration program supplies an in-
centive for the manufacturer’s involvement in com-
mercializing the technology. For example, the largest
market segment for the soil treatment technology seems
to be phosphorus removal. So far, however, phosphorus
removal by soil treatment seems to be competitive
primarily below the 2 MGD capacity level. For the
equipment manufacturer this means a very costly market
to prospect (i.e., the diluted market of small com-
munities) for a basic technology where it is difficult
to justify proprietary rights.
(3) Demonstration Grants Are Particularly Vital to
the Small Equipment Manufacturer Recently Estab-
lished in the Pollution Control Market
The objective of the demonstration program is
technology specific, and aims at commercializing
technologies that respond to priority needs. When
such technologies, however, have been developed by
small companies, the need for and phasing of the de-
monstration program becomes particularly critical.
111—8
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• - •‘._ ,
I
i)
FIGURE 111-i
Water Quality Limited Stream
Segments—EPA Region VI
:
-
L 0 U 4 t A
I • * —.
4
i *T * . -\ - -
111—9
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Despite the key role played by demonstration, the
small equipment supplier does not have the financial re-
sources to build and run a full-scale demonstration
project. When the small manufacturer turns to de-
monstration, his credit/liability limits have often
been reached after the basic, applied, and development
phases of his R&D efforts have been completed
(Figure 111-2). Technologies reported to have been
considerably delayed in their development for financial
reasons include:
• Cryogenic ozone generation systems
• Grinder and effluent pumps (from home treat-
ment systems)
• Biological phosphorus removal systems
• Fluidized-bed treatment systems.
At the end of the development phase, no signifi-
cant cash flow can be expected before the innovative
process arrives at maturity. The lead time can extend
to four years (the case of the phosphorus removal and
cryogenic ozone generation systems for instance) during
which the small manufacturer is in a very precarious
financial situation. EPA’s participation in a demon-
stration project then becomes critical to linking de-
velopment to commercialization since:
• EPA ’s participation alleviates the financial
burden of full-scale operation (capital and
O&M commitment).
• EPA’s participation changes the small manu-
facturer’s tight credit/loan situation to an
expanded (additional limits) or renewed one
(reported premiums).
The courses of action left to the small manufac-
turer when his demonstration grant has been rejected
or delayed is one of the following:
• The small manufacturer can sell his company
to a larger one which has the resources and
credentials to resubmit the project to EPA;
if accepted, the technology is not lost to
111—10
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APPLIED
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-------
EPA (the PhoStrip case). The technology
can also be submitted to EPA for the first
time by the larger company as was done in
the case of ozone cryogenic systems.
• The small manufacturer, if diversified, can
rely on other products to cope with the lag
time in EPA acceptance as was done with ozone!
ultrasonic systems.
• If the small manufacturer is not diversified,
and does not sell his technology to a larger
company, EPA stands to lose the technology.
The small manufacturer then turns to foreign
markets and simultaneously attempts to con-
vince a progressive community in the United
States marketplace to use his technology as
has happened with the fluidized bed technology.
In general the small manufacturer does not have
the resources to market his process extensively to the
consulting engineer or to the prospective municipal
client. The manufacturer expects therefore to use the
demonstration project as a powerful marketing tool.
To achieve this goal, the municipal user receiving the
grant should be representative of the customers for
the technology. It is critical for the small manu-
facturer to agree with EPA on a recipient who will be
typical of his major target market:
The selection of a typical demonstration
situations does not provide a strong enough
reference to be subsequently widely applied
by the consulting engineer.
The small manufacturer lacks the resources
and visibility to convince the consulting
engineer that his system has applications
beyond the tested special situations.
(4) Demonstration Grants Are Important, But Not As
Vital for the Larger Manufacturer Having an
Established Reputation in the Pollution Control
Field
The larger equipment manufacturer does not re-
quire EPA’s participation so much to help him cover
111—12
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his demonstration costs and information requirements,
as to gain quick recognition of the potential for his
technology by the key decisionmakers in the buying
process. When the larger manufacturer submits his
innovative process for EPA’S consideration, he general-
ly has already carried his own demonstration phase
successfully. By totally financing his own project
on at least a pilot scale, the larger manufacturer
expects to maximize his chances of grant approval.
This approach was followed for the pure oxygen acti-
vated sludge process, ozone generation systems, the
biological phosphorus removal process, and for in-
dustrial applications of the IP/C technology.
Thus the larger manufacturer does not primarily
approach EPA to demonstrate further the viability of
his innovative process, but rather to shorten his
route to commercialization through EPA’S independent
assessment. The larger manufacturer has the resources
and visibility to capitalize quickly on EPA’s willing-
ness to participate in a demonstration project. For
instance:
The combination of EPA’s participation in
demonstration, and the large manufacturer’s
reputation and backup service capability
considerably reduces the consulting engi-
neer’s risk to recommend the innovative
technology to his client.
Once a demonstration agreement is reached
with EPA, the larger manufacturer can devote
a substantial part of his resources to fi-
nance demonstration projects according to
his marketing target needs. One large
manufac turer was able to lease numerous in—
novativ ozone and pure oxygen systems to EPA
for demonstration projects.
In addition to his sales force, the large
manufacturer can readily use his subsidiaries
for indirect marketing purposes, and present
the advantages of chaining technologies
developed by the group (i.e., liability
coverage, backup and support services capa-
bility). A typical linkage would be the
combination of ozone disinfection with a
pure oxygen activated sludge treatment.
