Trends in the U.S. Water Market
Shaping Technology Innovation
Authored by:
Arti Patel
Associate, Research & Advisory
Cleantech Group, LLC
arti.patel@cleantech.com
Sheeraz Haji
President and CEO
Cleantech Group, LLC
sheeraz.haji@cleantech.com
Prepared for:
&EPA
cleantech.com
cleantech,
G R O U P L L C
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Notice: Any opinions expressed in this document are those of the author(s) and do not, necessarily, reflect the
official positions and policies of the U.S. Environmental Protection Agency (EPA). Any mention of products or trade
names does not constitute recommendation for use by EPA. Although this document has been reviewed in
accordance with EPA's peer and administrative review policies and approved for publication, the quality of the
secondary data has not been evaluated by EPA
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Table of Contents
1 Executive Summary 1
2 Market Overview 3
2.1 The US Water Market 3
2.2 Sizing Select Innovation Segments 5
2.3 Market Definitions 6
2.4 Service Providers 12
2.5 Regulatory Structure and History 16
2.6 Investment activity in water innovation 19
3 Filtration 21
3.1 Market 22
3.2 Policy and Regulation 23
3.3 Technologies 25
3.4 Vendor landscape 32
3.5 Venture activity 33
3.6 Company Profiles 35
4 Disinfection 35
4.1 Market 35
4.2 Policy and Regulation 37
4.3 Technologies 38
4.4 Vendor Landscape 41
4.5 Venture Activity 42
4.6 Company Profiles 44
5 Water Quality Monitoring 45
5.1 Market 45
5.2 Policy and Regulation 46
5.3 Technologies 48
5.4 Vendor landscape 50
5.5 Venture Activity 50
5.6 Company Profiles 52
6 Smart Water Metering 53
6.1 Market 53
6.2 Policy and Regulation 55
6.3 Technologies 55
6.4 Vendor landscape 58
6.5 Venture activity 59
6.6 Company Profiles 60
7
Infrastructure Assessment
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7.1 Market 61
7.2 Policy and Regulation 63
7.3 Technologies 64
7.4 Vendor landscape 66
7.5 Venture activity 66
7.6 Company profiles 67
8 Water Reuse 68
8.1 Market 70
8.2 Policy and Regulation 73
8.3 Technologies 74
8.4 Vendor landscape 76
8.5 Venture activity 77
8.6 Company Profiles 79
9 Nutrient Recovery 79
9.1 Market 80
9.2 Policy and Regulation 82
9.3 Technologies 83
9.4 Vendor landscape 85
9.5 Venture activity 85
9.6 Company Profiles 86
10 Distributed Small Water Facilities 87
10.1 Market 87
10.2 Policy and Regulation 89
10.3 Technologies 90
10.4 Vendor landscape 90
10.5 Venture activity 91
10.6 Company Profiles 91
11 Green Infrastructure / Wet-Weather Flow 91
11.1 Market 92
11.2 Policy and Regulation 94
11.3 Technologies 95
11.4 Vendor landscape 97
11.5 Venture activity 97
11.6 Company Profiles 97
12 Ballast Water 97
12.1 Market 98
12.2 Policy and Regulation 99
12.3 Technologies 102
12.4 Vendor landscape 105
12.5 Venture activity 106
12.6 Company Profiles 107
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i Executive Summary
The US water market—and the new technologies that will increasingly define its growth—are
entering a new era. Increased scarcity, new regulatory imperatives, public discontent over caustic
treatments and practices, and the decline of the design-bid-build model (through which major
infrastructure firms control supply chain) are all serving to accelerate innovation in water
technologies. And investors are beginning to notice. While venture capital has historically been
slow to flow to water ventures (representing only 2-3% of total venture dollars invested in clean
technologies), this is beginning to change. Global venture capital within the water sector rose to
$258 million in 2011, and accounts for nearly 5% of total investment thus far in 2012, and
mergers and acquisition (M&A) activity reached a historic high of $16.2 billion in 2011—a trend
that is continuing through the first quarter of 2012. Such numbers reflect the rising interest in
water and wastewater solutions from investors and major corporates that we at Cleantech Group
have encountered for several years now.
In this report, we detail ten technology and market segments (with current market sizes across
both equipment and services) where we are seeing high concentration of innovation and
deployment:
1. Filtration ($2.2B in 2011): We observed improvements in sand filtration, ion exchange,
and granular activated carbon, though the highest levels of innovation concern
membranes, which continue to dominate the filtration market with significant efficiency
gains and cost reductions. New technologies such as nanofiltration membranes are
increasingly showing promise for not only controlling pathogens and filtering a diversity of
contaminants, but doing so utilizing less energy and creating less waste.
2. Disinfection: ($2.25B in 2011, excluding chemicals) Ultraviolet (UV) disinfection
technologies are growing rapidly as regulations and the general public call for higher
quality water, fewer chemicals, and increased efficiencies; but the most promising
approaches are now combination techniques (e.g., UV + ozonation).
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3. Water Quality Monitoring: ($900M in 2011). In addition to multi-parameter sensors,
much innovation has centered on optical sensors, which provide indirect measurements
of water quality changes by monitoring variance in light through the sample water
volume. These optical sensors are gaining some deployment momentum as they require
minimal operational maintenance and are comparable in price to the more traditional
sensors.
4. Smart Water Metering: ($640M in 2011). Though a few years behind electric meter
deployments, smart water metering—and the analytics and applications they enable—is
being deployed at an accelerated rate, with the US dominating the market (65% of all
global shipments in 20101). In total, the smart water metering market is estimated to be
$640 million in 2011.
5. Infrastructure Assessment: ($260M in 2011). Though a nascent market, there is an
increasing demand for non-destructive detection techniques (for pipe failures, leaks, etc),
such as cameras, closed circuit television (CCTV) and acoustic leak detection technologies.
6. Water Reuse: ($1.0B in 2011). As water scarcity remains an imminent concern and
desalination still proves to be a costly option, water reuse remains one of the hottest
topics in water. Membrane bioreactor approaches are increasingly favored as they
produce high quality effluent suitable for discharge to coastal waterways or use for urban
irrigation.
7. Nutrient Recovery: ($10M in 2011) Nutrient recovery is a nascent market. However,
there is renewed focus on nutrient recovery given the increasing value of resources such
as phosphorous and nitrogen. Innovative solutions are reducing energy requirements and
extracting nutrients without chemicals, while offering utilities a new revenue stream.
8. Distributed Small Water Facilities: While small water facilities face the same treatment
regulations as large water facilities, they are exploring alternative packaging and delivery
1 The World Market for Water Meters - 2011 (IMS Research)
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of treatment solutions. For example, smaller facilities that do not operate full-time are
increasingly opting for preassembled units that are available at a lower cost.
9. Green Infrastructure / Wet-Weather Flow: ($680M in 2011). Cities are increasingly
investing millions in green infrastructure to manage stormwater, with common solutions
including green roofs, permeable pavements, gravel ditches, and retention basins. New
technologies that are increasingly utilized include moisture sensors and soil probes (to
measure infiltration), roof flow measurements, and flow meters.
10. Ballast Water: ($2.9B in 2011) Poised for growth upon the impending adoption of
International Maritime Organization (IMO) regulation, a host of new ballast water
treatment technologies are being adapted from trusted land-based techniques, with the
most prevalent systems being those that combine mechanical separation/filtration with
UV radiation or chemical disinfection.
2 Market Overview
2.1 The US Water Market
The US water market has been hard hit over the past few years. The global financial crisis caused
many large industrial companies to postpone or cancel major water investments. It also affected
public budgets and the ability of municipalities to secure low-cost financing. While federal
stimulus funding propped up the market in 2010 and 2011—the American Recovery and
Reinvestment Act (ARRA) contained nearly $14 billion for projects in water infrastructure-
municipal capital investments will likely dip in 2012 with the withdrawal of stimulus funding.
Despite the recent turmoil, the market is recovering. The overall US water market for equipment
and related services reached $82 billion in 2011 (returning to 2008 levels), and is projected to
grow at a mild-but-steady 4% compound annual growth rate (CAGR) to reach $100 billion by
2016.2 Starting in 2013, the increasing demand generated by regulatory necessity (e.g., consent
2 Water Market USA 2011 (GWI2010). Notably, this estimate excludes water utility revenues charged to end
users—namely water bills charged to the public and industrial clients for their water usage—which have been
included in some larger market estimates (for example, EBI's 2006 market estimates).
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decrees), water scarcity, and failing infrastructure will supplant the expired stimulus and lead to
5-6% growth through 2016.
The present day $82 billion estimate comprises both the (i) utility segment—including capital
expenditures ($34 billion) and operating costs ($46 billion)—as well as (ii) the industrial segment
($3 billion). Total services in 2011 (including both capitalized professional and contracted
services) amount to nearly $24 billion (or approximately 30% of the total market).3
Roughly 45% of the utility market concerns drinking water, with the remainder related to
wastewater. Specifically, drinking water accounts for $36 billion in 2011 (growing at 4.7%
annually) and wastewater accounts for $44 billion (growing at 3.0% annually). This higher
growth in drinking water is primarily driven by water scarcity and the growing need to render
potable wastewater and other low quality water sources.
Breaking down by general application type, we see the equipment market is unsurprisingly
dominated by infrastructure, services, and other utility operating expenses (which largely
comprises utility spend on labor, energy, and chemicals).
3 Water Market USA 2011 (GWI2010). Utility labor costs, estimated at $13 billion in 2011, are excluded from the
services estimate. If included, services would total ~50% of all water and wastewater market expenditures.
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Sector4
Total (2011)
Share
$billions
%
Filtration
1.1
1.4%
Disinfection
3.7
4.5%
Smart Water
0.3
0.4%
Infrastructure
12.4
15.1%
WW Mgmt.
1.2
1.5%
Other
5.4
6.6%
Services
24.2
29.4%
Op. Ex.
33.9
41.1%
Total
82.3
100%
2.2 Sizing Select Innovation Segments
In addition to presenting a general market overview, we have sought to assess the current market
size and growth potential of the specific emerging technologies detailed in this report (which are
areas where we see the most innovation and growth). These segments were chosen given the
level of (1) venture capital funding, (2) research & development (R&D) funding, and (3) general
industry interest that we have seen in recent years. We have crafted niche market estimates-
broken down by equipment and services, where possible—that measure the current revenues for
companies engaged in commercializing a specific application or technology, and provided this
information in the context of broader water market segments (as shown in Section 2.1). As an
example, while the overall market estimate for infrastructure is $12.4 billion, (of which $4.7
billion is the rehabilitation market), the present market opportunity for companies developing
innovative infrastructure assessment technologies (e.g., leak detection) is significantly smaller at
an estimated $260 million (see table below).
4 Sector definitions:
Infrastructure: Includes pipes pumps and valves
Filtration: MF/UF, RO/NF, Media Filtration, ion exchange, membrane bio-reactors
Disinfection: Disinfection systems and chemicals (opex)
Wastewater Management: Sludge management and zero liquid discharge systems
Smart Water: Meters, networking technologies, and software
Other: Control systems, aeration, primary intakes, chemical feed systems
Services: Site work, pipe rehab, professional services (capex), and contracted services (opex)
Operating Expenditures: Utility labor, energy, and other costs
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Subject to the definitions provided in Section 2.3, the following chart summarizes current market
estimates (split between equipment and services based on research and primary interviews) for
the innovation sectors detailed in this report. Please note that the Green Infrastructure and
Ballast Water are not included in the overall water market size estimate of $82.3 billion.
Innovation Sector (2011)
Total
Equipment
Services
$millions
$millions
$mil lions
Filtration
2,200
1,100
840-1,400
Disinfection
2,250
640
1,280 -1,920
Water Quality Monitoring
900
210
690
Smart Water Metering
540
310
150-310
Infrastructure Assessment
260
50
210
Water Reuse
1,000
450
550
Nutrient Recovery
10
3
7
Green Infrastructure
680
300-375
300-375
Ballast Water
2,850
950
1,900
In summary, the water innovation sectors that we analyzed totaled approximately $10.7 billion in
the year 2011. Equipment accounts for nearly $4.1 billion of this amount (or 40%), with the
remaining $6.6 billion spent on related services (we take the average of the service range for this
number).
2.3 Market Definitions
Few fully contemplate the long journey water takes to reach our homes and businesses. The
water cycle is quite complex; beginning with extraction (from numerous surface water or
groundwater sources), transport to a water treatment plant for processing via multiple phases of
treatment, then distribution across an expansive grid of pipes, customer end use, and then
collection before ultimately being treated for potential reuse or returned into the environment.
Technology innovation influences every step (or multiple steps simultaneously) of this water
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cycle. In this report, we analyze various technologies and services at different steps of this
journey, as depicted in the graphic below.
Extraction
Water Treatment
Distribution
Use
Collection
Wastewater Treatment/Reuse
""""" )
""7
Water Quality
Monitoring j
System Metering^
Infrastructure \
Assessment /
_,A
II II II II
The first water cycle market segment we address is water treatment. In this phase, water is
treated to various levels of purity based on expected usage of the treated water. For example,
water destined for irrigation to farm fields faces lesser standards, while the highest level of
treatment is reserved for drinking water.
There are many treatment methods used to render water potable, including aeration (the
process of increasing oxygen saturation of water to allow for the release of noxious gases such as
carbon dioxide, methane, or hydrogen sulfide), coagulation (treating water with chemicals that
neutralize particle charges and cause them to clump together), and sedimentation (allowing
heavier particles to sit to the bottom of a sedimentation basin using the force of gravity). The
two primary methods of treating water are filtration and disinfection, which we cover in more
depth in this report:
• Filtration is the process of passing water through a porous device to remove impurities or
other particles that could not be removed in other pre-treatment phases. While there are
many filtration techniques in use today, the bulk of innovation resides with the
membrane. Membrane technologies rely on thin, permeable layers of material to
separate contaminants from water. They fall into two broad categories: pressure-driven
and concentration-driven. As suggested by its name, pressure-driven processes use water
pressure to propel particles through a membrane filter to be separated based on size.
Concentration-driven processes use osmotic pressure, which relies on a highly
concentrated solution (one infused with solutes that cannot pass through the membrane)
to induce pure water molecules to pass through a preferentially permeable membrane.
As described later, osmotic pressure is the basis for reverse osmosis filtration.
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• Disinfection plays a key role in water treatment and is intended to remove or deactivate
pathogenic microorganisms (e.g., bacteria, protozoa, viruses and parasitic worms).
Disinfection agents range from chemical disinfectants (e.g., hypochlorite, chloramines, or
ozone) to physical disinfectants (e.g., UV, electronic radiation, or heat). It is the physical
disinfectants that comprise the large majority of disinfection equipment, and therefore
innovation in the sector.
Once collected water is treated by one or more of these approaches, it is ready to be distributed
to end users for consumption and use. The water travels through a network of storage tanks and
pipes that connect the treatment facility to residences, commercial businesses, farms, and a host
of other water consumers. Upon being released from the treatment facility, the water is
monitored for turbidity and residual chlorine levels. While the water leaving a treatment plant
will typically meet EPA water quality standards, the water is susceptible to changes in quality as it
passes through the water distribution system. To ensure the water is safe at any given end point
in the water network, treatment facilities rely on various water quality monitoring technologies
(or grab sampling methodologies) to periodically assess water purity at numerous points along its
journey. Further, by identifying points of potential contamination, these monitoring solutions
also help to assess the physical condition of the distribution network. This report details three
technology segments related to the monitoring of water quality and use:
• Water Quality Monitoring technologies enable utilities to detect the presence of specific
contaminants that are either regulated by EPA or indicative of potential network
weaknesses (e.g., pipe breaks, bio-fouling, or corrosion). Water utility operators rely on
these sensors to alert them of any water quality anomalies and take further actions to
identify and quantify the contaminant, if necessary. Traditional water testing
technologies include sensors that test for one contaminant at a time. Other sensors
capable of testing for multiple contaminants exist, but are typically more expensive.
• Water Metering allows utilities to monitor how much water is being distributed and used
by its various customers. While metering itself is not a new concept, new deployments
often focus on "smart" metering systems that overlay digital sensing, communication
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networks to transmit collected data, and analytics to drive new applications. Such
systems obviate the need for manual data collection (e.g., meter readers), but the data
itself is increasingly valuable. Rather than monthly reads, smart water metering systems
now enable readings at hourly intervals (or less), which offer utilities a detailed
understanding of water usage across their distribution system, and end users insight into
how they are consuming water (and thus how they can reduce inefficiencies). As such,
the bulk of the market in terms of dollars is allocated to services that facilitate a utility's
ability to use and act upon the collected data, rather than to equipment. Smart water
meters consist of first generation automatic meter reading (AMR), which merely transmit
usage data to the utility, and newer advanced metering infrastructure (AMI), which offer
two-way data communication that can enabling numerous services through the meter
(e.g., demand response, variable pricing, etc.).
• Infrastructure Assessment refers to the evaluation of the integrity of pipes, pumps, and
valves within water and wastewater distribution networks. While within the broader
context of water infrastructure, this sub-sector is related specifically to allowing utilities to
quickly pinpoint problems caused by aging or damaged infrastructure. The infrastructure
assessment market is closely related to water metering, as water meters allow utilities to
identify potential leaks, yet the solutions go beyond metering insofar as they detect
various factors that impact a pipe's ability to transport water at a required quality, flow
rate, and pressure. High pressure is often cited as a main concern for utility operators, as
this is what causes bursts and leaks. Some basic solutions measure these various
parameters (water quality, flow rate, pressure) at the beginning and end of a section of
the water distribution network, although these solutions do not offer insight into origin of
the problem or continued pipe performance. Increasingly popular are solutions such as
visual inspection, electromagnetic inspection, and acoustic monitoring technologies,
which can enable deeper diagnoses of water infrastructure problems.
After the treated water is distributed and consumed, it is collected and transported back to a
wastewater treatment facility. Wastewater is typically treated by some combination of physical,
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chemical, and biological methods, and then typically discharged into surface waters. The
wastewater treatment process can be split into three separate steps: primary, secondary, and
tertiary.
1. Primary treatment is meant to produce an effluent (i.e., liquid waste) suitable for
biological treatment. This step often consists of temporarily holding of collected sewage
in a dormant basin to allow heavy solids to settle to the bottom while oil, grease, and
lighter solids float to the surface. The settled and floating materials are removed, and the
remaining liquid is discharged and subjected to secondary treatment.
2. During the secondary treatment phase, the wastewater discharged from the primary
treatment is treated through biological oxidation to remove dissolved and suspended
biological matters. This step may require a separation process to remove microorganisms
from the treated water prior to discharge or tertiary treatment.
3. Tertiary treatment uses additional physical, chemical, or biological means to further
improve the effluent quality. This step typically uses some form of filtration.
These three treatment phases are the hallmark of approaches used to ensure safe discharge of
wastewater into surface water. But increasingly wastewater is being viewed as a resource in its
own right—as a source for water, energy, or other nutrients. Thus, new technologies are
emerging that not only seek to permit safe discharge, but also to remove and collect valuable
content from the effluent stream that can be stored, packaged, and sold as a commodity (e.g.,
fertilizer). Our report covers two areas with notable innovation—water reuse and nutrient
recovery:
• Water Reuse5 refers to reclaimed water that is collected, treated, and used all in the same
cycle (without releasing the treated water back into the natural water cycle). It also refers
5 Desalination, the process of removing salt and other minerals from saline water, is another popular alternative to
increasing the global supply of potable water. While desalination is important to note, it is not covered in detail in
this report as adoption has been slow due to the high costs associated with traditional thermal desalination
methods, such as multi-stage flash distillation. Less costly membrane technologies such as reverse osmosis (which
we do cover) have overtaken thermal technologies and led the market for the last 30-40 years.
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to reclaimed water that is being priced and sold by a water supplier.6 Technologies used
in the reuse market do not differ from those already used in the drinking water and
traditional wastewater treatment markets. Rather, to meet different reuse requirements,
customized treatment solutions are developed through unique technology combinations.
These combinations may vary based on several metrics, including characteristics
(contaminants) of inflow, final water quality requirements, end use of effluent, peak flow
requirements, regulatory requirements, and cost constraints. The most popular
combination includes microfiltration, reverse osmosis, and membrane
bioreactors/advanced oxidation, which we assess in detail in this report.