111—13
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IV. INNOVATIVE TECHNOLOGIES ARE PENALIZED BY THE
LACK OF TRUE COST-EFFECTIVENESS ANALYSIS
IN THE TECHNOLOGY SELECTION PROCESS
-------
IV. INNOVATIVE TECHNOLOGIES ARE PENALIZED BY THE
LACK OF TRUE COST-EFFECTIVENESS ANALYSIS
IN THE TECHNOLOGY SELECTION PROCESS
As part of the Construction Grant application process,
EPA requires applicants to perform a comparison of the cost—
effectiveness of competing treatment alternatives. It is
at this stage of the technology selection process that in-
novative technologies are compared to their conventional
counterparts according to Cost-Effectiveness Analysis Guide-
lines published by EPA (40 CFR, Part 35, Subpart E-Appen—
dix A). Since decisions to adopt or reject innovative tech-
nologies are usually based on the results of the cost—effec-
tiveness analysis, this chapter concentrates on that aspect
of the technology selection process. Subsequent sections of
this chapter deal with:
• Treatment plant construction cost experience
• Legal and institutional factors influencing the
cost-effectiveness of innovative processes
Deficiencies in EPA’s Cost-Effectiveness Analysis
Guidelines
• Other factors affecting the performance of Cost-
Effectiveness Analysis.
1. DESPITE EPA’S EMPHASIS ON COST-EFFECTIVENESS ANALYSIS
A RECENT SURVEY PUBLISHED BY EPA SUGGESTS THAT COSTS ARE
STILL A BY-PRODUCT RATHER THAN A KEY INDICATOR IN THE
TECHNOLOGYSELECTION PROCESS
A recent EPA study 1 of treatment plant construction
cost experience suggests that estimates of the capital costs
of treatment facilities are often arrived at subjectively
1 U.S. EPA, “An Analysis of Construction Cost Experience for Waste-
water Treatment Plants,” EPA Technical Report, EPA—430/9—76—002,
February 1976.
‘V-i
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and that they rarely reflect the true costs of construction.
The report states that “...more often than not cost appears
to be a consequence rather than a parameter of design and
construction.” Further, the study shows that even EPA’s own
cost estimating system (“A Guide to the Selection of Cost-
Effective Wastewater Treatment Systems,” EPA-430/9-75—002)
is erratic in predicting costs. Specifically, capital cost
estimates developed from the EPA system understate the bid
costs of treatment plants greater than 10 MGD by a factor of
two.
The same study also indicates that in numerous cases
no significant differences in bid costs could be detected
among sewage treatment plants achieving significantly
different levels of treatment. The wide dispersion in con-
struction cost estimates implies that no consistent cost
criteria have been used to test the cost—effectiveness of
proposed alternatives.
2. THE OVERALL COST-EFFECTIVENESS OF NEW TECHNOLOGIES IS
CONDITIONED BY THE LEGAL FRAMEWORK OF PL 92-800 AND
THE STRUCTURE OF EPA’S COST-EFFECTIVENESS GUIDELINES
(1) The Legal Framework of PL 92-500 May Have a Dis-
criminatory Effect on New Technology Commercial-
ization Efforts
The 75 percent Federal subsidy provided by the
construction grant pertains to capital costs only;
thus capital-intensive technologies with low O&M costs
can have a decisive financial advantage for municipal-
ities over low capital cost technologies with high
O&M costs. A sample cost comparison between two such
treatment alternatives was performed to illustrate
the potential economic implications of the Federal
grant subsidy. The cost comparison examined conven-
tional activated sludge (CAS), assumed to be a capita].-
intensive alternative with low O&M costs, and another
representative treatment process assumed to be a lower
capital cost alternative with higher O&M costs. The
following results for 1, 10, 15 and 50 MGD plants were
obtained:
Beyond the 10 MGD capacity level, the lower
capital cost alternative can be competitive
in overall cost with CAS prior to considera-
tion of the construction grant award.
IV-2
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• Once the 75 percent Federal subsidy of capi-
tal costs is included, the lower capital cost
technology is no longer competitive in terms
of total annual costs to the municipality.
• Above the 15 MGD capacity level, the Federal
grant subsidy tends to “refund” the cost dif-
ference that may exist between the two tech-
nologies, to the advantage of the CAS process.
Grant applications do not generally cite the Fed-
eral grant subsidy in their cost—effectiveness studies,
and do not account for the capital subsidy in their
cost computations. But in no instance did our grant
application survey, conducted in five regional offices,
uncover a cost-effectiveness study indicating that
the lower capital/cost technology could be competitive
with CAS when the lower cost alternative was identified
as a possible municipal treatment alternative.
Our analysis indicated that with the present 75
percent Federal subsidy, the lower capital cost tech-
nology is more expensive than CAS even at the 50 MGD
capacity level. Variations in the size of the Federal
subsidy, however, can have step-wise impacts on the
results of cost analyses for various sized treatment
plants:
• With a 65 percent Federal subsidy of capital
costs, the lower capital cost technology
becomes competitive at the 50 MGD capacity
level
• With a 60 percent Federal subsidy, the lower
capital cost process becomes cheaper to the
municipality than CAS at the 15 MGD capacity
level; however, lowering the capital subsidy
to 40 percent does not reduce the capacity
level at which the two technologies are com-
petitive.
IV-3
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(2) EPA’s Cost-Effectiveness Guidelines Assume That
Capital Expenditures Can be Cost—Effective Solu-
tions, but Fail to Recognize That Capital Spend-
ing Should be Minimized to Yield a Cost-Effective
Allocation of Federal Dollars
EPA’s cost-effectiveness guidelines are specific
about structural solution alternatives to water quali-
ty problems, but do not require consideration of non-
structural approaches and do not incorporate provisions
for minimizing capital spending. As a result, most cost-
effectiveness studies sum annual capital and O&M costs
without distinction in their present worth analyses.
The cost—effective alternative is therefore selected
on an aggregated basis with no specific consideration
as to its capital intensiveness.
In our illustration CAS could be preferred to the
lower capital cost process for any plant size (1, 10,
15 and 50 MGD capacities), and for any discount rate
(5, 7, or 12 percent), irrespective of the capital
intensiveness of CAS.
Without provisions in the guidelines to minimize
capital costs, the Federal dollar could polarize around
fewer projects than desired. Since the size of the Fed-
eral grant is proportional to the capital—intensiveness
of the project, the consulting engineer may be led to
maximize his client’s benefits from the grant and select
a capital intensive technology that will minimize his
client’s overall future costs.