• Nutrient Recovery refers to new applications for capturing biosolids, the nutrient-rich
organic materials that can be removed from wastewater during the treatment process for
eventual reuse as a fertilizer or soil conditioner. Nutrient recovery is drawing
considerable attention both because some nutrients are increasingly scarce (and valuable)
and because the EPA is now regulating the concentration of certain wastewater nutrients
that can lead to aquatic toxicity concerns.
Outside of the basic water cycle described above, there are many other segments adjacent to the
core water and wastewater industry. Specifically, the EPA directed its focus to three unique
water markets—distributed small water facilities, green infrastructure, and ballast water—which
we detail below.
Distributed Small Water Facilities refers to treatment centers with flow rates lower than 100,000
gallons per day. In many ways, these facilities do not differ from their larger counterparts—both
must treat drinking water to the same EPA standards. Differences do exist, however, for
wastewater treatment as larger plants have a larger impact on receiving surface water due to
their larger flow, and thus are held to more stringent effluent regulations.
6 Stormwater recapture and domestic reuse of greywater are not included in our analysis of water reuse.
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Green Infrastructure (or Low Impact Development) refers to strategically planned and managed
projects that naturally manage stormwater to reduce risk of combined sewer overflows. Design
elements such as green roofs, permeable pavements, and retention basins can mitigate
stormwater runoff from exposed surfaces by collecting and retaining precipitation, thereby
reducing the volume of flow into stormwater infrastructure and urban waterways. Communities
are becoming more aware of these benefits and are increasingly open to "greening" new
construction projects and upgrades to existing infrastructure. Measurement tools, such as
moisture sensors and soil probes, are used in conjunction with these green urban planning
initiatives to monitor and analyze their effectiveness.
Ballast Water denotes water that marine vessels intake at one coastal port and discharge at
another in order to maintain stability during transit. Treatment technologies have evolved in
response to impending new regulation and control over ballast water, as invasive microorganisms
and other contaminants can migrate from port to port through a marine vessel's discharge of
dirty ballast water. A large majority of ballast water treatment technologies have been adapted
from trusted land-based water treatment technologies, with the most prevalent solutions
combining mechanical separation/filtration with UV radiation or chemical disinfection.
2.4 Service Providers
In the US, water and wastewater treatment facilities have traditionally been delivered via a
Design-Bid-Build (DBB) method. In the DBB process, municipalities contract with firms for plant
design and plant construction separately, with a bidding phase in between. In the Design phase,
municipalities retain an engineering firm to design the project and draft tender documents which
can then be used to bid out to a construction firm.7 The engineering firm is responsible for
obtaining all permitting documents and necessary approvals. Permitting documents may include
wastewater discharge permits, NPDES (National Pollutant Discharge Elimination System) permits,
7 Sales representatives from various distribution firms typically involve themselves in this phase to ensure
engineers are designing projects in such a way that specific technologies are required to best suit their application.
Water treatment technology equipment vendors that do not contract with sales representatives have the potential
to be overlooked for projects, as sales representatives are typically more aggressive and have a closer relationship
with engineering firms than do technology vendors.
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permits necessary through the US Army Corps of Engineers, air permits, incinerator permits, and
a host of other permits. Towards the end of this phase, the design engineering firm may bring in
civil, electrical, and other engineers and architects to help finalize designs.
In the Bid phase, general contractors bid for the project based on the specification and their
ability to build the facility according to plan. In the third and final phase, the Build phase, the
selected firm will either build the facility by itself or subcontract various subcomponents of the
project. The engineering firm is retained throughout the entire process for inspection (quality
control) purposes.
Another model is the Design-Build (DB) approach. In this approach, there is only one point of
contact throughout the entire process, as the firm designing the facility is also responsible for its
commissioning. This structure allows a project to be constructed faster and cheaper, as the
design phase and construction phase can overlap. However, major construction is typically
postponed until all proper permits are obtained, leaving only certain activities (such as purchasing
supplies and materials) that can be done simultaneously with the design phase. This model is
often reserved for more technologically advanced projects within the US, but it is fairly common
outside of the US.
Other project delivery methods include the Design-Build-Operate (DBO)—in which an Operations
& Management firm is brought in as the final step, the Build-Operate-Transfer (BOT), the Build-
Own-Operate-Transfer (BOOT), and the Build-Own-Operate (BOO). The latter three approaches
may vary, depending on whether or not the plant is transferred back to the municipality at the
end of the contract.
Outside of new project builds, engineering, procurement, and construction firms (EPC firms) and
consulting firms also play large roles in the event of EPA consent decrees. Consent decrees are a
regulatory tool used by EPA to take legal action against large polluters, and they often require
plants to upgrade or expand their facility to bring them back into regulatory compliance. In order
to do this, municipalities typically engage the same firms they turned to for project development.
As such, the value chain can be depicted as follows:
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Examples of Entities in
Current US Water Market
Asset
Owners
Asset
Operators
Engineering
Firms
(and System
Integrators)
Systems and
Components
Vendors
Examples of major EPC firms in the US with a significant water focus include AECOM, Black &
Veatch, CDM, CH2M Hill, MWH, Tetra Tech, and URS. These firms have a major water market
share in the US, but they also diversify their focus to other sectors (transportation, power, etc.).
There are, however, a few firms that primarily focus their services to the water market, including
Aquatech, Carollo, Caldwell, Hazen & Sawyer, and Malcolm Pirnie. Profiles of some of these
companies are presented below:
• Black & Veatch is a global engineering, consulting, and construction company specializing
in infrastructure development in water, energy, telecommunications, and other
environmental markets. The employee-owned company has more than 100 offices
located around the globe. The firm estimates that ~20% of the world's population served
by community systems currently accesses potable water through systems that were
designed, constructed, or supported by Black & Veatch.
Greater Cincinnati Water
Works
Dayton Department of
Water
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• CH2M Hill is a global consulting, design, design-build, operations, and program
management firm. Its core focus areas include water, transportation, environmental,
energy, facilities, and resources. The Colorado-based firm has been gradually increasing
its water presence overseas, with an estimated 70% of revenues coming from
international markets in 2011. The firm also has an operations and maintenance arm
called CH2M Hill OMI, which allows the firm to participate in DBO projects. In total, CH2M
Hill has a global workforce of over 23,000 employees.
• MWH is a provider of consulting management, engineering and technical services, and
construction management services mostly relating to wet infrastructure. Other focus
areas include hydropower, mining, transportation, and energy, but the company claims
that over 50% of its work is in water and wastewater. Located in Broomfield, Colorado,
the firm maintains a global presence through 180 offices in 35 countries.
• Aquatech offers global sourcing, EPC, Operations & Maintenance (O&M), and other onsite
services to clients around the world, and has the ability to deliver projects on a BOOT
basis. The company also provides a full spectrum of water treatment technologies for
industrial and infrastructure markets, with a focus on desalination, water reuse, and zero
liquid discharge. Gradually, however, Aquatech has changed its strategy to move up the
value chain into plant operations and ownership. Its subsidiary, Aquatech Eastern,
focuses on providing water solutions in the Middle East and Asia-Pacific.
• Carollo Engineers specializes in the planning, design, and construction of water and
wastewater facilities around the US, with 32 offices in 12 states. The firm delivers projects
via the traditional DBB method, in addition to the DB and DBO methods, and also assists
with obtaining necessary permitting and any grants or incentives that are available.
There are also some global firms that play a large role in shaping the US water sector. Key firms
include Veolia Environnement and Suez, both of which are profiled below.
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• Veolia Environnement is one of the world's largest providers of diversified environmental
services. The firm, headquartered in France, is primarily engaged in operating various
municipal water, waste, energy, and transportation systems. Roughly 70% of the
company's business comes through municipal contracts, with the remaining percentage
through industrial/corporate relationships. The company has over 300,000 employees
operating in 70+ countries and principally provides labor and management services to
these industries.
• Suez Environnement is a global operator that, through its subsidiary SUFEGE, has claimed
a large role in wet infrastructure development. The firm has four core businesses
including water and hydraulic infrastructures, environment and waste, urban and
transport infrastructures, and energy. Suez focuses on offering comprehensive solutions
that can be applied across the entire value chain for water and waste. Through its various
subsidiaries around the world, Suez has pursued a selective development strategy that is
based on local partnerships.
2.5 Regulatory Structure and History
Common across all of our surveyed sectors (and indeed across all of water), is the central role
regulation plays in motivating (or deterring) the development of new technologies. In repeated
interviews, we heard of technical achievements in search of a market need. As an example,
despite the availability of extremely accurate fluoride testing technologies that may serve many
benefits, utilities often cannot justify purchasing such technology when there are already systems
that allow them to meet the existing regulatory standard around the presence of fluoride. Should
that standard be lowered, a new market will be borne. Indeed, this high sensitivity to regulation
is often shared by many investors and entrepreneurs who choose to pass on opportunities in
water. To delve deeper into how regulation can impact innovation in the water sector, we start
with a brief background.
At the national level, the US Environmental Protection Agency (EPA) is the primary body tasked
with regulating water and wastewater. There are 10 regional EPA offices that are responsible for
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overseeing and enforcing water programs within specific territories. Each region has at least one
environmental agency that administers regulations at the local level. Within EPA, the Office of
Water (OW) is mandated to ensure the safety of drinking water, protect human health and
maintain the oceans, watersheds, and aquatic ecosystems. The OW works with regional EPA
offices, other federal agencies (see below) and state and local governments to implement
environmental acts and statutes.
Alongside EPA, several other ministries and departments touch water. The US Department of
Agriculture (USDA) develops regulations and directives for the agricultural industry, such as the
use of pesticides and chemicals in the manufacture of food and wastewater discharge from
agricultural processing. The Department of Health and Human Services (DHHS) works closely
with the Public Health Service (PHS) to provide legislation and guidance on health issues from
water contaminants. The Department of Homeland Security (DHS) regulates and enforces rules
relating to critical water infrastructure that is either demarcated as being at risk of terrorism or
vulnerable to natural disasters. The US Geological Survey (USGS), a Department of Interior (DOI)
agency, responds to major events that affect the quality of water resources. The graphic below
shows the relationships between these various entities.
Cabinet Level Officers
Federal Executive Branch (Cabinet)
DHHS
I
PHS
DHS
DOI
I
USDA
USGS
I
EPA
I
OW
In addition to this federal level regulation, each state has its own health and environmental
protection departments that regulate water and wastewater. Under constitutional and federal
law, state regulations must meet the national standards set forth by EPA, but individual states are
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able to increase these standards as they see fit. Some states delegate enforcement powers to
EPA, while other states administer programs under their own jurisdiction or in conjunction with
EPA.
Turning to legislation, there are two foundational acts that regulate water at the federal level:
the Clean Water Act (CWA) which covers all source water, and the Safe Drinking Water Act
(SDWA), which authorizes standards for drinking water. Both are described in more detail below:
The basis for the CWA comes from the Federal Water Pollution Control Act of 1948, which was
later reorganized and expanded to become the CWA. The CWA establishes the basic structure for
regulating the discharge of pollutants from point sources (i.e., industrial and agricultural facilities)
into US waters and regulating quality standards for surface waters. Although the CWA does not
deal directly with groundwater or with water quantity issues, it employs a variety of regulatory
and non-regulatory tools to sharply reduce direct pollutant discharges into waterways, finance
municipal wastewater treatment facilities, and manage polluted runoff. These tools are
employed to achieve the broader goal of restoring and maintaining the chemical, physical, and
biological integrity of the nation's waters. Requirements for point source discharges are based on
the performance of available pollution control technologies (subject to a cost-benefit analysis),
without regard to the conditions of a particular receiving body of water.
Existing methods of testing surface water quality, however, can be arbitrary in nature. For
example, biochemical oxygen demand (BOD) is regularly monitored to ensure aquatic life and
aesthetic quality of lakes and streams can be maintained. The testing period to determine BOD
levels (5 days at 20°C) was formed from the BOD test defined by the UK Royal Commission on
Sewage Disposal in the 19th century, which referenced the maximum amount of time it takes for
river water to travel from source to estuary in Great Britain in the region's average summer
climate. To change this test, which currently has no theoretical grounding, would also mean
changing the equipment and supplies used in the test.
The SDWA was adopted in 1974, when improvements in water testing allowed for the detection
of smaller concentrations of contaminants, resulting in organic contamination being discovered in
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public drinking water. Congress was then persuaded to take action and develop the first federally
enforceable drinking water regulation.
Under the SDWA, EPA is required to set national health-based standards for drinking water to
protect against both naturally occurring and manmade contaminants that may be found in
drinking water. These standards, known as the National Primary Drinking Water Regulations
(NPDWR), set both a maximum contaminant level goal (which is unenforceable) and a maximum
contaminant level (which is enforceable). At least every six years, EPA must review these
standards and make any necessary updates based on the latest health data/reports and the
ability of the best available technology to attain the specific water quality standards. Underneath
this federal legislation, each state may set and implement its own drinking water contamination
regulations, with the caveat that these standards be no less stringent than those set by EPA. For
example, California regulates the presence of aluminum in drinking water while the NPDWR do
not.
According to several vendor interviews, the current regulatory structure is too
compartmentalized and creates artificial boundaries where a unified approach to water resource
management ought to exist. Not only must vendors navigate regulation at the national, EPA
level, but also at the state level, where regulatory policies may differ greatly. Better coordination
and clarity seems a frequent request from the commercial community.
2.6 Investment activity in water innovation
Venture capitalists are increasingly looking to water for investment opportunities, though it still
remains a niche sector for venture funds. In 2011, venture capital (VC) in water and wastewater
grew 4.3% increase to $258 million (via 48 deals), up from $247 million (via 56 deals) in 2010.
While the growing trend is encouraging, to put in context, this level of investment represented
approximately 3% of total cleantech VC dollars in 2011, which is consistent with levels seen in the
past. Focusing on the fourth quarter alone, we observed VC investment grow to $104 million (via
12 deals), which accounted for 4.7% of all cleantech VC investments - an encouraging statistic.
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Venture Investment in Water (2007-2011)
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While water is increasingly a topic of interest in our discussions with venture capitalists—and
we see this trend accelerating in the next few years—for most, water has traditionally not been
a core focus (nor an area of internal expertise). Further, of the few VCs focused on the sector,
few will invest in a water deal unless there is meaningful revenue history. Both XPV and
Emerald Technology Ventures have stated so publicly. New to the space, VCs are less willing to
take on much technology, market, and most importantly, regulatory risk, feeling that it is better
to bet on a company that already has a product and customers, and just needs help to scale.
The story is notably different in the M&A market, where 2011 was a watershed year. The
number of M&A deals increased from 37 to 56, and the total transaction value (based on
disclosed amounts) went from $925 million to exceed $16 billion. This significant growth is
partially explained by two landmark acquisitions that alone totaled $12.2 billion (Ecolab bought
Nalco Holdings for $8.3 billion and Cheung Kong Infrastructure bought Northumbrian Water
Group for $3.9 billion). Another notable transaction was BASF's acquisition of Inge
Watertechnologies. Although the purchase price for this transaction was undisclosed, the deal
came on the heels of Pentair's $705 million acquisition of Norit Clean Process Technologies and
helped call attention to the membrane technologies industry.
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Finally, seven water companies went public in 2011, raising $293 million or 2.9% of total
cleantech IPOs. In comparison, 2010 water IPOs totaled $1.7 billion. The unusually strong 2010
year was on account of 6 IPOs in Asia totaling $1.5 billion. For 2011, Asian water companies
raised only $105 million, on par with the $111 million raised by water companies in North
America in 2011. Notable 2011 IPOs include Waterlogic International's listing on the Alternative
Investment Market in London (for a $78 million raise) and Global Water Resources' listing on the
Toronto Stock Exchange in Canada (for a $61 million raise).
3 Filtration
Water filtration is the process of removing particles too small to have been caught and removed
in initial coagulation or sedimentation phases of drinking water treatment. Common water
filtration methods include sand and/or pebble filters, granular activated carbon, and ion exchange
media. The most innovative filtration methods today, however, use membrane technologies. An
overview of key water filtration market drivers and challenges are highlighted below:
Drivers
• Social driver - public concern over ingesting chemically-treated water
• Regulatory driver - strict turbidity and disinfection requirements set by
EPA in surface water treatment rules
• Economic driver - improved energy efficiency of new membrane
technologies has brought down operating costs
Challenges
• Social challenge - lack of public education/trust on effectiveness of
membrane technologies (e.g., skepticism over "toilet to tap" drinking
water)
• Regulatory challenge - stringent regulations around disposal of
concentrated brine
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3.1 Market
The overall US filtration market, including equipment and services, is estimated at approximately
$2.2 billion in 2011, growing rapidly at 8.1% CAGR to reach $3.2B in 2016.8 This sizing includes an
estimated $1.1B in equipment, including membranes, media filtration, and ion-exchange systems.
Related services include design engineering support, system operations, and system maintenance
services (e.g., membrane fouling and replacement) typically average 0.75-1.25x of the overall
equipment contracts, or alternatively an additional $830M-$1,380M to the total market (or
overall sizing take the average).
Much of the growth is being fueled by innovation and increased adoption of membrane
technology. This increase is being fueled by two key factors: First, costs of ownership have
declined due to technical advances in design (e.g., higher efficiencies have led new membranes to
have lower energy and other operational costs). Second, growing distrust of chemical use has
caused a broader shift to non-chemical alternatives, such as membranes.
Barriers to market growth include the public's lack of education on the science behind membrane
treatment processes. This is typically the root cause of negative public perceptions over
applications like "toilet-to-tap" drinking water (wastewater that is treated for reuse as potable
water), which relies heavily on membrane technologies. Also, regulations surrounding the
disposal of concentrated brine—a waste byproduct of membrane treatment that can be
damaging to the environment—pose a challenge to utilities using the technology.
Globally, sand filtration is most often the preferred technology in developing countries.
Membranes, however, are gaining the most popularity particularly due to their use within the
desalination process, which is big in the Middle East and Australia. Thermal desalination is an
attractive option in the Middle East, where energy costs are low, but countries like Australia rely
heavily on membrane technologies. Strict environmental standards result in complex water
intake and discharge, however, making the desalination process an expensive one, which limits
8 Water Market USA 2011 (GWI 2010)
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growth of the membrane market in that region. As a result, Australia (and other countries, like
Singapore) will continue to explore alternatives to traditional water resources, and water reuse
trends will ensure the membrane market continues to grow.
3.2 Policy and Regulation
Water filtration technologies are often used to meet turbidity and microbial log removal
requirements set by EPA in surface water treatment rules. Microfiltration (MF) and ultrafiltration
(UF) membranes, in particular, have demonstrated the ability to reduce turbidity to less than 0.1
NTU (nephelometric turbidity units), as well as remove Giardia and Cryptosporidium.9 Water
treatment rules include Surface Water Treatment Rule, Interim Enhanced Surface Water
Treatment Rule, and the Long Term 1 and 2 Enhanced Surface Water Treatment Rules. These
rules often create higher standards for filtration, as surface water or groundwater that is under
the direct influence of surface water (GWUDI) are more vulnerable to microbial contamination.
The aforementioned surface water treatment rules are introduced below:
• The Surface Water Treatment Rule applies to all public water systems that use surface
water or GWUDI, and includes treatment technique requirements to protect against
adverse health effects associated with the presence of pathogenic organisms in drinking
water supply. Plants using filters must meet combined filter effluent turbidity
performance standards of 5 NTU as a maximum and 0.5 NTU at the 95th percentile on a
monthly basis, calculated using 4-hour monitoring data.
• The Interim Enhanced Surface Water Treatment Rule, which was finalized in December
1998, applies only to those public water systems that use surface water or GWUDI and
serve populations of 100,000 or more. The regulation is meant to improve the control of
microbial pathogens, and addresses risk tradeoffs between the presence of pathogens
and disinfection byproducts. Disinfection byproducts are the chemical compounds that
9 EPA. "Low-Pressure Membrane Filtration for Pathogen Removal: Application, Implementation, and Regulatory
Issues". April 2001.
http://www.epa.gov/ogwdw/disinfection/lt2/pdfs/report_lt2_membranefiltration.pdf
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form as a result of disinfectants reacting with naturally present compounds in source
waters. The rule reduces combined filter effluent turbidity performance standards to 1
NTU as a maximum and 0.3 NTU at the 95th percentile on a monthly basis, calculated using
4-hour monitoring data. Individual filter turbidity monitoring requirements were also
introduced, which include the submission of an "exceptions report" to the state agency on
a monthly basis.