This approach is not inherently wrong since muni-
cipalities must be sure that a plant’s O&M costs will
remain low enough for them to continue to operate the
plant properly. However, without proper design review
of proposed projects the potential for abuse of the
capital cost subsidy exists. An example, albeit an
extreme one, of the type of abuse that can occur in the
absence of close EPA scrutiny of proposed projects is
provided by the 1MGD—capacity IP/C plant located in
LeRoi, New York. The plant was constructed with a
carbon regeneration furnace on-site, a feature not
generally thought to be cost-effective. But, as if
this were not enough, the furnace is sized for a plant
of 50 MGD capacity, a clearly non-cost-effective circum-
stance.
IV-4
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(3) EPA’s Cost—Effectiveness Guidelines Implicitly
Assume That No Significant Technological Changes
Are Likely to Occur in the Future, and Thus
Penalize Present RD&D Efforts
Cost—effectiveness incorporates a subjective ap-
preciation of time preference and risk; in the case of
innovative technologies, the higher the discount rate
and the shorter the planning period, the greater the
weight given to future uncertainty. The present worth
parameters (discount rates and planning period) selected
by EPA’s guidelines on cost-effectiveness can be char-
acterized as follows:
A relatively low discount rate (6-1/8 percent
for 1976) established by the Water Resources
Council. The same rate applies to any type
of Federally funded, water—related project
irrespective of the technology turnover. The
technology turnover of waste—water treatment
systems is significantly shorter than dams
or other massive flood control projects.
A planning period (20 years), which by RD&D
efforts and commercialization standards is a
long time period.
As a result, the economic assumptions set by the
present guidelines are that:
• Present economic uncertainty and inflationary
trends are not likely to affect the wastewater
treatment industry over the next 20 years.
• Current RD&D efforts will not significantly
impact the economic and performance charac-
teristics of conventional wastewater treat-
ment systems.
• Conventional wastewater treatment systems
are therefore cost—effective alternatives
that minimize the risk associated with tech-
nological choices.
The results obtained with low discount rates are
likely to influence the decisionmaking process; in ab-
solute terms, low discount rates tend to accentuate
the cost differences established by the 75 percent Fed-
eral subsidy:
IV-5
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• A 10 MGD conventional activated sludge plant
is 7.4 percent less costly to the municipality
than the same sized, lower capital cost tech-
nology considered as determined from our cost
analysis assuming a Federal subsidy with
5, 7, and 12 percent discount rate options.
• With a 5 percent discount rate, the absolute
cost difference between the two systems is
40 percent larger than in the 12 percent dis-
count case.
Although the results of cost effectiveness analyses are
independent of the rate of discount selected, a smaller
absolute cost difference is likely to be perceived as
a less decisive margin and may encourage adoption of the
lower capital cost technology.
3. EPA’S EFFORTS TO IMPLEMENT COST-EFFECTIVENESS IN THE
TECHNOLOGY SELECTION PROCESS OVERLOOK SOME OF THE KEY
FACTORS REQUIRED FOR THE PERFORMANCE OF SUCH AN APPROACH
(1) Without a Programmatic Breakdown of the “Fishable
and Swimmable” Legislative Goals, Cost-Effectiveness
Analysis is Impossible
Narrowly defined, cost effectiveness involves the
comparison of alternatives to minimize dollar costs
subject to some mission requirements, or conversely
to maximize some measure of performance subject to
budgetary constraints. Therefore, a prerequisite con-
dition to the performance of cost-effectiveness analy-
sis is the definition of programmatic objectives for
attaining goals. The lack of clear definition of pro-
grammatic objectives beyond 1977 standards, and present
performance and reliability levels is an indication to
the consulting engineer that, as a general rule, fur-
ther achievements are beyond the scope of his analysis
for the 20 years to come. A survey of the construction
grant files shows that:
• In most cost-effectiveness studies, 1977
standards are the exclusive wastewater treat-
ment objectives against which treatment sys-
tem costs are minimized for the year 2000.
IV-6
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• When AWT systems are required, cost—effective-
ness analyses assume the postponement of the
additional investment for treatment beyond
secondary by selecting an add-on approach
that does not fully account for inflation.
This is done in the hope that the designation
of water quality-limited stream segments
will be clarified.
Cost savings are so far the basic measure of
effectiveness; in a few instances only have
reliability and nonmonetary factors been
actually weighted and keyed into the cost-
effectiveness equation.
In the absence of intermediate plateaus beyond
attainment of 1977 goals, new cost effective treatment
processes are difficult to design, develop and opti-
mize; this affects the research efforts of the private
industry, EPA’s efforts to manage its RD&D program in
a cost-effective fashion, and the timely demonstration
of new unit process alternatives.
For example:
• The absence of clearly identified effluent
quality targets on toxic compounds, heavy
metals, total oxygen demand, reliability,
and systems flexibility for industrial in-
fluents and stormwater overflows greatly
affects the timely demonstration of new
unit process alternatives.
• Without clearly identified milestones and
goals, the research staff at 4ERL has no
reference against which technological break-
throughs could be measured, nor has it a
clear understanding of the rationale support-
ing EPA’s priority list for demonstration
funding.
EPA’s commitment to well—publicized regula-
tory milestones is critical to opening pro-
fitable markets, lowering significantly the
risk factor associated with RD&D, and attract-
ing private investment in municipal wastewater
treatment.
IV-7
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(2) With the Measure of Effectiveness Reduced to Cost
Savings, Breakthroughs Achieved by Innovative
Technologies Are Not Given Full Credit
In relying primarily on cost savings for achieving
specific treatment requirements, EPA’s guidelines on
cost-effectiveness penalize the introduction of innova-
tive technologies by leaving undefined:
• The question of systems performance and re-
liability and providing no decision criteria
to assess such factors.
• The means to incorporate ancillary factors
into the cost-effectiveness equation (such
factors as energy savings, land use, induced
growth, resource recovery).
• The means to assess the flexibility of treat-
ment systems with respect to variations in
wastewater influent characteristics (seasonal
variations, share of industrial influents).
(3) EPA’s Cost—Effectiveness Guidelines Do Not Provide
the Consulting Engineer and EPA’s Regional Staff
With a Cost Accounting Format Conducive to Compara-
tive Analy sis
The guidelines provide a format for cost analysis,
but do not provide the structure for systems analysis
and systems comparisons. For example, the itemized
list of capital and O&M cost information required by
the guidelines is exhaustive but does not enable ready
identification of major wastewater treatment components.
In addition, for most cost-effectiveness studies, the
key functional systems and their component alternatives
within a wastewater treatment train are not clearly iden-
tified, and thus do not allow an in—depth comparative
analysis.
The guidelines also do not specify to the consult-
ing engineer the information and analysis requirements
necessary to substantiate the screening of process al-
ternatives. As a result, in most of the 40 applications
examined it was impossible to find the rationale for ex-
cluding from consideration some treatment alternatives
in the cost-effectiveness analysis. Further, the pre-
sentation of broad systems and structural design criteria
IV-8
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used in the consultant’s analysis of technological al-
ternatives is not required by the Guidelines so that
many cost—effectiveness analyses lacked specificity.
Of the 40 grant applications surveyed three applica-
tions were found to be amenable to a standardized in-
depth review of the cost—effectiveness analysis.
4. A MANAGEMENT FRAMEWORK WITHIN WHICH A RIGOROUS COMPARI-
SON OF TREATMENT ALTERNATIVES CAN BE MADE DOES NOT YET
EXIST
(1) The Absence of a Reliable, Updated Economic and
Engineering Performance Data Base Strongly Penal-
izes Innovative Technologies
The cost and engineering performance information
published by the Environmental Research Information
Center (ERIC) does not provide the consulting engineer
with the comprehensive, analytical, and updated data
base he needs to perform a true cost—effectiveness
analysis. In the absence of reliable data regarding
the design and operation of innovative processes, the
consulting engineer often adopts such conservative
engineering factors that innovative technologies are
substantially penalized relative to their conventional
counterparts.
When an innovative technology is evaluated as
part of the cost-effectiveness analysis, higher engineer-
ing cost estimates are often. assumed and optional inter-
mediate treatment steps are planned without sufficient
justification.
In addition, EPA’s Regional Enforcement Divisions
do not relate their monitoring activities to the type
of technology in use. The enforcement files do not
lend themselves directly to any performance and relia-
bility analyses.
In genera]. it is impractical to relate the con-
struction grant files to those of the Enforcement Divi-
sion on a case by case basis to evaluate the perform-
ance of specific innovative technologies against their
conventional counterparts. Thus detailed performance
and reliability analyses would require an inordinate
effort from the consulting engineer.
IV-9
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In the absence of a reliable economic and perform-
ance data base, the consulting engineer is left to use
his best professional judgment and generally selects
the technology with which he has the greatest experi-
ence, i.e., conventional treatment alternatives. This
attitude is perfectly consistent with the framework
of cost—effectiveness; it is meaningless to try and
rank alternatives without knowing how likely the avail-
able options are to satisfy water quality effluent limi-
tations over time.
(2) Several Factors Create A Disincentive For the
Consulting Engineer to Perform a Rigorous Cost-
Effectiveness Analysis
The consulting engineer’s motivation to maximize
his client’s satisfaction and his own consulting profit
is not likely to achieve EPA’s objectives for cost—
effectiveness under present conditions. The present
situation is characterized by:
A failure to recognize explicitly the trade-
offs between total cost and system effective-
ness (i.e., efficiency, flexibility, perform-
ance and reliability)
A failure to recognize explicitly the trade-
offs between capital investment and O&M costs
with respect to overall reliability and per-
fortnance.
Above all, the consulting engineer should be re-
sponsible to his client for the operation of the treat-
ment facility he has designed. Under present conditions,
the selection of an innovative technology maximizes his
professional risk without any expected reward in the
future. The natural attitude is therefore to minimize
his own consulting risk, and the cost to his client.
(3) Certain Aspects of the Construction Grant Review
Process Militate Against the Selection of Innova-
tive Technologies
Grant applications proposing conventional treat-
ment alternatives are processed much more rapidly by
EPA than those recommending innovative technologies.
‘v—la
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The consulting engineer has noticed that the selection
of innovative technologies spurs a series of questions
(i.e., design specifications, materials selection, or
cost estimations) that are never raised for conventional
alternatives. From the consulting engineer’s standpoint,
the likelihood of having his project accepted without
further modification is higher with conventional tech-
nologies than with innovative alternatives.
Also EPA’s regional review staff was found to rely
on obsolete economic information in evaluating innova-
tive technologies.
A major barrier to the selection of innovative
technologies is the current emphasis within the Con-
struction Grant Program on obligating allocated funds.
As the 1977 deadline approaches, the consulting engi-
neer comes under increasing pressure to select conven-
tional technologies in order to expedite EPA’s approval
of the project. Cost-effective technologies currently
being demonstrated are directly penalized by this,
since conventional alternatives are often selected for
tactical reasons only. This lack of program coordina-
tion is of great concern to the industry in view of
its substantial RD&D commitments.
IV— ll
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V. PROCESS DEVELOPMENT HAS PREEMPTED
CO ERCIALIZATION AS THE FOCUS OF
EPA’S CURRENT RD&D EFFORTS
-------
V. PROCESS DEVELOPMENT HAS PREEMPTED
COMMERCIALIZATION AS THE FOCUS OF
EPA’S CURRENT RD&D EFFORTS
A review of the role played by ORD in new technology
development suggests that ORD has concentrated on the devel-
opment of innovative processes without comprehensively
addressing their commercialization. Because of the lack
of a focal point for commercialization within ORD, some
basic prerequisites for commercialization are not being met.
Chief among these are:
Fulfillment of end-use market requirements
• Performance of front—end market analysis
• Demonstration of developed technologies
Regional participation in the commercialization
effort
• Coordination between technology development and
implementation activities within EPA.