• The Long Term 1 Enhanced Surface Water Treatment Rule was proposed in April 2000,
and extends the requirements of the Interim Enhanced Surface Water Treatment Rule to
public water systems that use surface water or GWUDI and serve fewer than 10,000
people.
• The Long Term 2 Enhanced Surface Water Treatment Rule, published in 2006, builds on
earlier rules and is targeted towards reduction of illness associated with Cryptosporidium
and other pathogenic microorganisms. This rule requires monthly monitoring of systems
(via monthly sampling for Cryptosporidium) for an initial two year period, followed by a
second round of monitoring six years after completion of initial testing. Currently,
regulations require 2-log removal of Cryptosporidium for filtered water systems, and up to
3-log removal for unfiltered water systems. Additionally, systems that access open
reservoirs must treat water to inactivate 4-log virus, 3-log Giardia lamblia, and 2-log
Cryptosporidium.
EPA also sets specific legal limits on the levels of certain contaminants in drinking water, under
the jurisdiction of Safe Drinking Water Act. These limits are determined based upon levels
needed to protect human health and that are considered achievable by water systems using the
best available technology. Arsenic, for example, is an odorless and tasteless semi-metal that is
known to cause skin damage or problems with circulatory systems, and may increase the risk of
getting cancer. Given the element's natural occurrence in the environment (presence in rocks
and soil, air, plants and animals), EPA monitors arsenic levels in drinking water. In 2001,
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acceptable arsenic levels were reduced from 50 parts per billion (ppb) to 10 ppb.10 This
prompted many water systems to seek and test a variety of new treatment technologies for
effectiveness and affordability. One water system—the Fallon-Paiute-Shoshone water system in
Nevada—tested both a pressure filtration and a coagulation/microfiltration system, and
determined the latter option was more cost-effective and suitable for their arsenic levels.
Another water system, the Coldwater Canyon Water Company in Arizona, began using Dow
Chemical Company's ADSORBIA granular titanium oxide after a full-scale pilot test. While the EPA
limits can sometimes be seen as an encumbrance to water systems due to the high capital and
operating costs often associated with treatment technologies (according to one major water
utility in Arizona), the standards clearly foster growth in advanced water filtration and
disinfection systems while also promoting safer drinking water.
3.3 Technologies
3.3.1 Products
As previously mentioned, membranes are the most common filtration techniques used in the
drinking water treatment process, and are becoming more so as costs go down and efficiencies
go up. Other filtration methods include sand/pebble filtration, granular activated carbon (GAC),
and ion exchange media.
Membranes: Membranes are thin sheets of material that act as a physical barrier to suspended
or colloidal particles present in source waters. They were first developed in 1965 for the
desalination market. These membranes—reverse osmosis membranes—fundamentally
disrupted the thermal desalination market and quickly became the leading method for removing
dissolved solids from water. Thermal desalination processes apply significant amounts of heat to
high salinity water to create water vapor, which is then condensed to form high-purity distilled
water. The particular advantage of membrane separation processes was that they operated
without this requirement for heat, and thus consumed less energy than conventional thermal
10 EPA. "Arsenic in Drinking Water",
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separation processes (distillation, sublimation, or crystallization). Over time, membrane
efficiencies have continued to improve, and the economics of operating membrane plants over
thermal plants has caused membrane technology to increase its market share.
Membrane treatment technologies are typically classified according to the size of the molecules
that they are able to filter (which is dependent on membrane pore size), and fall into two broad
categories: pressure-driven and concentration-driven. Pressure-driven processes depend on
water pressure as the driving force to separate particles based on size, and include reverse
osmosis, nanofiltration, ultrafiltration, and microfiltration membranes. In contrast,
concentration-driven processes like forward osmosis use a concentrated solution to draw water
through a membrane, effectively trading the solutes of one solution for another. Processes like
forward osmosis have typically been reserved for desalination and evaporative cooling tower
make-up water, but are slowly being introduced to drinking water systems. Key membrane
technologies are highlighted below.
• Reverse Osmosis (RO): As previously discussed, RO membranes were first introduced in
1965 as a lower cost method of treating seawater. The membranes are dense sheets of
material that technically do not have pores, thus allowing for the removal of nearly all
inorganic compounds and organic molecules. Membranes are typically found in a spiral-
wound arrangement in which layers of flat membrane sheets are rolled around a central
pipe that provides the water to be treated. Due to membrane fouling and the threat of
limiting membrane efficiency, water is nearly always pretreated to remove contaminants.
The brine, or highly concentrated residual solution once the RO process is complete, must
be disposed of carefully, as it may be detrimental to surrounding marine life and plants.
Innovation regarding RO membranes has focused on improving energy efficiency, but the
laws of thermodynamics require a minimum of 0.8 kWh/m3 of energy and have been
somewhat limiting. Currently, the best performing RO membranes utilize between 3.8 -
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4.2 kWh/ m3.1:L One industry expert estimates there is still room for about 20%
improvement in membrane efficiency before hitting a plateau.
• Microfiltration (MF)/ Ultrafiltration (UF)/Nanofiltration (NF): MF membranes have the
largest pore size, and can remove sand, silt, clay, algae, bacteria, Giardia, and
Cryptosporidium. UF membranes, with slightly smaller pore sizes, have the ability to
remove everything an MF membrane can, in addition to viruses. NF membranes, as a
result of having the smallest pore size, provide near complete protection against viruses
and most organic contaminants. These membranes, which require very high water
pressures to force water through to the other side, can also reduce hardness in water.
Since the reverse osmosis breakthrough, there has been tremendous interest in
encompassing the emergence of low pressure membranes like MF and UF in drinking
water treatment, tertiary wastewater treatment, membrane bioreactors (MBR) and
various industrial applications. In drinking water, the low pressure membranes are used
to pretreat water before going through an RO membrane, as they reduce the amount of
chemicals required to remove microorganisms and provide a guaranteed feedwater
quality, which also helps to reduce membrane fouling and corrosion. In 2010, it is
estimated that 4% of low pressure membranes were used in desalination, while 51% were
used in MBR applications, 13% in tertiary wastewater treatment, 14% in industrial
applications, and 18% in drinking water processes.12 Sales of low pressure membranes for
RO pretreatment processes are expected to increase from $45 million in 2011 to $130
million in 2016.13
• Forward Osmosis (FO): A recent spate of membrane innovation has introduced FO
processes. Like RO, FO is a membrane-based separation process that removes dissolved
solutes from a solution, but does so without requiring pumping of energy, resulting in low
energy consumption. FO and its variations in hybrid systems are projected to be
promising technologies that could have broad applications to desalination, brine disposal
11 Water Technology Markets 2010 (GWI 2009).
12 Water Technology Markets 2010 (GWI 2009).
13 Water Technology Markets 2010 (GWI 2009).
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and water treatment markets. However, the biggest obstacle to the commercialization of
FO technology is the lack of commercially available FO membranes, with existing FO sys-
tems utilizing RO membranes that have been adapted to the FO process. However, these
suffer from inherent operational limitations in FO systems. Widespread
commercialization of FO membranes is not expected to be achieved for another 3-5 years.
The next big wave of innovation in the membrane market is expected to focus on continued
efficiency improvements of existing membranes, rather than the introduction of entirely new
membrane processes. Innovators are increasingly concerned with developing more efficient
membrane filtration methods that not only control pathogens and filter a diversity of
contaminants, but do so utilizing less energy and creating fewer byproducts or waste. As the
largest impediment to the widespread adoption of membrane technologies, high energy
requirements will be a core focus of innovators, and energy costs are predicted to fall over the
next 5-10 years.
Sand filtration: Sand filters, which have existed since the early 1800's, are very effective in
treating surface water and removing viruses (e.g., Giardia) and coliform bacteria by up to 99%.
They can vary in size (i.e., length, depth) based on desired flow rate at a treatment plant. Slow
sand filtration works by passing water through a thin layer of biofilm at the top of the sand. This
gelatinous layer is typically made up of bacteria, fungi, protozoa, and a range of aquatic insect
larvae, and is what ultimately provides the purification of the water. The underlying sand serves
primarily as a support medium for this top layer. The simplicity of this technology—as it requires
no mechanical power, chemicals, or replaceable parts, and only minimal operator training-
makes it an attractive and logical solution for poor and isolated areas. However, for large
municipalities, extensive land area must be available to house the slow sand filtration system.
Another potential disadvantage of this filtration method is that slow sand filters are most efficient
with low turbidity water, which means pretreatment may be required in hot summer months or
when raw water is turbid. Despite having been studied extensively by scientists, a complete
understanding of the biological activity that occurs within sand filtration does not yet exist,
making innovation in this area difficult.
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Rapid sand filtration, on the other hand, is a physical process that requires a smaller land area,
less sand, and passes water at a much higher flow rate (up to 20 meters per hour14). Further, the
system is less sensitive to changes in raw water quality (e.g., turbidity). However, these systems
require the use of chemicals and greater maintenance (cleaning once or twice daily), making
them more costly.
Granular activated carbon (GAC): GAC is one of the most commonly used media for
adsorption—a process in which molecules from dissolved compounds collect on and adhere to an
adsorbent solid—within the drinking water treatment process. Water is passed through a
stationary bed of activated carbon, leaving organic materials to accumulate at the top of the bed,
and filtered water to move on to the next phase of water treatment. The technology, made up of
tiny clusters of carbon atoms stacked upon one another, is produced by heating a carbon source
(e.g., coal, wood, peat) in the absence of air. GAC is a particularly good adsorbent given its high
surface area to volume ratio (one gram typically has a surface area of 1,000 square meters15),
which permits the adsorption of a large number of contaminant molecules, and the subsequent
removal of toxic organic compounds to virtually non-detectable levels. For this reason, GAC is an
EPA Best Available Technology Economically Achievable (BAT)16 for disinfection byproducts,
mercury and cadmium, natural organic matter, certain synthetic organic chemicals, and
radionuclides. While this technology is sometimes considered to be one of the least expensive
treatment options, it is important to note that filters must be cleaned and/or replaced on a
regular basis. Additionally, there exists the possibility that GAC filtration systems will adsorb
nitrate during the water treatment process only to later release (at an unknown frequency) that
nitrate into treated water. Certain California water systems faced this problem and were forced
to make modifications to their GAC system or other parts of their water treatment process. For
14 WHO Seminar Pack for Drinking-Water Quality
15 Carbtrol Corporation. Granular Activated Carbon for Water & Wastewater Treatment. September 1992.
16 According to EPA, BAT is defined as: "...the best available economically achievable performance of plants in the
industrial subcategory or category. The factors considered in assessing BAT include the cost of achieving BAT
effluent reductions, the age of equipment and facilities involved, the process employed, potential process changes,
non-water quality environmental impacts, including energy requirements and other such factors as the EPA
Administrator deems appropriate."
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example, in 2002, the California Department of Health Services directed "all water systems with
GAC treatment systems to increase the nitrate monitoring frequency of the GAC effluent to at
least one sample per week."17
An adsorbent that has been raising interest in the last few years is zero valent iron (ZVI), which
has traditionally been used for groundwater remediation. The technology's ability to remove
biological contaminants, such as viruses, from water was first cited by researchers in 2005.18
Subsequently, it was shown that ZVI could also remove natural organic matter, which would help
to prevent the formation of disinfection byproducts. ZVI can be added to filtration systems as
another granular medium (along with sand or gravel), and is thought to be particularly effective
as a pretreatment to chlorination. Liberty Hydrologic Systems, a West Virginia-based company,
received seed funding from Meidlinger Partners to further the research and commercialization of
its Generation 2 Selenium Remover ZVI solution.
Ion exchange: Ion exchange refers to processing water through ion exchange resins, which are
typically bead-like and spherical in shape, where ions from the water are exchanged for ions fixed
to the resins. The two most common forms of ion exchange are softening and deionization.
Softening is often used as a pretreatment to the RO process, as water hardness can be reduced
by exchanging two sodium ions for one calcium or magnesium ion. Deionization, a process in
which hydrogen ions are exchanged for cations or hydroxyl ions are exchanged for anions, is
often used in combination with RO filtration or carbon adsorption. This is because while ion
exchange is effective at removing dissolved inorganics, it does not effectively remove chlorine or
other organic contaminants in water. Also, while ion exchange requires a relatively inexpensive
initial capital investment, operating costs over the long term can be high. A regular schedule of
inspection and cleaning is necessary to help prevent resin fouling and degradation, one of the
most common problems of using ion exchange systems.
17 http://www.safedrinkingwater.com/community/GAC_nitrate_letter_2.pdf
18 Water Research Foundation. Enhancing Removal of Viruses in Water Treatment Plants Using ZeroValent Iron
[Project #4140], July 2011.
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Since ion exchange materials were first introduced to water treatment in 1906, there have been
vast improvements in ion exchange materials. The process first used natural and synthetic
inorganic products, but further research has led to the development of sulfonated coal, styrene-
base resins, phenolic resins and acrylic resins.19 New materials continue to be explored for
increased exchange capacities.
3.3.2 Services
Often, some degree of source water-specific testing is necessary to determine effectiveness of
water filtration systems before they are installed at full-scale. For example, it is important to
confirm GAC systems have the ability to adsorb target contaminants in the raw source water, or
to understand what filtered water turbidity an operating sand filter will attain. While these tests
need not be expensive, they will require the assistance of an EPC firm.
Maintenance and cleaning of the water filtration systems can often be conducted by the
treatment plant's own employees, or by a contracted EPC firm. With the exception of membrane
systems, cleaning components of a water filtration system can be simple, but time consuming.
Sand filtration systems require backwashing (reversing the direction of the water flow) or, in the
case of slow sand filtration, a scraping of the top biological layer once it gets near 2cm in
thickness.
While not all water treatment plants currently use membranes for drinking water treatment (e.g.,
Greater Cincinnati Water Works uses sand filtration and GAC treatment, followed by
disinfection), membrane technologies are increasingly becoming key components of the
treatment process. RO membranes have been standardized in RO systems, and as a result, have
become somewhat commoditized. The variety of low pressure membranes available, however,
indicates that these suppliers have a higher level of involvement with treatment plants than RO
membrane manufacturers. Either the membranes are sold as whole systems, requiring no
additional support from the supplier, or sold as individual membranes, in which case a supplier
19 Nalco. Ion exchange processes.
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must provide engineering support to ensure that system configurations comply with membrane
warranties. Since membrane technologies are components of treatment subsystems within
larger plants, the business model employed by a number of market participants concentrates not
only on the optimization of the membrane equipment, but also on the entire subsystem.
The distinction between components and systems means that EPC (Engineering-Procurement-
Construction) service firms compete with one another to buy the same parts from the same
suppliers. As the margins for designing and building membrane treatment plants become
increasingly narrow, EPCs are broadening their role by providing operations assistance to utilities
or working with a project developer to take an equity share in the project. While there is some
scope to employ process engineering to deliver water at a lower cost, this is a not a patentable
proposition, which leads to EPCs gaining only a short-term edge in terms of cost.
3.4 Vendor landscape
The majority of US water filtration companies are located in California, including companies like
NanoH20, Pionetics, and M2 Renewables. Texas houses the next highest number of water
filtration companies, including Water Standard and Envirogen Technologies.
While there is significant innovation, the membrane market is mature and increasingly
commoditized. Market leaders are typically early movers who establish share and a brand for
quality early on. One of the biggest barriers to entry is the relatively conservative environment in
this arena, which places higher importance on US-based proven applications versus international
applications. While globalization is expected to dissolve this barrier in the long term, foreign
players currently experience difficulty in gaining market acceptance when entering the US
market. Globally, the leading RO membrane suppliers include Dow Water & Process Solutions,
Hydranautics, Toray, Koch Membrane Systems, CSM, and Toyobo. The leading low pressure
membrane suppliers include Siemens, Pall, Norit Clean Process Technologies (acquired by
Pentair), Metawater, and Inge (acquired by BASF).
32
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3.5 Venture activity
Global venture activity in water filtration dropped 37% in 2011 to $61.2 million from 2010's $96.4
million. The large majority of investments have supported companies in the membrane space.
Traditionally, these companies have relied on growing organically through proving the reliability
of their membrane solutions and building a trusted brand. Securing enough capital to carry out
these activities can be tough for new entrants. For instance, Bio Pure Technology, an Israeli
company, successfully completed two rounds of financing in 2007 and 2009, but announced
liquidation in November 2011. The company was backed by Silicon Valley-based US Venture
Partners, Israeli venture capital firm Pitango and Tel Aviv-listed technology holding company
Elron. Its main products, NF membranes and a hybrid membrane treatment system, were both
intended to treat highly contaminated wastewater from mines, agro-chemicals production, and
other industries. Without additional funding to help bring products through testing and
commercialization however, the company soon found itself seeking investors to buy its assets.
As demonstrated by the example above, one of the primary keys to the success of any membrane
technology company is the ability to build a list of referenceable clients, which requires increasing
customer access and working capital. Both of these are significant challenges for vendors without
ready access to growth capital. An attractive solution to this dilemma is merging with or
acquiring a competitor, a trend we have noticed has been increasingly popular in recent years.
In 2011, Inge Watertechnologies was acquired by BASF, a German chemical giant, for an
undisclosed sum. This move is expected to help Inge increase market share through increased
stability, re-established market focus, and deep pockets. Additional recent consolidation in the
membrane market includes Pentair's 2011 acquisition of Norit Clean Process Technologies for
$705 million, which demonstrated Pentair's desire to increase its presence in fast growth markets
like Latin America and China, where Norit is a strong player (only 15% of Norit's 2010 revenue
was from Eastern Europe and USA regions, with the remainder coming from international
markets).
33
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The venture capital funding raised by various filtration companies—most of whom focus on
membrane technologies—during the 2009-2011 period can be seen in the following chart.
Company
Country
Description
Capital raise
Round
Na noH20
USA
Developer of thin-fiIm nanocomposite membranes ideally
suited for sea water reverse osmosis desalination plants.
$40,000,000
$14,872,599
$10,000,000
Series En-
Series D
Series C
Shenzhen JeCh
Technology
China
Developer of proprietary membrane suited for munici pal
water and wastewater treatment.
$30,800,000
Series A
ItN Na novation
Germany
Ma nufacturer of na no pa rticles that are then processed i nto
high-tech ceramics for filtration systems, catalysts and
protective coatings.
$20,000,000
Growth Equity
Triton Water
Si ngapore
Assembles and installs water treatment modules ranging
from low-energy desa li nation, to water ma nagement and
wastewater systems.
Undisclosed
$15,000,000
Series B
Series A
Bio Pure
Technology(BPT)
1 s ra e 1
Developer of na no fi Itration membranes and systems for
waste water treatment.
$12,000,000
Series B
Ha loSource
USA
Developer of antimicrobia 1 coated fi 1 ter cartridge and other
drinking, recreational, and environmental water treatment
products.
$10,000,000
Growth Equity
Oasys Water
USA
Developer of a forward osmosis platform for desa li nation,
water treatment, a nd waste heat recovery.
Undisclosed
$10,000,000
Series B
Series A
1 nge AG
Germany
Developer of ultrafi Itration membra nes and modules for the
treatment of drinking water.
$6,958,000
Series C
NEP Hoidings
Malaysia
Developer and distri butor of water fi Itration systems that
utilize ceramic beads.
$5,000,000
Series A
Waterl ife 1 ndia
1 ndia
Developer of technology for water purification.
$4,163,907
Series A
Clean Filtration
Technologies
USA
Developer of a self-cleaning, maintenance-free metal
membrane used to process wastewater and produce clean,
drinking water.
$3,500,000
Series B
Likuid Nanotek
Spai n
Developer of inorganic membra nes for fi Itration processes.
$2,700,000
Growth Equity
ABS Materials
USA
Developer of a reactive glass that swells up a nd absorbs
impurities from water.
$2,400,000
$250,000
Series A
Seed
M2 Renewables
USA
Developer of fi Itration process to obtai n i rrigation-qual ity,
reusa ble water directly from raw sewage.