The following sections characterize the commercialization
problems being encountered and offer some tentative steps
for their resolution.
1. EPA’s RD&D EFFORTS HAVE NOT FULLY SATISFIED END-USE
MARKET REQUIREMENTS
Two factors viewed as prerequisites to the commerciali-
zation of EPA-developed processes require particular atten-
tion, namely the participation of potential industrial spon-
sors and the evaluation and dissemination of program results.
(1) In Concentrating on Process Development, EPA
Has Not Elicited the Participation of Industrial
Sponsors to the Degree Required for Commercializa-
tion
The ultimate commercialization of processes de-
veloped and demonstrated by EPA requires the aggressive
V-i
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support of an industrial sponsor. In the absence of
such participation promising technologies are often
either left undeveloped or, if developed solely by
EPA, may languish ‘ t on the shelf.” Too often the human
element in the private promoter—government researcher
interaction has precluded EPA support at a critical
juncture in the development of a novel technology.
Several examples of the interaction between industrial
sponsors and EPA researchers are cited below.
The widespread use of pure oxygen-activated sludge
treatment is an example of the results that can be
obtained by aggressive marketing by a strong industrial
sponsor supported by the results of EPA R&D and Tech-
nology Transfer activities. As of June 1976, 21 munici-
pal plants in the U.S. were in operation treating
approximately 570 MCD while 46 municipal plants that
will use 02 to treat about 2170 MGD were under con-
struction. 1 In addition, another 38 municipal plants
in the U.S. are currently being designed to treat up
to 2650 MGD. This market, which built upon the re—
suits of the Batavia (N.Y.) and New Town Creek (N.Y.)
projects sponsored by EPA in the early 1970’s, now
comprises several variations of the original concept
being implemented by different manufacturers across
the U.S., Canada, Japan, and Europe. EPA’s participa-
tion in the take—off of this technology was both
critical and timely. In a field in which new develop-
ments often take as long as 20 years to implement, EPA
has significantly accelerated the acceptance of this
new process.
Likewise, EPA’s demonstration of land spreading
of wastewater in Muskegon County, Michigan is a strong,
positive step in the advancement of this concept. Be-
cause the land treatment technology does not lend itself
well to industrial sponsorship, EPA’s role in the devel-
opment of this useful concept is even more critical then
was the case with pure oxygen systems. It remains to
be seen to what extent EPA’s support of land treatment
can overcome the lack of a strong industrial promoter.
R.C. Brenner, “Updated Status of Oxygen—Activated Sludge Waste—
water Treatment” Publication pending publication in the Proceedings
of the U.S./Japan Conference on Sewage Treatment Technology held in
Cincinnati, October 1975.
V-2
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On the negative side, problems have been encountered
in eliciting the participation of small manufacturers
in the development and commercialization effort. For
example, manufacturers of the pumps used in pressurized
sewer systems have commented that EPA research largely
duplicated their results instead of furthering the devel-
opment of the technology. Also cited by this same group
as a factor inhibiting their participation was the overly
large lag time between the granting of awards for RD&D
projects and the actual disbursement of funds. Such de-
lays can exacerbate the cash—flow problems of a small
company.
Similar problems have been noted by the manufacturer
of a fluidized bed treatment system. Problems cited in
this instance, beyond the issue of timeliness of funding,
included:
Data requirements imposed by EPA
Patent policy restrictions.
The need to invest limited development funds in tech-
nologies most likely to pay off has led EPA researchers
to be highly selective in their choice of technologies
to support. This has translated into an increase in the
data required by EPA in support of a private developer’s
application for funding. This can work a hardship on
small manufacturers because of their limited ability to
respond to augmented data requests.
Problems with EPA’S patent policy were also cited
by this supplier. In general, EPA’s patent policy,
which roughly parallels ERDA’s, reserves background
patents to the developer unless the funded research
results in a significant modification of the technology.
In the case of this particular manufacturer a variant
of this policy may be applied under which control of the
background patents would revert to EPA after about 6
years so that EPA could require the supplier to license
his technology to potential competitors. While aimed
at accelerating the spread of this technology by creat-
ing additional suppliers, the licensing requirement is
likely to have an inhibitory effect on commercialization
by limiting the return-on—investment under the licensing
V-3
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agreement. EPA’s patent policy is being reviewed i i
more detail as part of an in-house effort to evaluate
factors affecting the implementation of developed tech-
nologies. 1
EPA in 1975 awarded about 35 percent of its pro-
curement funds to small businesses, an impressive share
relative to the more widely cited figure of less than
5 percent of all Federal R&D funds thought to go to
small businesses.. 2 However, the portion of EPA hardware—
related awards to small businessmen is thought to be
much less than 35 percent. Since many of the most
promising innovative technologies, including phosphorus
removal, waste collection by pressurized sewer, ozone
generation and f1uid ized bed treatment, were conceived
by the small entrepreneur, resolution of problems cited
above is important to the acceleration of new process
corrimercialj zation.
(2) Interpretation and Dissemination of Demonstration
Project Results and Analysis of Product Benefits
Have Not Met Commercialization Requirements
Results of R&D projects must be published in a
timely fashion and in a manner that highlights the
important advantages of innovative processes. At the
demonstration stage, in particular, the final project
report should be as much a marketing document as a re-
search report. The reports should present, in addition
to economic and engineering performance factors, a dis-
cussion of any resource use advantages (reduced energy
consumption, savings in land requirements, etc.) accru-
ing to the users of the innovative technology.
While EPA’s association with the demonstration of
an innovative process is a positive marketing point, the
general lack of official endorsement evident in most
demonstation project reports undermines the effective-
ness of the demonstration project as a marketing tool.
tJSEPA, Office of Planning and Management, “Evaluation of EPA’s
Mw icipa1 Wastewater R&D Program,” publication pending.
2 Herman Director, Chief Economist—Federal Contracts, National
Association of Small Businesses, personal communication,
February 15, 1977.