$2,500,000
Growth Equity
Axium Na no fibers
USA
Developer of ai r a nd water fi Iter products using nanofi ber
technologies.
$2,300,000
Series A
AquaZ
Denmark
Developer of an aquaporin membrane technology for water
purifica tion.
$1,050,000
Undisclosed
Series A
Seed
RC-lux
France
Developer of point-of-use water fi Itration systems that
uti lize hydrodynamic cavitation a nd UV treatment.
$1,195,796
Series A
na no-porous
sol utions
UK
Developers of multi-layer a dsorbent hoi low fi bre material
used in water separation and filtration processes.
$1,170,000
Seed
Advanced Hydro
USA
Developer of a technology to reduce membra ne foul ing usi ng
a deposition technique to adhere Polydopamine onto the
surface of commercial membranes.
$500,000
Seed
Li berty Hydro logic
Systems
USA
Developer of proprieta ry zero va lent iron technology to
remove selenium from water.
$500,000
Seed
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3.6 Company Profiles
For profiling purposes, recently funded US-based membrane technology vendors from various
sectors of the membrane market were selected.
• Porifera
• Oasys
• NanoH20
4 Disinfection
Disinfection is primarily used in the latter phases of the drinking water treatment process.
Disinfection agents range from chemical disinfectants, such as hypochlorite, chloramines, or
ozone, to physical disinfectants, such as ultraviolet (UV), electronic radiation, or heat. Key market
drivers and challenges are highlighted below:
Drivers
• Economic driver - applicability of certain disinfection solutions (e.g.,
UV) make it an attractive investment for facilities treating water to
multiple levels
• Regulatory driver - stringent limits on disinfection byproducts
Challenges
• Economic challenge - relative affordability and accessibility of chlorine
make it an attractive disinfection treatment
• Market challenge - costly and time-intensive processes associated with
being approved and selected as a technology provider
4.1 Market
Excluding chemicals (to maintain a focus on areas of equipment innovation), we estimate a total
market size of both equipment and related services of $2.25 billion in 2011, growing at 6.4%
CAGR to top $3 billion by 2016.20 Equipment comprises $640 million of the total market,
though the majority remainder is made up of services, which is estimated at 2-3x equipment sales
20 Water Market USA 2011 (GWI, 2010)
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(or $1.3-1.9 billion in 2011).21 This multiple is broad given the numerous attendant services
needed. In addition to the EPC services provided by contracted firms, the disinfection contracts
typically include chemical delivery and storage costs, control systems (i.e., computational fluid
dynamics), and lamp replacements.
One reason for the market growth here is that disinfection technologies have numerous
applications. Not only is disinfection the key aspect of treatment for drinking water applications,
it is equally important in myriad industrial process water and wastewater, as well as municipal
wastewater applications. The ability to treat water to various levels based on a combination of
disinfection solutions poses a significant economic benefit to utilities concerned with tightening
water quality regulations. Also, disinfection solutions are increasingly addressing the problem of
disinfection byproducts, which are now heavily regulated. Disinfection byproducts are the
chemical compounds that form as a result of disinfectants reacting with naturally present
compounds in source waters.
Barriers to market growth, however, include the cost and availability of the new disinfection
solutions. Since the discovery of disinfection byproducts, utilities have been forced to invest in
additional technologies that remove disinfection byproducts or to adopt entirely new disinfection
processes. However, chlorine is still one of the most commonly used disinfectants, and will
continue to be so due to its relative affordability and accessibility. While innovative disinfection
solutions exist, equipment vendors are not able to supply these alternate solutions as easily as
they had hoped, due to costly and time-intensive regulatory processes required to be approved
and selected as a technology provider.
Certain disinfection technologies are becoming increasingly attractive in international markets.
UV and advanced oxidation processes, for example, are coveted solutions in countries like
Singapore and Australia that are rapidly expanding their water reuse efforts. Chemicals used for
disinfection are also increasingly desired, and are facing an increased amount of competition in
the US from global competitors. One industry expert noted that Chinese companies are offering
21 Industry interviews; Cleantech Group Analysis
36
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chemical disinfectants for a fraction of the price of US providers, but that the lower price may be
associated with lower quality.
4.2 Policy and Regulation
In the seventies, scientists discovered the possible production of disinfection byproducts, such as
trihalomethanes, haloacetic acids, bromate, and chlorite, when treating water with chlorine or
other disinfectants. This discovery eventually led to the December 1998 establishment of the
Stage 1 Disinfectants/Disinfection Byproducts Rule, which aims to reduce the public's exposure to
disinfection byproducts in public water systems. The rule requires any public water system that
adds disinfectants during the water treatment process to implement additional treatment
measures to reduce the formation of disinfection byproducts and achieve specific contaminant
standards. Because of this new rule, water treatment facilities began searching for alternative
treatment methods that did not involve chemicals. The UV market in particular benefited from
the new legislation, and is expected to experience additional growth as a result of the Long Term
2 Enhanced Surface Water Treatment Rule, in which UV is listed as an option for municipalities to
comply with additional treatment requirements (see Section 3.2 for additional information).
Within LT2ESWTR, there are several requirements that address UV dosing, performance
validation testing, monitoring, reporting, and off-specification operation.
In the 1990s, the discovery of and introduction to endocrine disrupting compounds (EDCs) also
opened the door for new regulations, and consequently, innovation with regards to disinfection
solutions. EDCs are chemicals that interfere with endocrine systems to cause cancerous tumors,
birth defects, or other developmental disorders. These chemicals have been found to enter
water systems as byproducts or leachates, resulting in EPA amending the SDWA in 1996 to allow
for the screening of substances that may be found in sources of drinking water for endocrine
disruption potential.
Another crucial piece of legislation relating to the disinfection market is the Ground Water Rule,
which was published in 2006. The rule, targeted to ground water systems that are susceptible to
fecal contamination, has a goal of increasing protection against microbial pathogens. The basic
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requirements of this rule include sanitary surveys (every 3-5 years), source water monitoring,
compliance monitoring, and/or corrective actions.
Disinfection technology certification processes can also influence the competitive landscape and
available solutions. For example, UV disinfection initially experienced rapid growth after being
listed as a Best Available Control Technology by EPA in August 2009, following the 1993
Cryptosporidium outbreak in Milwaukee, Wl. The Best Available Technology (BAT) standards put
forth by EPA played a critical role in the creation and growth of the UV disinfection market in the
US. However, cost has been cited as one of the largest challenges in attaining EPA certification as
a BAT, followed by long timelines.
4.3 Technologies
4.3.1 Products
Innovation in the disinfection sector not only focuses on controlling pathogens and producing
fewer disinfection byproducts, but also on minimizing capital and operational costs. Key
disinfection technologies are highlighted below.
Chlorine: Chlorine, which is relatively cheap and easy to produce, has long been the most widely
applied disinfectant in the US, with about 90% of water utilities using it for disinfection.22
However, the discovery of chlorinated byproducts, and subsequent regulation of these
byproducts, has slowly led drinking water treatment plants to seek other alternatives. Many
plants started adding chloramine, a disinfectant formed by mixing chlorine with ammonia, as a
secondary disinfectant. In 2002, an estimated 20% of US drinking water facilities used
chloramines,23 and that number has since increased to nearly 33% of all public water systems in
22 Chlorine: the Achilles Heel? Presentation at the 2009 American Water Works Security Congress, by John
McNabb.
23 Lenntech - a Netherlands-based developer, designer, and manufacturer of water treatment plants.
http://www.lenntech.com/processes/disinfection/introduction/introduction-water-disinfection.htm
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the US.24 Chloramine is favored for its ability to produce a lower concentration of disinfection
byproducts (with the formation of little to no trihalomethanes) and its ability to persist and
remain active in water storage tanks for long periods of time. However, it has caused the
formation of new disinfection byproducts such as N-nitrosodimethylamine (NDMA), which is
leading to investigation. It is also known to be less effective than chlorine in the inactivation of E.
Coli, and has the potential to cause corrosion of lead or copper water distribution pipes in the
case of ammonia being released through chloramine's chemical interaction with water. These
limitations of chloramine allow chlorine to still be one of the most trusted methods of eliminating
water-borne pathogens and preventing reinfection during transport, storage, and distribution of
treated water.
Ultraviolet (UV): Ultraviolet disinfection is the fastest growing disinfection alternative with a 15-
20% growth rate in the municipal water and wastewater markets,25 primarily because it has the
key advantage of being a byproducts-free physical process with low chemical management costs
and safety risks. UV disinfection exposes water to short wave ultraviolet light, which is absorbed
into the nucleic acid of harmful microbes, thereby harming DNA structures and eliminating the
possibility of reproduction. The treatment solution is far more effective than chlorine in
eliminating parasites such as Cryptosporidium or Giardia. Since the 1993 Cryptosporidium
outbreak in Milwaukee, and upon being listed as a Best Available Control Technology by EPA in
August 2009, the UV market has exploded. The market is expected to continue to grow rapidly
with new regulations and the emergence of combination disinfection methods (e.g., UV +
ozonation).
Ozonation: Ozonation, the injection of ozone, is another powerful disinfectant used to treat
drinking water. Ozone is a colorless and unstable gas that is generated by air discharge, electro
analysis, and UV light radiation to kill bacteria and viruses. It is often touted for its ability to
24 Pennsylvania Department of Environmental Protection.
http://www.portal.state.pa.us/portal/server.pt/community/public_drinking_water/10549/chloramine_in_drinking_w
ater/553919#question5
25 Siemens.
http://www.water.siemens.com/en/products/chemical_feed_disinfection/ultraviolet_disinfection/Pages/trends-
uv-water-industry.aspx
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effectively eliminate pathogens and organic materials without creating byproducts, but its use is
limited by its high energy consumption and operating cost.
Peracetic acid: Peracetic acid (also known as peroxyacetic acid) is a colorless liquid that is
typically produced by a reaction between hydrogen peroxide and acetic acid. The solution poses
a health and safety hazard in high concentrations, and is therefore typically produced and sold in
12-15% solutions. The biocide oxidizes the outer cell membranes of microorganisms through an
electron transfer, and is particularly effective for deactivating viruses and spores. In fact,
treatment plants have cited the effectiveness of peracetic acid to be comparable to that of
chlorine, albeit at a much higher cost. While the solution also is gaining attention because it
forms no disinfection byproducts, its ability to destroy endocrine disruptors has recently been
called into question. Effectiveness is reportedly diminished in waters with higher pH and lower
temperatures. For these reasons, the solution has not been widely adapted to drinking water
treatment processes. Rather, it is more attractive for wastewater and combined sewer
applications, where its low degradation rate makes it more appealing than chlorine (as
intermittent rain only calls for intermittent use of the disinfectant). Further, peracetic acid
negates the use of sodium hypochlorite disinfectant and associated sodium bisulfite, and
therefore eliminates the issue of sodium ion byproducts. The cost effectiveness of peracetic acid
over sodium hypochlorite is currently being researched. The disinfectant is believed to be more
widely used in Europe than in the US.
Advanced oxidation (AO): Advanced oxidation is a process that relies on chemical oxidation to
remove contaminants from water streams, and can be a combination of technologies (e.g., UV
and ozonation). AO solutions have gained a significant amount of attention in recent years due to
their ability to degrade endocrine disruptors and similar compounds. They generate highly
reactive hydroxyl radical species, which are a powerful oxidant. The oxidants can result in
complete oxidation and mineralization of organic contaminants and break them down to carbon
dioxide, water and mineral acids. While the process has proven to be very effective in removing
emerging contaminants, it is a costly disinfection alternative for drinking water treatment plants
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as it requires higher capital and operational costs due to the use of reagents and irradiation
sources.
4.3.2 Services
The disinfection technologies deployed in water treatment plants are typically chosen in a joint
effort by EPC firms and plant owners and operators, leading them to play a large role in
promoting innovation or presenting major obstacles to deployment of new technologies. For
instance, CH2MHNI evaluates the viability of technology choices for new build facilities and wields
significant influence in supplier selection, while asset owners and private asset operators, such as
Veolia Water and United Water (Suez), are integral to the vetting and deployment of new
technologies. These firms typically show a preference for legacy, proven technologies. An
overview of these firms and services is offered in Section 2.2.
Other services related to water disinfection are sometimes necessary for monitoring and
maintenance of disinfection and dosing systems. For example, Grundfos Pumps' subsidiary
Grundfos Alldos offers technical support and training for the systems they deliver to clients. The
company employs project engineers to work with clients during any phase of installation - from
planning and layout to calculating operating costs to commissioning and maintenance of the
system. Companies offer clients these in-house services to leverage their product expertise, but
EPC firms can also be contracted.
4.4 Vendor Landscape
Just as there are a range of disinfection technologies that can be used to treat water, there are
also a range of equipment vendors that serve the municipal/utility market. In the North
American chemical disinfection space, key vendors include Nalco (recently acquired by Ecolab),
Chemtreat (a Danaher company), and Calgon Carbon Corporation. Within UV, key vendors
include ITT Wedeco, Trojan Technologies (a Danaher company), and Siemens Water
Technologies. The relatively new ozonation and advanced oxidation markets include major
players like Ozonia and APTwater. Suez (via Degremont/Ozonia), ITT Wedeco, Mitsubishi, and
Fuji have all invested heavily in ozone-based disinfection technologies. Manufacturers of
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peracetic acid include Solvay Chemicals (a Belgian company) and FMC Corporation (a US
company).
A competitive advantage in this industry is to be aware of all existing and upcoming regulations so
that solutions can allow a municipality or end user to remain in compliance at all times. Usually,
the companies that can navigate the regulatory markets and help clients to understand them are
the companies that attract the earliest and largest market share.
While vendors of disinfection technologies and solutions are located all throughout the US, the
majority of market players are found on the West Coast. In particular, vendors are located in
states such as California, which has the highest presence of disinfection companies, Oregon, and
Washington. A few companies are based on the East Coast, but in no concentrated area (Ferrate
Treatment Technologies is based in Florida while Hydro-Photon is based in Maine).
Certain states offer disinfection technology vendors increasingly attractive opportunities to pilot
or sell their products. For example, California's constant battle with water shortage issues has
caused the state to rely heavily on wastewater reuse. The wastewater in California, however, has
been found to have a high level of Total Dissolved Solids (TDS), which is a common byproduct of
water softeners. Santa Clarita Valley and Inland Empire, as a result, have recently introduced or
enforced "Softener Bans" banning residents from putting customary water softeners in their own
homes. This presents a unique selling opportunity for HydroNovation, a Santa Cruz, CA-based
company, which is developing chemical-free, low power water disinfection technology based on a
continuous electrodeionization process. The company's new HydroDI whole house water
treatment system may provide an alternative to the traditional salt-based softeners that are
commonly banned in California's residences.
4.5 Venture Activity
Global venture activity in disinfection remained relatively stable at $50.5 million in 2011
(compared to $51.3 million in 2010). In the last two years, companies providing point-of-use
disinfection solutions have seen the most funding, with Quench raising a total of $43 million and
WaterHealth raising $50 million (combined with its India subsidiary). While these deals certainly
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demonstrate impressive fundraising efforts for water treatment companies, the largest deal was
actually seen in the form of an acquisition. Ecolab, a provider of cleaning, sanitizing, food safety
and infection prevention products and services for industrial markets, acquired Nalco for $5.4
billion (or 34% above its market value on NYSE). Nalco, a provider of water disinfection and
process improvement services, will bring industrial water treatment (particularly oil drilling and
food production) to Ecolab's portfolio of services and in return, will benefit from increased access
to funds for various growth investments.
The growth of alternative disinfection technologies is demonstrated by the aforementioned
investments by global enterprises and the recent mergers and acquisitions (M&A) activity
outlined above. Additional funding (venture capital and other) raised by companies during the
2009-2011 period is outlined in the following chart.
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Com pany
Country
Description
Capital raise
Round
Quench
USA
Maker and distributor of water purification 'point-of-use'
coolers that utilize ultraviolet light technology.
$30,000,000
$13,000,000
Growth Equity
Series B
Waterleau Global
Wa ter Technology
Belgium
Provider of water treatment, processing and purification
technology and services
$27,030,000
Growth Equity
Wa terHealth
USA
India
Provider of water purification and disinfection technology to
underserved rural and peri-urban communities.
$22,100,000
$10,000,000
India $15,000,000
$2,660,998
Growth Equity
Series D
Structured Debt
Growth Equity
HaloSource
USA
Developer of anti microbial coatings and drinking water
treatment products.
$10,000,000
Growth Equity
MIOX
USA
Manufacturer of water purification equipment that uses salt
electroysis to generate chlorine disinfectant.
$5,000,000
Series C
AquaMost
USA
Developer of an advanced oxidation technology that uses
ultraviolet radiation to activate a titanium dioxide (Ti02)-
based photoactive electrode.
$3,000,000
$1,000,000
Series B
Research Grant
Clara nor
France
Developers of low-energy, zero water consumption pulsed
light disi nfectant technology.
$3,500,000
Series C
Hydro-Photon
USA
Developer of a handheld device - Steripen - that uti lizes
ultraviolet light to purify water.
$2,000,000
Series A
Clarizon
UK
Developer of an electrochemical cell technology that
generates ozone directly into water.
$950,000
Series A
Puralytics
USA
Developer of photochemical water purification technology.
$830,000
Seed
Aqua Pure
Technologies
1 s ra e 1
Developer of an advanced oxidation technology for water
treatment with focus on MTBE treatment, metal removal and
site remediation.
$720,000
Growth Equity
Wadis
1 s ra e 1
Developers of water disinfection method based on pulsed
power technology.
$500,000
Seed
APTwater
USA
Developer of ozone-based advanced oxidation technologies
that reportedly create no disinfection byproducts.
Undisclosed
Series A
Hydro Novation
USA
Developer of chemical free, low power technology to create
high purity water through a continuous electrodeionization
process.
Undisclosed
Undisclosed
Series A
Series B
Bio-UV
France
Manufacturer of ultraviolet water treatment equi pment.
Undisclosed
Growth Equity
VRTX
Technologies
USA
Provider of chemical-free water treatment for cool ing towers
and evaporative condensers.
Undisclosed
Private Equity
4.6 Company Profiles
• Purifies
• HaloSource
• MIOX
44
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5 Water Quality Monitoring
Water Quality Monitoring enables utilities to monitor water quality through the detection of
specific contaminants regulated by EPA or otherwise indicative of potential distribution network
weaknesses. This market is fast-evolving, with increasing crossover to advanced water metering
and other smart water technologies. Technology advancements in these sectors are slowly
moving market participants towards a system of total water management, which integrates
technologies to address problems faced by plant managers (e.g., water supply, water quality).
Key market drivers and challenges are highlighted below:
Drivers
• Technology driver - improved technology enables detection of
endocrine disruptors and other previously undetectable contaminants
• Social driver - threat of deliberate surface water contamination
• Market driver - aging infrastructure increases risk of mass
contamination through equipment/system failure
Challenges
• Economic challenge - high capital and labor costs
• Regulatory challenge - lack of continuous water quality monitoring
regulations and archaic water purity standards leave little incentive to
innovate
5.1 Market
We estimate the US water testing market in 2011 to be roughly $900 million across two solution
segments: (i) lab testing services and related equipment, and (ii) in-line monitoring equipment
(for supplying real time measurement along the pipe infrastructure). The lab testing services
market reached an estimated $625 million in 2011, with specialty testing equipment reaching
$160 million.26 Rough projections place the in-line monitor equipment market at $50 million,
with an additional $70 million in design and maintenance services. Global Water Intelligence
estimates a historical growth rate of 3-4% percent across the sector; assuming a similar rate going
26 Water Technology Markets 2010 (GWI 2009); Cleantech Group Analysis
45
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forward, the market is poised to reach $1 billion by 2016.27 With several drivers leading to
increased concern over water quality, we believe this is a conservative estimate.28
Utilities are not only responding to tightening regulations around the presence of endocrine
disruptors in drinking water supply, but also to the threat of deliberate surface water
contamination, which became a major concern after the 9/11 attacks in New York, NY.
Additionally, utilities are becoming more and more proactive in their management of water
plants in hopes of better managing capital expenditures. Pipe breaks, biofouling, and corrosion
are all elements of aging infrastructure that can be detected through water quality monitoring
equipment, especially when combined with other smart water technologies.