V-4
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Symbolic of EPA’s ambivalence in the dissemination of
officially obtained results is the presence of a stand-
ard disclaimer on the inside cover of R&D project re-
ports:
DISCLAIMER
This report has been reviewed by the
Municipal Environmental Research Laboratory,
U.S. Environmental Protection Agency, and
approved for publication. Approval does
not signify that the contents necessarily
reflect the views and policies of the U.S.
Environmental Protection Agency, nor does
mention of trade names or commercial pro-
ducts constitute endorsement or recom-
mendation for use.
While EPA must be careful to avoid appearing to favor
a “brand name” technology, nevertheless EPA should take
equal pains to legitimize its own R&D efforts by high-
lighting the results of its work to a greater degree.
In addition, the lack of interpretation of results
presented in demonstration project reports confuses
the picture of EPA’s support of new processes. While
generally presenting a well-documented and objective
summary of technical findings, demonstration project
reports often fail to satisfy the information needs
of the potential user audience, i.e., municipal
officials and consulting engineers. Results of demon-
stration projects need to be interpreted as to:
Factors affecting competitiveness with
alternative processes
Resource use tradeoffs
Plant-site related factors that condition
results
Consistency of obtained results with others
reported in the literature.
Another key factor in the dissemination of pro-
ject results is the timeliness of reports. For various
reasons lag times for the publication of demonstration
project results currently range anywhere from two to
four years. This not only has the obvious effect of
V-5
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delaying the spread of engineering and economic per-
formance data but also ensures that such data will be
obsolete, and possibly misleading, when it is finally
made available. Economic data generated in a major
demonstration of pressurized sewer systems was published
three years after the project’s conclusion and failed
to reflect major, cost-reducing measures which had been
developed in the interim.
Of even greater concern is the failure to update
regularly the “Process Design Manuals” distributed to
consulting engineers. This generally excellent series
of publications summarizes the results of EPA R&D pro-
jects around the country and presents design information
on specific processes for use by design engineers.
However, in some cases technological developments of
the past few years have made the design data presented
in some manuals obsolete. For example, the Process
Design Manual for Carbon Adsorption, last revised in
October 1973, does not include data developed in a
1974, EPA-funded, pilot study in Pomona, California
of the use of activated carbon in independent physical!
chemical treatment (IP/C). This study indicated that
bacterial decomposition of wastes occuring in the carbon
filtration columns could enable a substantial reduc-
tion in the carbon inventory of an IP/C plant thus
significantly reducing capital and O&M costs.. This
finding was later duplicated in an EPA—sponsored, full-
scale (10 MGD) demonstration of IP/C at the Rocky River
plant in Cleveland, Ohio in 1975. Although the.project
suffered from some serious design errors, the carbon
system functioned quite well, requiring no thermal
regeneration after 18 months of operation.
These results do not appear in the Process Design
Manual for Carbon Absorption nor have the final reports
for the Pomona pilot project and the Rocky River demon-
stration project, completed in 1976, been published by
EPA. Such delays in the publication of official pro-
ject reports cast serious doubts on EPA’s support of
demonstrated technologies. Clearly, given the fast
pace of new plant construction, timely dissemination
of results is necessary if updated design information
is to be implemented in time to impact the design of
new treatment plants.
In addition, there is an apparent reluctance on
EPA’s part to publish negative or controversial results
from demonstration projects even though these can be
V-6
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most helpful to the designer. For example, publication
of the design errors made in the demonstration of IP/C
at the Rocky River plant could prevent the repetition
of such mistakes at other plants.
In summary, the general unavailability of reliable
results published in a timely fashion continues to be
a major impediment to the implementation of innovative
technologies.
2. EPA HAS NOT CONDUCTED THE FRONT-END MARKET ANALYSIS
NECESSARY TO GUIDE PROCESS DEVELOPMENT DECISIONS
Central to the selection of technologies for develop-
ment and demonstration must be a clear perception of the
market that exists for them. The delineation of this mar-
ket, determined by existing and forthcoming regulations as
well as specific regional needs, requires input from di-
verse sources both within and beyond EPA in order to guide
development decisions effectively. While a structured
program for market analysis would further tax an already
tight R&D budget, a fairly sophisticated perception of mar-
ket needs is required if the limited funds available for
technology development are to be invested wisely. Front—
end market analysis is needed to perform two specific
functions vital to EPA’s commercialization effort, namely
to:
• ‘Evaluate stated treatment needs against actual
market requirements
• Provide a market orientation to unit process
development.
These functions are examined in more detail below.
(1) Stated Treatment Needs Have Not Been Critically
Evaluated Against Actual Market Requirements
In evaluating technology development needs EPA
has primarily depended on in-house information sources,
basically regional office staff, researchers and Con-
struction Grant Program personnel. In the past,
periodic “Needs Surveys” have been used for market
identification but these have not been well-suited for
such purposes because of the potential for duplication
of stated needs. Although the information sources
V-7
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mentioned above are important, problems in cornmunica—
tion between EPA and the municipalities, illustrated
by the inflated “Needs Survey” figures, indicate that
additional methods for evaluating stated needs against
actual market requirements must be developed.
The lack of critical market analysis has allowed
the development of processes that respond to specific
stated needs but which can’t be readily commercialized.
One such example is the development of Independent
Physical/Chemical Treatment (IP/C) which is now per-
ceived as an expensive and sophisticated system
designed to achieve effluent quality standards beyond
those required for secondary treatment. It occupies
such a specialized market niche that widespread adoption
is unlikely unless its design is downgraded to meet
secondary treatment needs. A description of the re-
search setting within which this occured is provided
here:
“Physical—chemical treatment was originally
developed in the middle 1960’s based on a
mandate from headquarters to develop tech-
nology which could be used to produce reus-
able water from wastewater. In the course
of these investigation it was found that
in addition to the use of physical-chemical
treatment after biological treatment, the
former could be applied directly to raw
sewage and produce an effluent which was
as good as, if not superior to that pro-
duced from conventional secondary plants.