In this regard, the poor state of infrastructure in the US makes it a uniquely attractive market
opportunity, but global opportunities do exist. For global adoption, opportunities will be defined
primarily by the specific contaminants regulated in global standards, such as those set by the
World Health Organization (WHO).
Factors affecting the growth of this market include the high cost of purchasing this technology
and the high labor costs associated with employing qualified personnel that can handle the
monitoring instruments and interpret the acquired data. The expensive undertaking is difficult
for utilities to justify, especially in the absence of regulations. Market participants consistently
noted real-time water quality monitoring as an area where new requirements could directly
stimulate innovation and purchasing.
5.2 Policy and Regulation
Currently, in the US, there are no regulations around continuous water quality monitoring
throughout a plant. The closest piece of legislation has been the Public Health Security and
Bioterrorism Preparedness and Response Act of 2002 (Bioterrorism Act of 2002), which requires
27 Water Technology Markets 2010 (GWI 2009); Cleantech Group Analysis
28 We adopted a conservative estimate given a potential lag on traditional lab test services. Newer testing
solutions are increasingly being sold as self-contained systems (featuring equipment and software) that allow plant
operators to detect and identify contaminants without consulting outside specialists. One industry expert
estimates that if the newer solutions continue to be released under this business model, the service market will
eventually account for only 10-20% of equipment.
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drinking water systems of a certain size to conduct vulnerability assessments and develop or
update emergency response plans that address potential terrorist threats. Beyond this, however,
utilities lack a tangible incentive to invest in and implement water quality monitoring
technologies. Without the threat of consequences - monetary or otherwise - utilities are not
being forced to recognize the vulnerability of their water systems and are thus not prioritizing
water quality management above other measures.
Rather, regulations such as the CWA and SDWA govern quality testing of water only once it is
treated to potable standards. Existing methods of testing water quality have been around for
decades, and as such have become entrenched within the drinking water sector. While improved
testing technologies enable the detection of previously undetectable contaminants, any changes
are likely to require an upgrade of existing treatment systems and be costly for water treatment
plants. For example, the WHO set a widely accepted guideline that drinking water should not
contain more than O.Olmg/L of bromate - a level set so low that, until recently, there was no
equipment available to measure it. When an effective measurement of bromate was introduced
by the emirate of Fujairah's water utility in 2005, it discovered that bromate levels exceeded the
WHO maximum tenfold. This prompted water agencies across the Gulf region to reevaluate their
disinfection methods.
The widespread use and acceptance of existing water quality tests provides minimal incentive for
utilities to adopt technology that more accurately detects contaminants to levels outside of
regulation. Thus, while university laboratories continue to develop innovative contaminant
analysis techniques, few of these are likely to be adopted by the water industry until more
stringent water testing measures are implemented.
Additionally, the system of dual regulation (federal and state) creates a problem for innovators
concerned with the development of contaminant testing solutions, as all technologies must be
approved by both EPA and individual states before utilities can adopt them. The inherent
difficulty in obtaining such approvals places a significant cost and time burden on innovators,
consequently stifling innovation and investment in this area. For instance, one vendor of water
quality monitoring technology quoted the required allocation of $350,000 worth of staff hours to
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complete certification as the reason for refocusing efforts on the process control markets within
the chemicals and pharmaceuticals industries, where there are more predictable returns on
investment. Other vendors have noted the approval timeline, which can range anywhere from 6
months to 5 years, as overly burdensome in marketing solutions to potential clients.
5.3 Technologies
5.3.1 Products
Despite the lack of clear regulatory drivers, the water quality monitoring market has seen some
innovation primarily focused on water security-related monitoring. Innovation includes the
development and enhancement of online single-and multi-parameter sensors, optical sensors,
and various bio-sentinel type sensor solutions, which, compared to traditional sensors, provide
improved information. These technologies have been briefly outlined below.
Single- and multi-parameter sensors: These are electro-mechanical measurement devices (e.g.,
membrane, electrode, or microchip) that convert physical and chemical characteristics of water
into "signals" or measured values of parameters in real-time that can be further processed and
analyzed. Traditional single parameter sensors measure one water quality parameter at a time,
while the multi-parameter instruments can measure more than one parameter at a time. As an
alternative, companies like Hach and S-can have introduced instrument panels that include up to
7 different sensors in one integrated system.
Optical sensors: These technologies provide interpretative (versus direct) measurements of
water quality changes by monitoring variance in light refractive index, absorption, fluorescence,
and/or transmission at selected light wavelengths through the sample water volume. The
measured value in some cases is also quantified by applying specific algorithms and expressed as
equivalent measured value(s) of a specific water quality parameter such as Total Organic Carbon,
Turbidity, Nitrates, etc. Another commercially available optical sensor is capable of detecting
biological contamination using multiple angle light scattering properties of the organisms (e.g.,
JMAR). These optical sensors are gaining some deployment momentum as they require minimal
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operational maintenance and are comparable in price to the more traditional sensors. Other
vendors in this arena include S-can, Realtech, Hach, ZAPS technologies, and Optiqua.
Bio-sentinel sensors: These are biological instruments that are based on monitoring the behavior
changes of a "sentinel organism." For example, algae- or bacteria-based sensors are based on
fluorescence. In the case of an algae-based sensor, as algae are exposed to toxins, the
photosynthetic activity of the algae is suppressed, and the sensor is designed to detect these
changes and report toxic events. Other existing organism-based water toxicity sensors include
fish, bi-valves, daphnia, and genetically engineered frogs. However, operation of these bio-
sentinels requires a somewhat high level of technical expertise. Consequently, this market has
not seen the levels of market penetration or venture funding associated with other water
technologies (see Section 5.5).
Significant potential for growth in this sector lies at the nexus of water quality testing and smart
water. Where innovators of real time contaminant detection apparatus are able to relay the
information from remote sensors to a central network control center, there is a great opportunity
to create a cohesive water quality management system. This would enable utilities to monitor
water quality in real time and respond to contamination issues with immediacy. As such, there
are many parallels that can be drawn between the opportunities within the water quality
monitoring market and the system metering market. Thus, it is likely that many smart water
innovators will either move into the water quality monitoring field or, more likely, subsume water
quality monitoring into their systems to establish total water management systems.
5.3.2 Services
Laboratory testing and analysis represents the service sector of this market. Nearly half of the
testing is conducted in-house, in onsite laboratories that are a part of water and wastewater
treatment plants or industrial plants. The other half of testing is done by commercial
laboratories, most of which tend to run very small operations due to their specific geographic
focus. While there are a few major lab groups in the world, they account for less than a quarter
49
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of all water testing.29 The laboratory water testing market within the US was estimated at $600
million in 2008, accounting for just one third of the overall laboratory testing market.
5.4 Vendor landscape
Providers of water quality monitoring solutions are distributed throughout the US, with Colorado
serving as home to two of the largest manufacturers of in-line monitoring equipment, Hach
Company and Siemens, while YSI (acquired by ITT Corporation and now part of Xylem) is based in
Ohio. Other large manufacturers of testing equipment include Agilent (a Hewlett Packard spin-
off), Thermo Scientific (who acquired Dionex, another major US manufacturer of high-end lab
equipment, in May 2011), and Waters. Smaller players in this market include Fluid Imaging
Technologies and ZAPS Technologies.
5.5 Venture Activity
Despite the stifling effect of the entrenched drinking water purity standards, companies in the
water quality monitoring space have seen a healthy number of investment deals since 2009. The
size of each deal, however, is generally smaller than other sectors within the water industry. Due
to this and the fact that many companies choose not to disclose transaction values, total funding
of $1.2 million in 2011 was down from $5.5 million in 2010 despite a higher number of deals. The
largest deals have gone to companies that offer real-time monitoring and testing solutions,
indicating market appetite for established technologies that offer utilities improved (i.e., cost-
and time-efficient) ways of testing water quality. The lack of funding in innovative technologies
that monitor contaminants on an ongoing basis shows the novelty of these solutions, and it may
take time for the market to understand and appreciate their added value. It is also interesting to
note that with the exception of two deals for undisclosed amounts, all companies that raised
money are located outside of the US. Rather, the US water quality monitoring market has seen a
significant amount of movement through M&A activity and spin-offs, as described above in
Section 5.4.
29 Water Technology Markets 2010 (GWI 2009).
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While funding is extremely important to startups introducing new technologies, it is not the only
key to success. JMAR LLC, a San Diego, CA-based provider of laser-based solutions that allow for
microbiological detection of organisms in water, announced in early 2012 that the company
would lay off 80% of its workforce and cease manufacturing, selling, and upgrading of its product
on January 31, 2012. Despite attracting nearly $2.5 million of funding for two straight years and
never experiencing difficulties with its equipment, the company went through long and extensive
customer trials, which were coupled with a slow sales cycle. Rather than selling a minimum of
100 units per year, which would have allowed the company to break-even on a cash-flow basis,
the company saw fewer than 10 units sold in 2011. JMAR's inability to survive in today's
environment makes real the risk of innovative water quality monitoring companies failing as a
result of a lack of funding or market appreciation of the value these technologies can provide.
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The following chart outlines venture capital investments in the Water Quality Monitoring sector
since 2009.
Company
Country
Description
Capital raise
Round
Neosens
France
Developer of conti nuous & real-time liquid quality
monitoring & control sensors.
$5,400,000
Series B
Checkl ight
1 s ra e 1
Developer of real-time water quality testing and monitoring
kits and products.
$1,000,000
$2,000,000
$500,000
Growth Equity
Growth Equity
Minori ty 1 nvstmnt
Intell itect Water
UK
Developer of water quality sensors and instruments.
$3,300,000
Fol low-on
Aqua labo
France
A provider of instruments and probes for water quality
monitoring, checking and analysis.
$2,800,000
Growth Equity
Sorbisense
Denmark
Developer of water quality monitori ng technology for a
variety of sources includingdrains, groundwater, dri nking
water, and industrial wastewater.
$1,200,000
$461,000
Growth Equity
Growth Equity
Shaw Water
Engi neering
UK
Developer of technology to detect the presence of harmul
parasites in fresh water supplies.
$1,190,000
Seed
TACount
1 s ra e 1
Developer of a technology that a 1 lows for the detection of
microorganisims in fluids.
$600,000
$600,000
Series A
Seed
Sens-lnnov
UK
Developer of sensors for water pol 1 ution.
$640,000
Seed
Zaps Technology
Spain
Producer of on-l ine, rea l-ti me, green water composition
monitoring equipment.
$569,596
Series A
En Print
UK
Developer of applied DNA fi ngerprinting technology to
deliver an accurate assesment of water quality.
$248,400
Seed
BiAqua
Netherlands
Developer of bio-based contamination detection in water
treatment.
Undisclosed
Series A
SecureWaters
USA
Manufacturer of a front-end electronic monitor/a 1 arm system
that offers continuous protection of drinking water sources
by measuring changes in aIgae characteristics.
Undisclosed
Seed
American Micro
Dectection
Systems
USA
Developer of a system that detects toxic metals in water
networks.
Undisclosed
Mi nori ty
Investment
5.6 Company Profiles
We profile four the following three companies due to their innovative technology.
• SecureWaters
• OndaVia
• ENDETEC
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6 Smart Water Metering
Water meters collect and register information on the volume of water used over a period of time
at a particular location, allowing utilities to accurately monitor water usage and bill end users.
Smart water meters go one step further, with the ability to help utilities identify and mitigate
instances of inaccurate water metering, improperly sized and typed water meters, billing system
errors, and theft of service. The sector has gained special attention in recent years as utilities face
decreased levels of federal funding, and are therefore more concerned with capturing all possible
revenue from the distribution of treated water. Key market drivers and challenges are
highlighted below:
Drivers
• Economic driver - utilities want to reduce/eliminate non-revenue
water (water lost due to unmetered users, faulty meters, or
undetected leaks)
• Technology driver - improved efficiency through real-time detection of
system leakage
• Technology driver - proven successful implementations of transferable
technology within the energy and technology markets
• Social driver - data enables better understanding of water usage and
therefore can promote water conservation
Challenges
• Economic challenge - high capital costs and labor costs associated with
installation and maintenance of smart water meters
• Social challenge - reluctance of end users to invest where tariffs are set
below the cost of services
6.1 Market
While dwarfed by the rollout of electric smart meters, smart water meters are starting to gain
traction in the US and the market is poised for steady growth. We estimate a current market size
of $640M growing at 9.3% CAGR to approach a $1B by 2016.30 Related equipment (including
30 Water Market USA 2011 (GWI 2010), The World Market for Water Meters - 2011 (IMS Research); Cleantech
Group Analysis
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meters, communication modules, and networking equipment for deployments) are estimated at
$310 million in 2011, with meter planning and deployment services—including program
management, network planning and installation, and systems integration— an additional 0.5-1.Ox
on equipment sales (or $160-$310 million).
Utilities are becoming more inclined to invest in smart water meters and incorporate them in
future fixed network infrastructure, particularly as the price of two-way meters gradually
decreases and becomes comparable to one-way meters. This upgrade will provide utilities and
end users with more data on water consumption patterns, and therefore may stimulate more
effective water conservation programs. These types of programs have received an increasing
amount of attention especially as the growing world population makes water scarcity a real
concern. Additionally, the water industry is starting to develop analogous needs to the electricity
industry, where rising energy prices and the desire of both consumers and utilities to better
manage electricity use has been the driving force behind deploying more advanced metering
infrastructure in the electric grid.
When examining the rollout of smart electricity meters and the level of resistance electric utilities
faced, it can be seen that public acceptance of smart water meters has the potential to pose a
barrier to growth. Some public misconceptions regarding electricity meters are not applicable to
smart water meters, such as increased exposure to radio and electromagnetic waves, while
others are more relevant. For example, water utility customers have voiced concerns over
compromised personal privacy and potential rate increases. Water utilities will need to address
and debunk these myths in order to successfully rollout smart water meters.
The North American market for smart water meters is attractive due to the absence of a
regulated water meter replacement rate (as seen in parts of Europe) and high manual labor costs
(which further justify the move to automated meter reading). Currently the largest market for
advanced metering, North America accounted for over 65% of global advanced water meter
shipments in 2010.31 As the penetration of advanced water metering increases, global
31 The World Market for Water Meters- 2011 (IMS Research)
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opportunities do exist, but it will take a number of years for the international AMR market to
reach that of North America. The global AMR market was estimated at about 5.5 million global
shipments in 2010, totaling over $500 million in revenue, and is expected to increase to nearly 10
million by 2016.32
6.2 Policy and Regulation
There are currently no regulations around traditional water metering in the US, as the technology
is mainly concerned with data gathering and analysis—actions that are outside of water quality.
Though many municipalities are challenged by EPA to conduct infrastructure upgrades to
maintain system performance and ensure system enhancements in order to continue to
maximize utility and city services.
6.3 Technologies
6.3.1 Products
Water meters are standalone devices composed of metal and/or plastic, and typically range in
size from 5/8" to 2" in diameter for residential and commercial customers.33 Historically, meters
were read via the "eyeball" approach, in which a meter reader would physically go to the meter,
estimate usage based on what is displayed on the meter's register, and record this information on
a paper form that is later transferred to a utility's billing system. This labor-intensive and
relatively inaccurate process would occur at least every quarter, but sometimes every month.
Since then, the method has evolved to "walk-by" meter readings, which allow a meter reader to
use a handheld computer device to read and record water usage information. Gradually,
however, utilities are moving to smart water meters, which can communicate directly with water
utilities and allow for meter readings on demand. Smart water meters consist of automated
meter reading (AMR) and advanced metering infrastructure (AMI).
32 The World Market for Water Meters - 2011 (IMS Research)
33 https://media.blackhat.com/bh-us-ll/McNabb/BH_US_ll_McNabb_Wireless_Water_Meter_WP.pdf
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Automated Meter Reading (AMR): AMR meters integrate communication units to transmit data
in at least one direction. Most AMR meters are radio frequency (RF) devices that are read by
drive-by or handheld receivers. These meters transmit data in near real-time usage, with up to
tens of thousands of data transmissions possible in one day. This frequent broadcasting of data
ensures utility workers in close proximity to the meters can collect the information at virtually any
time. The automated process helps to reduce a utility's operational and maintenance costs and
to increase billable water usage. These meters have only slowly (albeit steadily) been replacing
legacy meters that require access to private homes for visual inspection and meter reading, as
funding is a significant challenge for utilities. It is estimated that approximately 25% of the 90-92
million water meters currently in use in the US have been outfitted with AMR functionality.34
Advanced Metering Infrastructure (AMI): The second generation of AMR meters, known as AMI,
allow for bi-directional communication to and from the meter primarily over fixed wireless
networks. These meters typically transmit stored readings once a day, but have the capability to
send readings on demand when prompted by a utility. The investment case for AMI has not yet
been compelling for most water utilities, despite the promise of enabling utilities and consumers
to better understand water usage and the operational benefit of enabling utilities to more
accurately identify leaks and other operational problems. We estimate that only 10% of AMR
units deployed by water utilities would be classified as AMI. In comparison, AMI deployments
have seen fast adoption amongst electric utilities that received project funding through the
American Recovery and Reinvestment Act of 2009. By 2010, electric utilities had deployed
approximately 20 million AMI units.35 The one benefit of this delayed deployment is that AMI
technology continues to mature through its deployment by electric and gas utilities. In the
electricity space, mobile AMR systems cannot support daily collection of time-of-use data or
remote meter reprogramming, causing more and more utilities to shift to AMI meters.
Fortunately, many electric AMI systems are designed to support water utility metering. It is
34 Dr. Howard Scott, Managing Director of Cognyst Consulting
35 2010 U.S. Smart Grid Vendor Ecosystem Report (Cleantech Group)
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expected that reliability of AMI meters will increase over time arid costs will decline, enabling
water utilities to reap these benefits in future implementations.
The adoption estimates outlined above are irt line with a recent water utility study published by
Oracle, The study found that only 7% of water utilities have implemented a smart meter program
with an additional 7% in pilot phases, while 64% had not yet even considered a smart water
meter program.
, 3% are unsure
have assessed
or implemented
a smart meter
program
How far along is your program?
7%
have fully implemented 3
smart meter program
7%
nave implemented a smart
meter pitot program
7%
nave prepared a strategic
plan for adoption
¦
have assessed the
opportunity for a smart
meter program
Larger water utilities (100 employees or more) are more than twice as likely as smaller water utilities (less
than 20 employees) to consider or implement smart meter technologies - 59% to 26%, respectively
Source: Oracle, Environmental Leader
6.3.2 Services
Many of the companies that offer smart water metering solutions will take care of the installation
and maintenance services, eliminating the need to involve EPC or design engineering firms. To
collect data, city workers may be employed for remote meter readings from their vehicle. Once
the data is collected, utilities must employ skilled engineers to monitor and analyze the data.
These engineers are responsible for identifying accounts that appear to have either abnormally
high or low billed usage or accounts that generate conditional alarms caused by periodic spikes in
daily usage.
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Many utilities may choose to implement a meter data management (MDM) program to assist
their engineers analyze and use meter data. MDM systems perform long term storage and
management of the vast quantities of data that are captured by AMR and AMI devices. While
many meter providers offer MDM solutions, some equipment providers will refer clients to
outside companies. Major MDM system providers in the US include Aclara, eMeter, and Ecologic
Analytics. Itron and Oracle are two MDM system providers that also sell water meters.
6.4 Vendor landscape
Within the US water metering market, we have seen dominance by a small number of large,
established vendors. Badger Meter, Neptune, and Master Meter account for the majority of
automated meter deployments. Itron, Elster, and Sensus are thought to be the global leaders
with 14% market share each.36
Also, companies like Silver Spring Networks and Trilliant, which do not manufacture meters but
rather focus on communication units, are partnering with vendors that integrate communication
units into water meter hardware (e.g., Itron, GE, and Landis+Gyr). These companies have
primarily targeted electric utilities, but are beginning to penetrate the water market due to the
relative ease of transferring technology between the two sectors.
Large IT players including Cisco, IBM, and Oracle are also increasingly interested in the water
business and the opportunity to exploit the convergence between IT and water—specifically
where data aggregation, management, and control are concerned. Yet some water industry
veterans argue that there is a limit to the role of IT in water, where environments are harsh and
regulation is extremely thick.
There is no one region of the US that boasts a concentrated presence of water meter vendors. In
fact, both the West Coast and East Coast have an equal showing of meaningful technology
providers, with Itron and On-Ramp Wireless in Washington and California, respectively, and
Bentley, Sensus, and Elster AMCO in Pennsylvania, North Carolina, and Florida, respectively. The
36 Water Technology Markets 2010 (GWI 2009).
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South also houses technology vendors, with Capstone Metering and Master Meter both located
in Texas.
6.5 Venture activity
Globally, smart water has seen a rapid increase in the amount of VC funding going to the sector -
2011's total $27.7 million was 59% higher than 2010's total $17.4 million. Specifically within the
water metering sector the majority of investment activity has been aimed at providing seed
funding for new entrants (with the exception of i20 Water). This is consistent with expectations,
as many of the large providers of smart water metering solutions are well-established smart grid
companies that are not seeking funding, but rather focus on partnerships or M&A transactions.
The fact that so many new entrants have been able to secure financing is further indication that
the smart water industry is on the verge of taking off. Venture funding for smart water metering
companies, starting from 2009, is shown in the table below. It should be noted that the venture
capital funding catalogued below only covers investment in companies that operate entirely in
the water sector.
Company
Country
Description
Capital raise
Round
i 20 Water
UK
Developer of a smart metering and pressure control system
ensuring the average zone pressure in the pipes is kept to
the minimum required, leading to reduced leaks and bursts.
$15,700,000
$6,350,000
Series C
Series B
On-Ramp
Wireless
USA
Developer of wireless communication systems for the water,
smart grid and other industries that allow device
communication in hard to reach environments.
$11,500,000
$4,500,000
Series B
Series A
Ikor Metering
Spain
Provider of water and gas metering products.
$1,900,000
Seed
Aquacue
USA
Provider of water meter monitor and Internet-based water
use efficiency solutions to monitor and compare water use.
$1,000,000
Series A
Wa terSmart
Software
USA
Provider of software and services to utilities aimed at
providing customer access to water use information and
water saving solutions.
$900,000
Seed
Hydros pin
1 s ra e 1
Developer of inside pipe generator that supplies electricity
for water monitoring and control systems.
$500,000
Seed
TaKaDu
1 s ra e 1
Provider of a web based platform that monitors water
distribution networks.
Undisclosed
Undisclosed
Series B
Series A
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6.6 Company Profiles
We have selected the following four companies for profiling on the basis of their innovative
technologies and recent venture appetite for their product:
• On-Ramp Wireless
• Capstone Metering
• TaKaDu
• Aquarius Spectrum
7 Infrastructure Assessment
In its 2009 Report Card of America's Infrastructure, the American Society of Civil Engineers (ASCE)
awarded the US network of drinking water and wastewater systems a D-.37 Leaking pipes in the
US result in 7 billion gallons of clean drinking water lost each day, equating to 18% of all treated
water. This can be monetized as a real loss of approximately $7 billion per year.38 To address this
problem, utilities may choose to implement smart water meters or condition assessment
solutions, or a combination of the two. Condition assessment technology checks the integrity of
buried drinking water mains and allows a utility to identify which pipes are in worst condition and
should therefore be replaced first. The vast room for improvement of water utility distribution
systems signifies vast market growth opportunity for condition assessment vendors. Key market
drivers and challenges are highlighted below:
37 2009 Report Card on Infrastructure (American Society of Civil Engineers).
http://www.infrastructurereportcard.org/fact-sheet/drinking-water;
http://www.infrastructurereportcard.org/fact-sheet/wastewater
38 Water Technology Markets 2010 (GWI 2009).
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Drivers
• Economic driver - allows utilities to be more cost-efficient with
infrastructure repairs
• Economic driver - reduces loss of non-revenue water
• Economic driver - water captured through pipe repairs is more
economic than finding new water source through dam, reservoir, etc.
• Social driver - water scarcity concerns
Challenges
• Technology challenge - utilities are hesitant to deploy any technologies
that may potentially disrupt water distribution services or quality
7.1 Market
The overall infrastructure market (including pipes, pumps, and valves) is very large, reaching
$12.4 billion in 2011.39 Moreover, site work and rehab services introduce another $13.4 billion
of expenditures on the market. Given this vast backdrop of infrastructure spend and related
services, it is no surprise we are seeing innovation solutions to address it, including our focus in
this section: infrastructure assessment.
With extensive real loss from underperforming water infrastructure, there exists significant
market potential for those who can efficiently identify problems. Based on projected overall
infrastructure spend and interviews with key condition assessment vendors, we estimate the US
water infrastructure assessment market to be roughly $260 million in 2011, across two solution
segments: (i) condition assessment tools and other related equipment, and (ii) engineering
services (to conduct the assessment). The equipment market is estimated at nearly $50 million,
with utilities often leasing equipment from vendors. Contracted services account for the
remaining $210 million, in which utilities retain engineering consulting firms or technology
vendors' engineers to perform assessments.
In addition to pure water loss, public health concerns are increasingly becoming a key concern, as
leaky pipes pose the threat of introducing external contaminants while transporting treated
39 Water Market USA 2011 (GWI, 2010)
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water. In the event a water-borne illness is introduced, it could result in increased medical
expenditures for households or decreased labor productivity given necessary use of sick days.
Utilities would inevitably be blamed for neglecting water infrastructure, resulting in negative
press (which is often cited as a utility's worst fear). Also, promoting the growth of this market is
the fact that by identifying and fixing leaks within the distribution network, plants can reduce or
eliminate the loss of unaccounted for water that has undergone expensive treatment processes.
In addition, they can better assess asset values and understand remaining useful life of these
assets, allowing for more effective management of their budget. These typically cash-strapped
utilities, when faced with the task of replacing water mains on a periodic basis, are predicted to
start turning more readily to condition assessment solutions in order to identify the most
effective repairs. According to ITT's nationwide "Value of Water" Survey, there are numerous
instances in which pipes meant to last for 50-75 years have been in operation for 100 years or
more.40
A barrier, however, is utilities' lack of education on condition assessment technologies. Despite
the fact that condition assessment technologies can help alleviate the consequences associated
with failure of a given pipe, utilities are yet to set these technologies as a funding priority for fear
of disrupted water supply for end users. Although some technologies do require pipes to be out
of service, emptied and cleaned, innovators have developed a number of non-disruptive solutions
that do not affect water distribution. Some utilities have even voiced concerns regarding
potential contamination of treated water supplies from introducing inspection tools into
operational mains. Additionally, it is nearly impossible for utilities to make true cost/benefit
decisions regarding adoption of this technology due to the difficulty in quantifying the immediate
value of information gathered through condition assessments.
In the England and Wales region, water loss is a serious concern, and Ofwat, the water regulator,
has made significant efforts to collect statistics around water leaks. Using this data, Ofwat
40 ITT Value of Water Survey, 2011.
http://www.itt.com/valueofwater/media/ITT%20Value%20of%20Water%20Survey.pdf
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managed to curb water loss nearly 30% from 1995 - 2005.41 Outside of the US, Australia leads
the globe in matching England and Wales' data tracking efforts of water leakages, therefore
positioning itself as an attractive and open market for condition assessment technologies.
7.2 Policy and Regulation
Federal drinking water standards motivate drinking water plants to consider regular upgrades to
infrastructure. Wastewater plants, however, are subject to regulation in the form of EPA consent
decrees, which, in one primary interview, were referred to as "administrative nightmares".
Consent decrees are a regulatory tool used by EPA to take legal actions against large polluters.
With an estimated 900 billion gallons of untreated wastewater discharged every year as a result
of leaky pipes and inadequate capacity42, it is no surprise that nearly 28% of U.S public water
systems had at least one significant EPA violation reported in 2009.43 Utilities have recently
become more proactive in the maintenance of their systems in order to decrease the mental
stress and financial liability of consent decrees.
If utilities choose to undergo water mains rehabilitation, there are certain standards that must be
met. For example, NSF/ANSI Standard 61 establishes "minimum health effects requirements for
materials, components, products, or systems that contact drinking water, drinking water
treatment chemicals, or both." The standard covers pipes and other mechanical devices used in
water distribution, resulting in utilities selecting vendors that offer products specially designed to
meet these various standards.
41"Turning losses into gains". Global Water Intelligence, December 2006.
http://www.globalwaterintel.eom/archive/7/12/market-insight/turning-losses-into-gains.html
42 Failure to Act: The Economic Impact of Current Investment Trends in Water & Wastewater Treatment
Infrastructure (American Society of Civil Engineers).
http://www.asce.org/uploadedFiles/lnfrastructure/Failure_to_Act/ASCE%20WATER%20REPORT%20FINAL.pdf
43 http://www.epa.gov/compliance/resources/reports/accomplishments/sdwa/sdwacom2009.pdf
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7.3 Technologies
7.3.1 Products
Condition assessment technologies can be indirect or direct. Indirect methods do not require
access to water mains and largely include the analysis of historical data (e.g., failures, water
audits, and flow tests) rather than the use of physical equipment. In contrast, direct methods
engage and collect data from internal and/or external surfaces of the water distribution network,
producing a higher level of detail, timeliness, and confidence in condition assessment results.
Popular direct solutions include cameras, closed circuit television (CCTV) and acoustic leak
detection technologies.
Since water pipeline systems are comprised of different types of pipe (e.g., concrete, metallic)
buried in variable surroundings, different solutions may target different markets. Solutions that
can be easily inserted and retrieved from a pipeline, and can assess the quality and condition of
various pipes without interrupting water distribution services, will enjoy the most success. The
conservative nature of utilities, who understandably cite disruption of water delivery as one of
their main concerns, view these as significant competitive advantages for any condition
assessment technology provider.
Closed circuit television (CCTV): CCTV, a commonly used tool for inspecting pipes, involves a
video camera that moves through a distribution network and records the condition of interior
pipe surfaces. A drawback to this technology is that only the pipe surface above the waterline is
captured on record. Additionally, this can be an expensive solution due to the necessity of
cleaning pipes before inserting the video camera. Costs increase with the depth of the
distribution network due to longer set-up times required and longer cables needed to reach pipes
from the surface. Sonar images are increasingly being used in conjunction with CCTV, as they
allow users to inspect pipes below the water line, providing a complete picture of the piping
system.
Cameras: Cameras are another well-established and common method of condition assessment.
Cameras can be mounted on trucks, and are often equipped with long-range zoom lens and
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powerful halogen spotlights. Cameras are now also available with side-scanning features,
increased zoom inspection, and image stabilization capabilities, making them an attractive option.
Additionally, as they do not require pipes to be pre-cleaned, they are a lower cost alternative to
CCTV.
Acoustic: Acoustic technologies detect signals emitted due to pipe defects. While acoustic
technologies can vary based on inspection purposes, some of the more popular technologies
include sonar or ultrasonic. These technologies gauge the velocity of high frequency sound waves
within a pipe, and any signal-specific changes in transmission or propagation velocity, to
determine the presence of any defects.
Ground Penetrating Radar (GPR): GPR emits radio waves into the ground and measures the
strength and delay of resulting echoes (or refraction waves). This technology is used more often
for leak identification, as radio waves are slowed down by saturated soil, than for condition
assessment.
7.3.2 Services
Often, technology vendors will directly interact with utilities to pilot and sell their solutions, and
then continue in the role of an engineering firm to implement and conduct the condition
assessment. For example, Pure Technologies, a Calgary, Canada-based provider of technologies
for water pipe inspection, monitoring and management of water infrastructure, typically offers
utilities a combination of technology and engineering services. The company works side-by-side
with a client to monitor pipes and identify leaks in what could be a multi-year commitment. The
company also offers one-off services, meaning utilities can choose to retain Pure Technologies
solely for its leak detection technology or for its services.
In instances when only technology is bought, utilities may choose to engage a separate consulting
or engineering firm, such as Black & Veatch, to perform the condition assessment. Black &
Veatch has completed a number of important condition assessment studies on strategic large
diameter water mains both in the US as well as overseas.
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7.4 Vendor landscape
Key vendors of condition assessment solutions include Fluid Conservation Systems (a Halma
company), Echologics (a Mueller company), In-Pipe Technology, RedZone Robotics, and Pure
Technologies (who acquired Pressure Pipe Inspection Company in 2010 and Electromechanical
Technologies in 2011). Many technology vendors target specific types of pipes and ultimately
strive to be a leader in that sector. For example, Pure Technologies focuses its condition
assessment technology on large diameter pipelines. The company plans to move into condition
assessment solutions for other pipe types, largely through acquisitions.
While infrastructure needs generally tend to parallel population increases and greater economic
activity, as seen in certain parts of the West Coast and Southeast regions, solutions vendors are
not as strategically located. Some of the largest vendors are based in the Northeast region and in
close proximity to Ontario, Canada.
7.5 Venture activity
While VC funding for infrastructure assessment companies grew to $27.7 million in 2011, from
$5.1 million in 2010, this is not indicative of a new trend we expect to see in the sector. RedZone
Robotics, a sewer pipeline inspection company, saw a $25 million financing round that accounted
for the large majority of 2011 VC activity. A trend that is worth noting, however, is that much of
the large financing activity in the Infrastructure Management sector has gone to service providers
that work with utilities to optimize water management operations. When taking a look
specifically at condition assessment equipment providers, investment activity is more in line with
that of Water Metering, a closely related sector.
Due to the fragmented nature of this market (as solutions are commonly tailored to specific types
of pipes and distribution systems), M&A activity is particularly strong. As previously noted,
Canadian-based Pure Technologies acquired Emerald Technology Ventures-backed Pressure Pipe
Inspection Co. (PPIC) to broaden its international exposure. PPIC currently has customers not
only in North America but also in South America, the Philippines and Hong Kong. More recently,
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Pure Technologies acquired Electromechanic Technologies to move into the metallic pipe
assessment space.
Company
Country
Description
Capital raise
Round
Hyflux
Singapore
Provider of integrated water management and environmental
solutions.
$116,000,000
Project Finance
RedZone Robotics
USA
Provider of sewer pipeline inspection products and services.
$8,500,000
$25,000,000
Undisclosed
Series D
Series C
Structured Debt
i20 Water
UK
Water technology vendor addressing water leakage and
advanced pressure management for utilities.
$15,700,000
$6,350,000
Series C
Series B
Pratibha
Industries
India
Provider of integrated water transmission & distribution
projects, water treatment plants, elevated and underground
reservoirs.
$11,250,000
Private Equity
SMS Paryavaran
India
Provider of water transmission, treatment, storage and
distribution solutions.
$8,700,000
Growth Equity
Insituform
Technologies
USA
Provider of technologies and services for rehabilitating
sewer, water, energy and mining piping systems and the
corrosion protection of industrial pipelines.
$4,000,000
$2,500,000
Series B
Series A
Hydrelis
France
Developer of leak detection systems and water management
systems.
$4,632,977
Series A
Syri n i x
UK
Developer of leak detection systems on trunk main water
distribution networks, allowing a repair to be made before
the pipe fails catastrophically.
$900,000
Seed
Curapipe Systems
1 s ra e 1
Developer of a leak curing solution for buried pipelines,
primarily within urban water distribution networks that
constantly leak.
$725,422
Series A
Aquarius
Spectrum
1 s ra e 1
Developer of online water leak detection systems for
municipalities.
$280,000
$500,000
Seed
Seed
SPC Tech
1 s ra e 1
Developer of smart pressure control system to prevent leaks
in water systems.
$500,000
Seed
Echologics
Canada
Developer of acoustic technologies to detect and locate
leaks in fluid delivery pipeline.
$500,000
Seed
Pressure Pipe
Inspection
Company (PPIC)
Canada
Developer of patented technologies to evaluatewater
infrastructure to reduce water losses, avoid catastrophic
pipeline failures, and meet regulations.
Undisclosed
Series A
TaKaDu
1 s ra e 1
Provider of a web-based platform that monitors water
distribution networks, enabling utilities to detect leaks and
other inefficiencies.
Undisclosed
Undisclosed
Series A
Series B
7.6 Company profiles
• Echologics
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• Pure Technologies
• RedZone Robotics
8 Water Reuse
Wastewater is currently a $44 billion market in the US.44 General municipal wastewater
treatment methods, which include a combination of physical, chemical, and biological methods,
have remained relatively the same throughout the years. Treatment typically involves 3 levels:
primary, secondary, and tertiary.
Primary treatment is meant to produce an effluent suitable for biological treatment. This step
often consists of temporarily holding sewage in a dormant basin to allow heavy solids to settle to
the bottom while oil, grease and lighter solids float to the surface. The settled and floating
materials are removed and the remaining liquid is discharged or subjected to secondary
treatment. During the secondary treatment phase, the wastewater is treated through biological
oxidation to remove dissolved and suspended biological matters. This step may require a
separation process to remove microorganisms from the treated water prior to discharge or
tertiary treatment. Tertiary treatment uses additional physical, chemical or biological means to
further improve the effluent quality. This step typically uses some form of filtration.
Innovation in this sector is largely defined by the emergence of reused water, which refers to
reclaimed water that is collected, treated, and used without being released back into the natural
water cycle. Water reuse has emerged as an attractive solution to the looming water crisis; as
water consumption rates increase around the world, so does the availability of wastewater as a
resource. Municipalities often cite stringent regulatory concerns, economic factors, and lack of
potable water supplies as the main drivers of the reuse market.
Industrial wastewater treatment, on the other hand, has seen more advancement as effluent
quality limitations have become more stringent. As a result, demand for products such as
advanced membrane systems, disinfection equipment, and specialty chemicals has increased. As
44 See Section 2.1 - The US Water Market
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more and more companies find themselves investing higher dollars in additional treatment
requirements to satisfy existing discharge quality limits, the benefits of reusing this highly treated
water are becoming more and more apparent. Other factors promoting the concept of water
reuse include the rising price of fresh water and increasingly limited access to water resources,
which is thwarting growth plans. Industrial reuse is explored in more detail in the "Water Reuse"
section below.
While the concept of water reuse has been around for decades, it has most typically served only
the irrigation and industrial markets. A breakdown of existing applications of reused water
include agricultural and landscape irrigation, industrial use (e.g., boiler feed water, facility cooling,
process water), ground water storage and recovery and salt intrusion barriers in coastal
communities. Very little reused water is currently leveraged for either direct or indirect potable
use (high quality water), despite these being areas that represent big market opportunities. Key
market drivers and challenges are highlighted below:
Drivers
• Environmental driver - provides sustainable and weather-independent
water provision
• Economic driver - increasing cost advantages over desalination and
other supply alternatives (e.g., new dams, new reservoirs, new "purple
pipe" distribution systems)
• Regulatory driver - government policies (e.g., California)
Challenges
• Social challenge - negative public perception causes delays, design
complications and cost overruns
• Economic challenge - standalone unit economics for reuse projects not
always compelling
• Technology challenge - reuse projects tend to be unique based on
various project-specific requirements (e.g., treatment of specific inflow
contaminants, final water quality requirements, peak flow
requirements, cost constraints, regulatory standards)
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8.1 Market
Given the significant overlap of reuse technologies with wastewater technologies and treatment
processes, it is difficult to cleanly segregate and size the water reuse market. Based on data of
existing reuse projects, their combined capacities, and projected growth rates in the usage of
reused water, the North American market is estimate to be $1 billion in 2011.45 This market is
projected to grow at a rapid 10.4% per year to top $1.6 billion by 2016,46 as restrictions on
potable reuse are relaxed and public perception around the use of reused water continues to
evolve. Approximately $450 million of the current spend relates the equipment; the remaining
$550 million owing to related services.
Several other factors will contribute to the growth of this market. For example, the economics of
reuse plants are financially attractive. While improvements in membrane technologies have
increased the cost-efficiency of desalination, reuse is still largely considered to be the cheaper
alternative. It also has the added benefit of presenting a new revenue stream for typically
financially-constrained wastewater plants. Additionally, implementing reuse systems in existing
wastewater treatment plants eliminates the need to raise financing or identify land for new
reservoirs or distribution systems for cities faced with urbanization. Urbanization poses a new
challenge of developing water resources to meet a city's needs in the face of insufficient space for
reservoirs or pipelines to transport water to new suburbs. Finally, reuse has the potential to
enhance landscaping associated with improved river quality, as wastewater is no longer being
discharged at the same rate.