This realization was achieved late in the
1960’s. It is important to note that at
that time, P.L. 92-500 was not the legisla-
tion in force and the general trend of water
quality standards was aimed at a more strin-
gent level of achievement than secondary
effluent. Therefore, the thrust of EPA re-
search activity, and this applies to the
investigations for nitrogen and phosphorus
removal as well, was well within the frame-
work of guidance that we were receiving
from headquarters and experts in the field.
Now, because of the adoption of 30—30 as
the basic effluent standards, EPA is being
castigated for developing technology which
is too good and for which no market exists.
In fact, we responded directly to head-
quarters requirements because it was expected
V-8
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that such a market would exist in the future.
It should be noted that now with the pass-
age of the recent toxic materials legisla-
tion, the need for much more stringent
achievement than the 30—30 standard will
probably manifest itself and we will soon
be castigated for not spending enough ef-
fort developing improved sophisticated
technology for removing hazardous materials
and carcinogens from the water. What this
points out is that there is some long term
planning which must be done to indicate
exactly what the thrust of techno 1 ogy
development efforts should be...”
In summary, greater attention to the analysis of
the wastewater treatment market is needed to:
• Evaluate actual market requirements for EPA
on a nationwide basis as they are perceived
by state regulatory bodies, consulting en-
gineers and municipalities
• Assess future market needs likely to evolve
from impending effluent standards
Identify commercialization requirements
during technology development and demonstra-
tion
• Analyze feedback from demonstration projects
for required mid-course corrections, if any
• Capitalize on previous demonstration ex-
periences
Project the potential economic competi-
tiveness of a new technology based on best-
and worst—case assumptions.
(2) EPA’s Technology Development Efforts Lack the
Necessary Market Orientation
R&D efforts within EPA’s Municipal Environmental
Research Laboratories (MERL) have centered around the
1 -- Memo to Francis T. Mayo, Director of the Municipal Environmental
Research Laboratory, U.S. EPA from Dr. Irwin J. Kugelman, Water
Resources Division, U.S. EPA “Review of Booz, Allen & Hamilton
Draft Report on EPA’s Role in the Development of Innovative Tech-
nologies for Municipal Wastewater Treatment, March 15, 1977.
V-9
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development of unit processes while consideration of
commercialization requirements have been deferred to
the demonstration phase. In the absence of input from
systematic analysis of market conditions, new tech-
nology development has proceeded independent to a
large degree of specific market requirements. The
development of IP/C exclusively for the narrow market
segment corresponding to treatment beyond the secondary
level, cited earlier, provides an illustration of this.
A separate example is the development of a number
of advanced wastewater treatment (AWT) alternatives
such as phosphorus and nitrogen removal technologies
without a clear understanding of their respective mar-
ket shares. The major problem here, however, lies
with the states in that the delineation of water quality-
limited stream segments seems to have been somewhat
arbitrary. For example, in crossing the state line
into Louisiana all but two Arkansas rivers, which
are all water quality-limited, become merely effluent—
limited (see Figure Ill—i). In the face of such in-
adequately articulated needs, subject to the interpre-
tation of 50 state regulatory bodies, equipment manufac-
turers are reluctant to press expensive marketing ef-
forts. The point is, however, that in making technology
development decisions EPA needs as accurate an estimate
of the potential size of the market for a new technology
as any supplier. There is simply no more efficient way
to allocate scarce R&D funds among competing processes
and programs.
3. DOWNGRADING OF THE DEMONSTRATION GRANT PROGRAM HAS
SERIOUSLY RETARDED THE COMMERCIALIZATION OF NEW TECH-
NOLOGIES
The value of full-scale demonstration projects, as illus-
trated in previous chapters, cannot be overstated. Funding
for this vital program, however, has not matched its impor-
tance to the commercialization effort. In order to conserve
funds ORD has sometimes funded demonstration projects at
already existing plants that can be modified to accept a new
process. While this approach enables some demonstration of
innovative processes to be carried out within budget, the
constraints in terms of choice of plant type and location can
significantly affect the commercialization effort.
For example, for its first full-scale demonstration of
independent physical/chemical treatment (IP/C), EPA selected
v- b
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the Rocky River Plant in Cleveland, Ohio, an already exist-
ing primary treatment plant that was to be expanded to pro-
vide secondary treatment to a 10 MGD flow. While an exist-
ing primary clarifier was improved and a new carbon adsorp-
tion system was added, the performance of the plant has
been significantly inhibited by chronic operating problems
with the original sludge dewatering and disposal systems
and by the ill-advised selection of some system components.
The problems encountered have prevented EPA from obtaining
representative engineering and economic performance data;
yet the performance of the carbon contactors was better than
expected:
“It should be recognized that the problems
are equipment and materials of construction
problems and not process problems. The
system has worked and worked well.
...the main problem here is old, overloaded
equipment and inefficient handling.” 1
As a result, even though the project’s problems were attribu-
table to systems other than the performance of the carbon
columns, IP/C has acquired a negative marketing image that
has adversely affected its commercialization.
Another example is provided by the demonstration of
a novel phosphorus removal process at a 6.3 MGD plant
in Reno-Sparks, Nevada. Although the demonstration of this
innovative technology would have been more effective if
located in the re.gion where phosphorus removal is a prime
concern, i.e., the Great Lakes states, EPA, for cost and time
considerations selected a site fairly remote from the market
area. This has made it more difficult for the consulting
engineer to evaluate the process and placed an additional
burden on the manufacturer in his marketing effort.
As the above examples have illustrated, funding con-
straints placed upon the Demonstration Grant Program have
adversely affected the commercialization of EPA-developed
technologies. The implications of this situation are
discussed in the sections below in terms of the value of the
demonstration program and its role in new technology
commercialization.
1 Memo from J.J. Westrick, USEPA-MERL to J.J. Convery, USEPA-MERL
on “Problems at the Rocky River Wastewater Treatment Plant,”
July 15, 1976.