There are also many barriers to the growth of the reuse industry. Public acceptance has been one
of the largest impediments to market growth, as the concept of water reuse is still commonly
referred to as "Toilet to Tap." The negative views on reusing water for direct or indirect potable
use is largely attributable to lack of education and understanding of the treatment processes
involved, as all municipal water treatment plants are legally required to meet stringent effluent
limits that meet the needs of the receiving source. To help residents and opponents get over the
45 Water Market USA 2011 (GWI).
46 Water Market USA 2011 (GWI).
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psychological hurdle of drinking treated sewage water, San Diego offers tours of its Advanced
Water Purification Facility. Visitors can get an up-close look at the facility's water treatment
process, which includes microfiltration/ultrafiltration, reverse osmosis, and advanced oxidation
with ultraviolet disinfection and hydrogen peroxide. At the end of the tour, visitors are
encouraged to sample and compare existing drinking water and purified recycled water from the
facility. Financing also serves as a barrier, as revenue generated from selling reused water is an
important source of funds for utilities, but not enough by itself to support the investment.
Utilities that rely on pricing to recover a portion (if not all) of the costs of implementing reuse
within the wastewater treatment process are often limited by the basis of setting reused water
rates at a percentage of drinking water rates. According to a survey conducted by HDR (a global
EPC firm) in 2009, in which 26 US utilities participated, nearly 70% of respondents stated they
were not able to cover 100% of annual operating costs via sales revenue from reused water.47
These figures are strikingly similar to an AWWA survey in 2007, which showed nearly 75% of
respondents unable to recover full operating costs through reused water revenues. While pricing
reused water below that of drinking water may or may not help to overcome the public
perception barrier and encourage its use, passing the entire cost of reused water through to
customers would indeed be directly prohibitive to its use. To promote reuse, municipalities may
award subsidies that enable utilities to justify investment in reuse technologies. For example, the
Metropolitan Water District in Los Angeles, California disburses up to $0.17 per m3 of reused
water manufactured and utilized within its members' jurisdiction, thus posing the double benefit
of receiving a subsidy and not having to purchase costly water from the MWD.48 Some utilities
may wish to rely on government bonds like the Clean Water State Revolving Fund programs to
fund their reuse upgrades. However, only 1% of the $74 billion in financing provided through
FY2009 has gone towards stormwater/recycled water projects.49
In the seven year span from 2009 to 2016, the global installed capacity of high quality water reuse
plants is expected to experience an 18% compound annual growth rate, growing from 31 million
47 Municipal Water Reuse Markets 2010 (GWI).
48 Municipal Water Reuse Markets 2010 (GWI).
49 http://water.epa.gov/grants_funding/cwsrf/upload/2009_CWSRF_AR.pdf
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m3/d to 79 million m3/d.50 When capacity of high quality water reuse plants is combined with
that of lower quality water treated to no more than secondary level (typically used for irrigation,
cooling purposes, and similar applications), total design capacity of the sector is estimated to
grow from 50 million m3/d to 135 million m3/d globally.
8.1.1 Industrial Reuse
Industrial water reuse is also gaining a significant amount of popularity, as increasingly stringent
effluent quality limitations are forcing companies to invest higher dollars in advanced treatment
solutions such as advanced membrane systems, disinfection equipment and specialty chemicals.
Additionally, as limited water resources are starting to make fresh water more expensive, the
benefits of reuse are becoming more and more apparent. The power generation industry in
particular is exploring the concept of water reuse, as cooling systems use millions of gallons of
water a day. In 2008, water-cooled thermoelectric power plants withdrew 60 billion to 170 billion
gallons (180,000 to 530,000 acre-feet) of freshwater from rivers, lakes, streams, and aquifers
every day, and consumed 2.8 billion to 5.9 billion gallons (8,600 to 18,100 acre-feet) of that
water.51 To address this excessive water usage, power plants are increasingly looking to reuse
water and to replace existing technology with more water-efficient technologies. Though in
reusing water, industries must keep in mind the variability of constituents from one water source
to the next (to avoid mineral scaling, corrosion, or microbiological growths in its systems), as well
as the effect of salinity on effluent toxicity.
Another industry gaining much attention for its usage of freshwater and subsequent production
of wastewater is the oil and gas industry. This sector has grown immensely over the past few
years, and is expected to remain one of the fastest growing markets for water technology going
forward. According to Chrysalix Energy Venture Capital, oil and gas wastewater treatment
presents one of the largest near-term water opportunities, as companies in the sector are faced
with a defined problem and are noticeably eager to find a solution. In particular, it is the advent
50 Municipal Water Reuse Markets 2010 (GWI).
51 Averyt, K., J. Fisher, A. Huber-Lee, A. Lewis, J. Macknick, N. Madden, J. Rogers, and S. Tellinghuisen. 2011.
Freshwater use by U.S. power plants: Electricity's thirst for a precious resource. A report of the Energy and Water
in a Warming World initiative. Cambridge, MA: Union of Concerned Scientists. November.
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of hydraulic fracturing, which is the process of using a pressurized fluid to fracture rock layers in
order to release petroleum, natural gas, coal seam gas, or other substances for extraction, that is
propelling the reuse market forward in this industry. The process uses an immense amount of
water and poses potential environmental, health, and safety risks, leading it to be suspended or
banned in various states throughout the US. Water companies have identified this sector as a
huge market opportunity, and have begun to introduce treatment technologies that address the
unique effluent qualities of produced water. For example, Latitude Solutions, a Boca Raton, FL-
based company, utilizes electro-precipitation technology to remove heavy metal ions, charged
colloids, emulsions, and microorganisms present in oil and gas streams, while FilterBoxx, a
Canadian company, uses combinations of reverse osmosis, nanofiltration, green sands, clarifiers,
and desalination systems to treat produced water via mobile units.
8.2 Policy and Regulation
There are currently no federal regulations directly governing water reuse practices in the US,
guidelines are increasingly being built into legislation to preserve high standards of public health
and sustainable living environments. Various states have, however, developed regulations
specific to reused water quality and treatment requirements. To date, 25 states have regulations
in place and 16 states have adapted guidelines or design standards, while 9 states have no
regulations. An extremely common water quality standard in the US is the "Title 22" standard
from Chapter 4 of the California Code of Regulations, which defines standards for various
beneficial uses of reused water.
The standard is known to be the strictest classification standard in existence, and as a result, is
used as the basis for regulations in other states throughout the US, and was even reportedly used
as a basis to draft a Canadian code on water reuse. To become Title 22-certified, technology
vendors must install and test their system(s) for approximately 3-6 months and demonstrate
compliance with Title 22 requirements. Title 22 certification testing can be conducted by a
variety of parties, including engineering firms (e.g., MWH, who confirmed compliance for Meurer
Research's MeurerMBR) and university research labs (e.g., North Carolina State University, who
confirmed compliance for Anua's PuraM MBR). California, which is widely regarded as a leader in
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developing the regulatory landscape, is also drafting regulations for Groundwater Replenishment
with Recycled Water.
Also, wastewater treatment is becoming less and less of an option for utilities and industries in
light of increasingly stringent environmental discharge regulations, lending to the rise in
popularity of water reuse. For instance, the National Pollution Discharge Elimination System
(NPDES) under EPA subjects municipal and industrial wastewater to varying permitting
requirements and discharge limitations based on location of discharge (e.g., sanitary sewer, storm
drain, or septic system) and local guidelines in existence. In addition, depending on the type of
industrial or commercial facility in operation, more than one NPDES program may apply. NPDES
permits do not apply to the practice of reuse unless the treated wastewater is used to augment a
receiving body of water. As indirect or direct potable reuse gains more traction, regulations
under the Safe Drinking Water Act, which apply to every public water system in the United States,
will also become relevant.
8.3 Technologies
8.3.1 Products
Technologies used in the reuse market do not differ from those already used in the drinking
water and wastewater treatment markets. To meet specific reuse requirements engineering
design firms typically develop customized treatment solutions through unique technology
combinations. Combinations vary based on characteristics (contaminants) of inflow, final water
quality requirements, end use of effluent, peak flow requirements, regulatory requirements, and
cost constraints, among other metrics. The most popular technology combination includes
microfiltration, reverse osmosis, and membrane bioreactors/advanced oxidation. It is expected
that this three-stage treatment process will ultimately (in the next ten years) become a standard
for the water reuse industry.
The overlap in technologies with the drinking water and wastewater sectors has served to fuel
additional sector growth. Public perception of water reuse remains relatively low, but customer
confidence in certain technologies (i.e., ultrafiltration, reverse osmosis, UV) is rising. The use of
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proven technologies provides customers with a certain level of reassurance in the ability to treat
water to a point where it can be blended in reservoirs or aquifers for potable purposes. As the
microfiltration and reverse osmosis membrane markets were already covered in Section 4, the
technology overview for reuse will focus on innovation within the membrane bioreactors/
advanced oxidation segment.
Membrane bioreactor (MBR): MBRs were first introduced to the wastewater treatment market
in the 1970s, and are now positioned as one of the most promising technologies for water reuse
applications. The technology, which was originally used for desalination, consists of a membrane
process combined with a suspended growth bioreactor. MBRs are favored for reuse applications
because of their ability to produce high quality effluent fit to be discharged to coastal waterways
or used for urban irrigation. However, membrane fouling (and subsequent costly replacement of
membranes) presents a major drawback. Fluid mixing within an MBR plays a major role in
controlling membrane fouling, but also contributes to high energy consumption.
Advanced oxidation (AO): AO is widely used for reuse applications because of its ability to
drastically reduce or completely eliminate contaminants associated with public health and
environmental concerns, such as endocrine disruptors. Yet, the process is known to generate
byproducts, such as bromate and bromite, as a result of introducing ozone into the wastewater
treatment process. For this reason, UV technology, a costly alternative, is often introduced to
break down chemical bonds of contaminants. There are reportedly about 15 full-scale remedial
applications of the UV/oxidation process in operation right now, with most of them for
groundwater contaminated with petroleum products or a variety of industrial solvent-related
organics (e.g., TCE, DCE, TCA, and vinyl chloride).52 Further testing on pilot and/or full-scale
installations would help to further understand benefits and effectiveness of the combined
solution.
52 http://www.frtr.gov/matrix2/section4/4-45.html
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8.3.2 Services
Reuse projects are commonly owned and operated by municipalities, but there are multiple firms
that focus on the development, application, and design of wastewater treatment and reuse
facilities. Examples of these firms include AECOM, Black & Veatch, CDM, CH2M Hill, and MWH.
Veolia has noted that reuse is of special interest to the firm due to the high margins achievable
given the level of customization required for each project. As a result of financing barriers,
consulting engineers are also increasingly being brought onto projects in a Design-Build capacity.
This approach is also popular in international markets where large companies self-finance
projects and then recover money through the rates charged for the treated and distributed
water.
8.4 Vendor landscape
The reuse market materialized from existing wastewater treatment processes. With equipment
and services commonly shared between wastewater treatment projects and reuse projects, there
are few, if any, players exclusively devoted to water reuse.
Current market leaders for providing reuse systems are GE Water, ITT's newly formed Xylem,
Siemens Water Technologies, and Veolia, all of who have prioritized reuse within their business.
Key component suppliers include Memcor (Siemens), Norit, and Pall/Asahi, all of who supply
UF/MF membranes, and Zenon (GE), Memcor (Siemens) and Kubota, all of who supply MBR
systems. Not only will typically risk-averse customers be more apt to use one of these trusted
technology brands, but global companies like these may help to reduce costs associated with
water reuse through achieving economies of scale.
Within the US, reuse is gaining the most attention in drought-prone areas that are dependent on
non-renewable groundwater resources. States like California, Texas, Florida and Arizona, all of
which are current leaders in the reuse of water for agricultural purposes, have all strongly
considered wastewater-to-drinking-water systems as a result of long droughts that are
increasingly believed to become long-term problems due to global warming effects. In the
Southwest region especially, lack of rainfall has made reuse an attractive long-term solution, as it
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remains a financially attractive alternative to desalination. The largest system in the US is
Southern California's $480 million Groundwater Replenishment System, which provides reused
water to more than 100,000 Orange County families.53
8.5 Venture activity
Investment in companies that provide tertiary or advanced treatment technologies, which could
be used for treating reused water to drinking water quality, has been relatively healthy in the last
few years. Global VC funding in the reuse sector increased 16% to $33.4 million in 2011 from
$28.7 million in 2010. Bluewater Bio, a provider of wastewater and sludge treatment services
using biological technologies, received two separate rounds of funding, in addition to an $8
million revolving convertible debt facility. Separately, companies have also found funding in the
private placement market, as companies like United Envirotech, a provider of membrane-based
treatment solutions, received a $113.8 million investment from Kohlberg Kravis Roberts (KKR) in
the form of a bonds issue.
Venture activity in the reuse market is difficult to capture as few companies (if any) are strictly
focused on reuse. VC firms, however, do acknowledge the market opportunities that exist within
reuse, and are increasingly on the lookout for new technologies that can be applied in the sector.
According to XPV Capital Corporation, the reuse market presents scalable opportunities and
North America is expected to be one of the largest reuse markets, ahead of other parts of the
world. Another firm, Kinrot Ventures, expects the reuse market to continue to grow primarily
within the agricultural and industrial markets in the near term, with potential to shift to direct or
indirect potable use in the long term. The firm views pricing of water to be a somewhat
influencing factor in growing the wastewater-to-drinking-water market, but views the public's
psychological barrier as being more difficult to overcome. These views are somewhat consistent
with those expressed by Ecomundi Ventures, who also finds the industrial market to be more
53 http://www.wired.com/science/planetearth/multimedia/2008/01/gallery_sewage_plant
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attractive than the municipal market, but cites shorter time frames for technology adoption and
relatively faster returns on equity as reasons for growth.
The companies below have developed some of the more recent technologies that have the
potential to impact and propel the reuse market, and are believed to be the latest innovators
within the space
Company
Country
Description
Capital raise
Round
United Envrotech
Singapore
Provider of membrane-based water and wastewater
treatment and reclamation solutions, in addition to EPCand
O&M services.
$113,800,000
Private Placement
Latitude
Solutions
USA
Provider of products, processes and solutions for
contaminated water remediation in industrial applications.
$17,991,567
Private Placement
Bluewater Bio
UK
Provider of wastewater and sludge treatment services using
biological technologies.
$8,000,000
$6,100,000
$3,250,000
Structured Debt
Growth Equity
Growth Equity
Triton Water
Singapore
Assembles and installs water treatment modules ranging
from low-energy desalination, to water management and
wastewater systems.
Undisclosed
$15,000,000
Series B
Series A
Filte rboxx
Canada
Supplier of containerized water treatment systems to
industrial, municipal, resort and aboriginal clients.
$9,000,000
Undisclosed
Growth Equity
Growth Equity
Hangzhou
Dingchu
Technology
China
Energy conservation and water recycling business.
$4,400,000
Series A
AquaMost
USA
Developer of an advanced oxidation technology that uses
ultraviolet radiation to activate a titanium dioxide (Ti02)-
based photoactive electrode.
$3,000,000
$1,000,000
Series B
Research Grant
M2 Renewables
USA
Developer of filtration process to obtain irrigation-quality,
reusable water directly from raw sewage.
$3,000,000
Growth Equity
Pasteurization
Technology Group
USA
Developer of combined renewable energy generation and
wastewater disinfection for reuse systems.
$1,000,000
Series A
Geo-Processors
Australia
Developer of proprietary saline water treatment technology
that enables wastewater minimization through product
recovery and water reclamation.
$1,000,000
Seed
Aqua Pure
Technologies
1 s ra e 1
Developer of an advanced oxidation technology for water
treatment with focus on MTBE treatment, metal removal and
site remediation.
$720,000
Growth Equity
Advanced Hydro
USA
Developer and provider of membrane based solutions for
water reclamation, desalination, and general treatment.
$500,000
Seed
Geo Pure Hydro
Technologies
USA
Developer of technology that purifies and recycles
contaminated exploration and production wastewater.
Undisclosed
Series A
APTwater
USA
Developer of water treatment technologies and provider of
operating services, targeting a wide variety of contaminants
and applications in industrial and waterand wastewater.
Undisclosed
Series A
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8.6 Company Profiles
• APTwater
• M2 Renewables
• Pasteurization Technology Group
9 Nutrient Recovery
With recognition of the value resources within wastewater streams, effluent is no longer being
seen as solely a disposal issue. Numerous methods for recovering these resources are emerging
and they target both (1) energy recovery, where wastewater sludge can be removed to serve as a
source for renewable energy generation. And (2) nutrient recovery, concerning the capture of
biosolids from wastewater, which can be composted, packaged, and sold as fertilizer or soil
conditioners. As approaches to energy recovery have been around for years, this report focuses
on very recent attempts to recover key nutrients. Key market drivers and challenges for the
nascent nutrient recovery market are highlighted below:
Drivers
• Regulatory driver - nutrient discharge limits
• Economic driver - increased revenue through new revenue stream or
reduced energy costs
• Economic driver - extraction of certain nutrients from wastewater
streams may be cheaper than extracting from nature
• Economic driver - removes cost of sludge disposal
• Operational driver - dissolved nutrients can clog piping systems
Challenges
• Regulatory challenge - nutrients extracted from wastewater may be
viewed as waste and subject to unique regulations
• Social challenge - negative public perception of using biosolids as
fertilizer
• Market challenge - complex decision-making processes with
municipalities
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9.1 Market
Today, the total wastewater management market in the US is estimated at $1.2 billion, growing
at a 5.8% CAGR to roughly $1.6 billion by 2016.54 Wastewater management covers a broad range
of activities, including sludge digestion, thickening, dewatering, thermal processing, reuse, and
ultimately, disposal. Included in this market estimate are both utility and industrial users, in
addition to energy recovery technologies that focus on the production of biogas and alternative
fuels from sludge.
Narrow our focus to only the nutrient recovery market, eliminating energy recovery and general
sludge disposal markets, we see a nascent industry just beginning to deploy new technologies.
Based on our review of vendors engaged in nutrient-recovery-for-fertilizer projects and pilots, we
estimate the current market to be only ~$10 million. While the market is small, we are bullish on
prospects for nutrient recovery technologies and anticipate high market growth due to several
factors.
One of the biggest growth drivers of the nutrient recovery market is its ability to generate an
additional revenue stream for wastewater treatment plants, as technology vendors often share a
portion of revenues from the commodity sales with their customers. A popular use of recovered
nutrients is fertilizer, which is becoming increasingly expensive in the US, therefore posing an
attractive revenue-sharing opportunity for wastewater treatment plants. Nutrients such as
phosphorous, nitrogen, and ammonia are popular recoverable resources as they are both
becoming scarcer in the atmosphere and are often without natural substitutes. One often cited
example is phosphorus. Florida, which accounts for nearly 80% of the domestic production
capacity of phosphate,55 reportedly only has ~30 years of phosphate reserves left, indicating the
nation's phosphate-based fertilizer industry could suffer if no new or innovative actions are
taken.
54 Water Market USA 2011 (GWI)
55 http://www.epa.gov/radiation/tenorm/fertilizer.html
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Further, the nutrient recovery market continues to gain traction as regulatory limits on nitrogen
and phosphorus proliferate. EPA has imposed nutrient discharge limits in an effort to stem the
detrimental effects on the environment of excessive nutrients in wastewater (e.g., promoting
algae growth, affecting dissolved oxygen levels, and posing a threat to natural fish habitats).
Nutrients can also pose problems for internal operations at a wastewater treatment plant. Plants
that practice biological nutrient removal and anaerobic sludge digestion are particularly affected
as they concentrate large quantities of ammonia and phosphorus in their sludge handling
streams. These dissolved nutrients form struvite-scale in piping, pumps and valves, leading to
plugging of the piping systems, which in turn leads to pumping inefficiencies, reduced system
capacity, high operating costs, maintenance shutdowns, and pipeline failures.
Market growth may be slowed by a variety of market, regulatory, and site-specific challenges.
Specifically, nutrient recovery vendors cited complex decision-making structures at municipalities
as a barrier to industry growth. Decisions to adopt and implement new technologies can take
years and work directly against the accelerated sales model most young companies aim to
establish. While this concept is applicable to young companies in virtually any sector of the water
& wastewater market, it is interesting to note that vendors in the nutrient recovery sector voiced
this as a high priority challenge. Vendors often face cash flow challenges in working with
conservative municipalities and their cumbersome decision-making processes. As a result, many
companies have refocused efforts on the industrial sector, a secondary target market after
municipalities that offers a greater growth opportunity.