V-li
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(1) The Demonstration Phase Provides the Public/
Private Sector Interface Required for Commercial-
i zation
A demonstration project provides a vehicle for
focusing the interests of EPA and private sector re-
searchers on a common goal. EPA’s concentration on
generic process development and the manufacturer’s
emphasis on materials and design specifications are
merged at the demonstration phase in an effort to
produce the most effective showpiece for an innovative
technology.
In addition, the demonstration phase becomes the
forum in which the need for close cooperation enables
the resolution of potential conflicts regarding patent
rights and direction of competing research efforts
prior to commercialization.
(2) A Vigorous Demonstration Program Provides EPA the
Opportunity to Prove the Effectiveness of Its Own
Research Efforts
The demonstration program provides a showcase for
technologies developed under EPA’s management and as
such constitutes a measure by which EPA’s stewardship
in this area is evaluated by Congress and others. The
end—product orientation of the demonstration phase enables
the successes and failures of diverse research efforts
to be placed in context. In displaying the “successes”
of the development process, a demonstration program
supplies the justification for the investment made in
research.
(3) EPA’s Demonstration Program Is Isolated in Its
Commercialization Mission
While demonstration fulfills process development
efforts, the ultimate indicator of success remains
market acceptance. However, as discussed earlier,
the task of facilitating commercialization is left
almost solely to the demonstration phase. Greater
coordination of EPA activities including standard
setting, process development, demonstration, transfer
and implementation is a prerequisite to the widespread
adoption of municipal treatment technologies. While
the Demonstration Program can be the focal point for
commercialization, it cannot accomplish it alone.
V-12
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4. EPA’s REGIONAL OFFICES COULD FACILITATE JOINT
COMMERCIALIZATION EFFORTS BUT LACK THE RESOURCES TO
DO SO
EPA’s regional personnel can significantly aid the
commercialization of innovative technologies by use of their
specialized knowledge of the region and by close review of
construction grant applications. Through their familiarity
with the water quality needs of individual states, EPA R&D
representatives can identify those areas within a state
likely to benefit most by the installation of proven in-
novative technologies and target potential grant applicants.
R&D personnel could then supply identified municipalities
and their consultants with sufficient information on in-
novative technologies to permit their evaluation as part
of the municipality’s front-end alternatives analysis.
This early identification of potential users of
developed processes could be instrumental in closing the
gap between the dissemination of information on new tech-
nologies and their selection as proposed alternatives by
the municipality. This “customer identification” process
is ideally suited to the regional offices and can raise the
selection rate for new technologies if done early in the
municipality’s review of alternatives. By getting involved
“up front” in the alternatives selection process, EPA will
correspondingly reduce “tail end” problems, i.e., those
that arise in the environmental review of proposed “201” plans.
While this scheme will enable the municipal official
to make a more informed decision regarding the selection
of a treatment option, it is not likely to succeed without
the cooperation of Construction Grant Program personnel in
expediting applications proposing innovative technologies.
Interviews with Construction Grant Program personnel in
five regional offices indicated that applications involving
innovative technologies generally encounter significant
delays in the approval process, often because of doubts
about their cost-effectiveness. This is understandable
since, as indicated in Chapter IV, cost-effectiveness
analysis, as presently performed, generally penalizes in-
novative technologies and since EPA does not maintain a
regional capability to perform an in-depth review of cost-
effectiveness.
Although the practices outlined above would result in
a more cost-effective distribution of Federal funds,
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regional offices do not currently have the staff or resources
to carry out these procedures. In the five regional offices
visited it was noted that Construction Grant Program staff
were hard-pressed just to meet their goals for the monthly
obligation of program funds. In order to expedite the review
of applications, technical review of proposed projects has
been delegated in many regions to the individual state
water quality programs. Thus regional personnel presently
have neither the time nor the mandate to review technological
alternatives to proposed actions; they merely process the
applications for funding. While the development of more
structured cost—effectiveness analysis guidelines could
enable a more cost-effective distribution of Federal funds,
this goal cannot be accomplished without a commitment
by EPA to perform in—depth technical reviews of the cost-
effectiveness of at least major proposed projects.
5. GREATER COORDINATION OF EPA RESOURCES IS REQUIRED FOR THE
SUCCESSFUL COMMERCIALIZATION OF INNOVATIVE TECHNOLOGIES
While it is clear that innovative technologies can be
cost—effective solutions to specific municipal wastewater
treatment needs, their implementation within the municipal
Construction Grant Program will require the careful coordina-
tion of various EPA activities. In order to facilitate
the timely adoption of innovative wastewater treatment
technologies, the commercialization responsibilities of EPA
personnel in the Headquarters R&D group, the Cincinnati
laboratories, ERIC, and regional R&D and Construction Grant
Programs need to be more clearly defined. The necessary
orientation toward commercialization can be accomplished in
a series of steps, summarized from the body of the report,
among which are:
(1) Performance of detailed, front-end market analysis
(2) Identification of commercialization needs and
priorities for innovative technologies
(3) Selection of technologies for development in
accordance with actual market needs
(4) Encouragement of industrial sponsorship of
individual technologies
(5) Reinstatement of a vigorous Demonstration Grant
Program
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(6) Establishment of a data base detailing the per-
formance, reliability and cost characteristics
of conventional and innovative treatment tech-
nologies
(7) Dissemination of data and reports on a timely
basis
(8) Strengthening of cost—effectiveness analysis
guide lines
(9) Reinstatement of a technical review capability
in the regional offices to enable the evaluation
of the cost-effectiveness analysis of treatment
alternatives
(10) Early identification of potential users of in-
novative technologies.
Other steps that may be equally important, such as
modification of EPA patent policy and the establishment of
incentives for selecting an innovative technology, could be
envisioned but their detailed consideration lies beyond the
scope of this study. Also left unaddressed is the need
for a more centralized structure within the Office of
Research and Development for the commercialization of new
technologies. At present, for example R&D activities fall
under a different Deputy Assistant Administrator than do
information dissemination functions.
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