As previously noted, the US market has been relatively slow and is currently "catching up" to the
rest of the world when it comes to recovering nutrients from wastewater streams. Other
countries have long treated nutrients as a form of pollution and therefore implemented
regulations around nutrient discharge, while the US is in the initial phases of giving engaging with
this concept. Additionally, some countries (e.g., Netherlands, Japan) impose high sludge
treatment costs on utilities, further promoting the international growth of the nutrient recovery
concept. For instance, Japan now has a full-scale demonstration of the Phosnix process, which
enables phosphate removal and recovery from wastewater at the Ube Industries Sakai plant.
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9.2 Policy and Regulation
The existence of excessive nutrients in receiving waterways is considered by EPA to be the single
largest cause of water quality impairment in the US. As a result, limitations on certain nutrients
(e.g., phosphorous, nitrogen) have been imposed on effluent discharge from wastewater
treatment plants. While traditional wastewater treatment technologies remove nutrients to
some degree, nutrient removal technologies help to ensure that any and all federal regulations
(states do not establish their own maximum nutrient limits) relating to a specific nutrient are met.
Water treatment plants are slowly becoming more aware of the economic benefits that nutrient
removal technologies offer, as these technologies enable compliance with current and future
regulatory limits.
Other relevant policies and regulations in the nutrient recovery industry include those around
biosolids and fertilizers. Biosolids are heavily regulated in comparison to manures, fertilizers, and
other yard waste composts, primarily due to the unpredictable presence of organic matter. They
are separately regulated by EPA under the CWA (specifically, the CWA amendments of 1977 and
1987), which ensures safe and responsible management of biosolids, and the Ocean Dumping
Ban Act of 1988, which prohibits dumping biosolids into the ocean. Also, the 40 CFR (Title 40,
Code of Federal Regulations) Part 503 Biosolids Rule of 1993 governs the use and disposal of
municipal sewage sludge. The quality requirements set within this rule are meant to promote
public acceptance of biosolids as a soil conditioner or fertilizer.
Phosphorous-based fertilizers may also be regulated under fertilizer regulations, which vary on a
state-by-state basis and are generally less stringent due to the consistent chemical makeup of
fertilizers. For example, Ostara Nutrient Recovery Systems, a Vancouver, Canada-based company
that produces fertilizer from municipal and industrial wastewater streams, falls under this
category. The company's technology is able to produce consistent fertilizer no matter which
waste stream is being treated. As a result, the company navigates fertilizer laws in every state
and must register its product in each one separately.
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9.3 Technologies
9.3.1 Products
Companies are increasingly developing technologies that can be applied to wastewater streams
and foster the removal of solids, which are then sold as commodities. Many technologies rely on
complex, high-energy processes, and as such are not widely accepted by utilities. Typically, the
recovery of resources such as phosphate was done by adding chemicals to wastewater holding
tanks and precipitating out the phosphate, while current innovation focuses on recovering these
nutrients in a different, more saleable form.
Innovation is focused not only on the removal of nutrients, but also on the recovery of struvite,
which is increasingly marketed as a high-value, slow-release fertilizer. While the market for
struvite as a fertilizer product is not yet well-established, growth trials have been positive. In
King's County, WA, for example, crop needs are matched with the nitrogen value of biosolids,
resulting in enhanced crop yield and reduced soil erosion. The County has so far found that
biosolids have improved the germination rate of wheat, thereby improving winter survival of
young wheat plants.56 However, the fertilizer product may have to overcome some regulatory
hurdles as products from wastewater may still be viewed as waste, and therefore subject to
unique rules.
Fluidized bed reactor (FBR): FBRs are undergoing increasing use in the Resource Recovery sector
due to their ability to generate struvite in a controlled and reliable way. The process beings with
the addition of chemicals to a wastewater stream to form struvite crystals, which combine to
form pellets. Treated wastewater is then removed, leaving behind the struvite pellets, which
continue to grow and are later harvested for fertilizer. This crystallization process has proven to
be a simple and promising process for utilities.
http://www.kingcounty.gov/environment/wastewater/Biosolids/BiosolidsRecyclingProjects/BoulderPark.aspx7prin
t=l
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Physical-chemical: Physical-chemical technologies rely on separating dissolved phosphorous
from sludge via precipitation. As technologies differ in their approach involving the use of various
chemicals and/or processes such as ion exchange, final products are also varied. Phosphorous
can be recovered as struvite, phosphoric acid, or iron phosphate.
Vitrification: Vitrification is the process of combusting sludge in a chamber with air. Upon
melting, the sludge turns into molten glass, leaving behind silica and other inorganic matter. A
heat recovery system will collect the gases created as a result of the combustion, while the glass
is drained into a quenching tank. This process is known throughout the water industry, but no
known technology vendors exist.
9.3.2 Services
Municipalities interested in nutrient recovery frequently contract with engineering firms who aid
in the analysis and design of recycling and waste management programs. These independent
engineering firms work closely with equipment vendors to understand and approve nutrient
recovery technologies, and then endorse solutions to the municipality. Major engineering firms
include CH2M Hill, Black & Veatch, and Carollo. EPC firms, such as Veolia and Suez, are typically
only brought in for big projects that include nutrient recovery as one of multiple initiatives.
Other services related to nutrient recovery include the operation of the struvite system, its
ongoing maintenance, and subsequent transportation and delivery of the end fertilizer product.
Though, wastewater treatment plants typically opt to train internal staff members to run the
systems, rather than contracting out to consulting or engineering firms. In addition, system
vendors largely offer proprietary maintenance services, and take care of the marketing and
distribution of the fertilizer. While wastewater treatment plants will pay a monthly fee for
ongoing use of the struvite system, they also enter into a revenue-sharing agreement with the
system vendor for any money generated from the sale of fertilizer. The structure of business
models currently in place leaves little room for outside service revenues.
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9.4 Vendor landscape
Due to the market's relative nascence, many companies are still in the pilot/product development
phase and there are no established leaders as of yet. One of the more indicative ways to analyze
the market, therefore, includes looking at total capital raised. In this regard, market leaders in
North America (by disclosed amount of capital raised) are ThermoEnergy (Little Rock, Arkansas),
Ostara Nutrient Recovery Systems (Vancouver, Canada), and Aquarius Technologies (Port
Washington, Wisconsin). The majority of equipment vendors within the global nutrient recovery
market are located in the US, with a minor presence in Israel and Canada.
Some of these companies invested significant amounts of money into resource recovery
technology that was not accepted by the market. For example, ThermoEnergy had a licensing
agreement with Battelle Memorial Institute for the institute's Sludge-to-Oil-Reactor System
(STORS). The process proved to be overly complex in pilot testing and energy requirements were
substantial, limiting ThermoEnergy's ability to capitalize on the product's otherwise successful
results. Ultimately, ThermoEnergy dropped the product from its portfolio.
These types of experience show that companies can claim a competitive advantage when capital
and operating costs are kept down; companies need to ensure that manufacturing costs are less
than the value of the final product.
9.5 Venture activity
While total VC activity has fallen 8% to $35.5 million in 2011, from $38.4 million in 2010,
companies in the resource recovery sector are attracting higher dollars per round than companies
providing water monitoring and metering solutions. Energy recovery is an increasingly popular
theme in wastewater treatment, though investments tend to favor companies that develeop
nutrient recovery technologies. The following chart higlights funding within the resource
recovery sector since 2009.
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Company
Country
Description
Capital raise
Round
Glori Energy
USA
Developer of the AERO™ (Activated Environment for the
Recovery of Oil) System to increase oil recovery from water
flooded oilfields.
$20,000,000
$16,000,000
Series C
Series B
BCR
Environmental
USA
Provider of water and wastewater treatment solution based
on biosolid treatment methods.
$10,000,000
Series A
Erne fey
1 s ra e 1
Developer of Electrogenic Bioreactors that treat wastewater
and generate electricity.
$4,000,000
$5,000,000
Undisclosed
Series B
Series A
Seed
ThermoEnergy
USA
Developer of technologies for removing nitrogen from
wastewater streams, converting sewage sludge to a fuel, and
a clean coal system.
$2,630,000
$1,250,000
$5,000,000
Private Placement
Private Equity
Private Equity
PhosphonicS
UK
Developer of a technology to recover precious metals from
process, waste and effluent streams.
$5,300,000
Follow-on
Aquarius
Technologies
USA
Developer of technology for preventing the generation of
waste sludge during wastewater treatment.
$4,000,000
Series B
Simbol Materials
USA
Developer of a process for removing silicates from
geothermal wastewater via precipitation and filtration.
$1,375,000
Structured Debt
MAR Systems
USA
Developer of proprietary adsorbent media that removes
heavy metals (e.g. mercury, selenium, chrome, arsenic) from
aqueous streams.
$1,137,190
Seed
Pasteurization
Technology Group
USA
Developer of combined renewable energy generation and
wastewater disinfection for reuse systems.
$1,000,000
Series A
Ecochemtec
1 s ra e 1
Developer of sedimentation technology to produce high
value chemicals from sea water desalination plant waste.
$500,000
Seed
Hydros pin
1 s ra e 1
Developer of inside pipe generator that supplies electricity
for water monitoring and control systems.
$500,000
Seed
Liberty Hydro logic
Systems
USA
Developer of proprietary technology to remove selenium from
wa te r.
$500,000
Seed
Pilus Energy
USA
Developer of scalable Electrogenic Bioreactor (EBR) platform
to convert industrial wastewater into value.
Undisclosed
Private Placement
BlackGold
Biofuels
USA
Developer of a patented process to convert grease from
wastewater streams into biodiesel.
Undisclosed
Series A
Algal Scientific
USA
Developer of advanced wastewater treatment systems using
proprietary algal strains, which also produce biomass as a
byproduct.
Undisclosed
Seed
9.6 Company Profiles
• ThermoEnergy
• Ostara Nutrient Recovery Systems
• Multiform Harvest
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10 Distributed Small Water Facilities
For purposes of this discussion, small water facilities are defined as those with flow rates lower
than 100,000 gallons per day. EPA estimates that there are nearly 43,750 public water facilities
that serve a population of 3,300 people or less, and just over 4,210 public water facilities serving
a population of 10,000 people or more.57
10.1 Market
A primary difference between different sized water treatment plants is the source of water.
Small drinking water facilities rely on wells and surface water, where multiple treatment
technologies are often required to treat the unique contaminants present in each source. Due to
the smaller pools of water that run through the plant, rainfall and other events have relatively
large impacts, and influent rate and quality can vary significantly on a day-to-day basis. Also,
there is a higher emphasis on groundwater reuse and sewer mining, where smaller plants take
treated water from larger plants and treat that effluent to potable standards. This trend is mostly
driven by previously discussed water scarcity and social responsibility concerns. Sludge is
typically transported back to larger plants for treatment and disposal. From an operational
standpoint, most treatment technologies in small water facilities can be run on a part-time basis
due to the lower flow rates. These technologies are typically packaged differently for smaller
facilities than larger facilities, in that they can be constructed of lighter weight material (e.g.,
steel) and delivered as preassembled solutions. In contrast, larger treatment plants typically
install permanent treatment technologies in concrete bases, leading to higher construction and
engineering costs. Additionally, the large plants are held to more stringent regulations due to the
impact their larger flows have on receiving bodies of water (as related to wastewater discharge).
From a regulatory standpoint, these facilities are held to the same standards when it comes to
57 EPA 2011. Fiscal Year 2010 Drinking Water and Ground Water Statistics. EPA Office of Ground Water and Drinking
Water. EPA 817K11001, June 2011.
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quality of drinking water. Effluent standards at wastewater facilities, however, differ between
small and large plants, as explained in Section 10.2.
When examining how equipment vendors approach asset owners as potential customers, it is
critical to consider the size of drinking water facilities and the dynamics of serving these facilities.
EPA categorizes drinking water systems into five categories by size from Very Small to Very Large.
The following chart illustrates the markedly inverse relationship between population served and
size of system for community drinking water systems (these systems cover 90%+ of America's
population). According to the data, 82% of the population is covered by only 8% of the country's
water systems (approximately 4,100 of 52,000 systems).58
Vendor Dynamics By Community Drinking Water Systems: By Size. % of Systems. % of Pop.
if of Systems
Pop. Served
Difficult to profitably
\fendors target for eariy
Top vendor
i serve at sea)e ] adopters and pilots | accounts
j j 46%
¦ ¦ i
¦ II
l
Very Small Small Medium Large Very Large
> 500 501-3,300 3,301-10,000 10,001-100,000 >100,000
Source: 2010 EPA Factoids, Cleantech Group Analysis
For many vendors, municipal water utilities are the last customer segment to be addressed given
their notoriously slow procurement and certification processes. Water innovators are attracted
to customers with sufficient scale to drive revenue at a reasonable cost of sales and service.
58 Fiscal Year 2010 Drinking Water and Ground Water Statistics (EPA).
http://water.epa.gov/scitech/datait/databases/drink/sdwisfed/upload/new_Fiscal-Year-2010-Drinking-Water-and-
Ground-Water-Statistics.pdf
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Consequently, many equipment vendors find the fragmented Small or Very Small systems market
as difficult and unattractive. Most innovators will look to larger systems to pilot technologies.
Medium and Large facilities are ideal early adopters as they have sufficient scale for vendors to
serve profitably, but may be able to move somewhat more nimbly than the largest of systems to
adopt new technologies, though this is not uniformly the case. In general, for first adopters and
pilots, early stage vendors will look for systems that meet a size threshold and that have the
lowest sales friction. The ~400 Very Large systems that cover 46% of the population are key
accounts for any vendor; they are the long term target market for vendors hoping to become
major forces in the drinking water market.
10.2 Policy and Regulation
Drinking water standards do not differ for treatment plants based on flow rates or size of
population served, and wastewater discharge regulations have typically been more stringent for
large treatment plants due to the impact their larger flows have on receiving bodies of water.
Recently, however, distributed small water facilities have expressed that Total Maximum Daily
Loads (TMDLs), which are the maximum amount of a pollutant that bodies of water can receive
and still safely meet water quality standards, are becoming burdensome from both a financial
and environmental standpoint. These limits require a high level of local involvement for activities
such as the development, submission, and approval of a Watershed Implementation Plan and the
allocation of nutrient reduction goals to counties and small watersheds. Though the local-level
focus and details are necessary to address many of the decisions that contribute to nutrient
pollution (e.g., planning and zoning actions; stormwater management; erosion and sediment
control programs; septic system regulations; ordinances regulating lawn fertilizer, etc.), tough
economic conditions and budget cuts are affecting the ease with which localities can address EPA
limits.
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10.3 Technologies
10.3.1 Products
While the underlying treatment technologies do not differ largely based on flow rates, packaging
and delivery of technologies vary based on expected usage. Smaller facilities do not require
permanent solutions that run on a full-time basis, and therefore have the ability to opt for
preassembled units that are available at a lower cost. Additionally, in some cases smaller facilities
have more control over the water sources accessed, resulting in higher quality influent. With this
increased quality of water, simpler disinfection methods such as chlorine are sufficient, and the
need for multiple treatment technologies is avoidable. For small water facilities, solutions can
also often be directly joined to wells that serve as a main water source in order to treat the
specific contaminant(s) present in that stream.
10.3.2 Services
The value chain for distributed small water facilities does not differ significantly from that
outlined for municipal wastewater (and reuse) facilities. The presence of distributed small water
facilities is believed to be on the rise, despite the last 30-40 years focusing on developing and
serving larger plants that large EPC firms tend to target. This is expected to result in an increase
in the number of local engineering design firms, as they maintain a deep understanding of the
specific regions that will be served by the small water facilities. While the majority of requests
from small water facilities will be serviceable by these small, local EPC firms, the option to
subcontract resource-intensive work (e.g., feasibility analyses) to larger firms always exists.
10.4 Vendor landscape
As previously noted, treatment technologies do not differ for smaller plants and larger plants.
However, distributors are often required to package and deliver their solutions differently based
on the different target customer. Siemens, for example, will tailor membrane solutions for large
facilities that serve nearly 100,000 people, and small facilities that serve no more than 10,000
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people. As such, the vendor landscape for small water facilities closely matches that of Filtration,
Disinfection, and Water Reuse.
Vendors tend to offer solutions that serve a specific market segment (e.g., municipalities), but
some may attempt to bridge together multiple markets (e.g., residential and commercial
markets). Large technology vendors have the ability to package their solutions for smaller users,
but some often lack the resources necessary to understand unique market dynamics and to
effectively compete with smaller, more experienced vendors. The large upfront investment
required for large vendors to enter regional markets can delay expected returns by 3-4 years, at
least, and serve as a barrier to entry.
10.5 Venture activity
As explained above, venture landscape for small water facilities is expected to include all the
same companies mentioned in Disinfection, Membrane/Filtration, and Reuse. For information on
venture investments within each of those sectors, please refer to the corresponding chapter
sections.
10.6 Company Profiles
• Anua
• Puralytics
il Green Infrastructure / Wet-Weather Flow
Billions of dollars are spent annually on big pipe systems to prevent combined sewer overflows,
as these pipes can be even costlier to replace when faced with EPA consent decrees. Stormwater
management strategies such as green infrastructure and other low impact development (LID)
techniques also reduce future water infrastructure needs, and can result in financial savings to
communities. Cities have recently begun to acknowledge these benefits and green roofs, rain
gardens, permeable pavement, and similar solutions are becoming more common as methods of
wet weather overflow management. Key market drivers and challenges are highlighted below:
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Drivers
• Regulatory driver - EPA consent decrees for violating CWA
• Economic driver - money savings to communities
• Social driver - helps avoid negative public attention associated with
closing of public beaches, parks, etc.
Challenges
• Market challenge - lack of data to demonstrate effectiveness and
promote understanding of benefits
• Economic challenge - expensive projects with long timelines
• Social challenge - runoff may be richer in nitrogen and phosphorus
• Regulatory challenge - rainwater harvesting largely unaddressed by
enforceable regulations and codes, leading to use of overly stringent
graywater requirements
11.1 Market
For the purposes of market sizing, we have restricted our view to municipal construction/retrofit
projects specifically designed to reduce wet weather waterflow.59 An examination of some of the
largest and smallest cities in the US and their estimated spend on green infrastructure initiatives
leads us to estimate the current market at $600-750 million in municipal spending. Services
comprise about 50% of this tally and consist of design and engineering costs, landscaping, labor,
mobilization costs, and project contingencies. The other 50% is largely made up of construction
and landscaping materials such as permeable pavement, sand beds, ponding areas, planting soils,
and plants.
We expect the green infrastructure market to grow at a somewhat slow pace, as many of the
cities and communities undertaking green infrastructure initiatives are not yet doing so out of a
proactive desire to manage stormwater. In fact, the market is largely driven by EPA consent
decrees relating to combined sewer overflows (CSOs) that are in violation of the Clean Water Act.
A CSO, which is the discharge of untreated wastewater and stormwater into local waterways, is
59 To include all public/private construction projects that incorporate elements of waterflow design would
encompass the majority of the US construction market.
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caused when combined stormwater and wastewater management facilities become
overburdened (i.e., after rainstorms). This is largely due to urban areas being dominated by hard,
nonporous surfaces that contribute to heavy urban runoff, defined as rainfall that travels over
roofs and the ground, picking up various contaminants (e.g., soil particles, heavy metals, organic
compounds, animal waste, oil and grease). EPA estimates that there are over 770 CSO
communities throughout the US, mostly concentrated in older regions such as the Northeast and
Great Lakes regions, with a smaller presence in the Pacific Northwest.60 Another driver of the
green infrastructure market is the growing concern around climate change. For cities predicting
more rainfall, the need to implement more solutions has become increasingly apparent.
There are numerous headwinds that are slowing growth in the market. A primary reason is the
short track record of low impact development in urban planning, resulting in a lack of
performance data that can demonstrate its effectiveness in different environments. Additionally,
this inexperience with green infrastructure initiatives extends to governments, institutions, and
individuals, causing projects to potentially incur high costs and long timelines. While some of the
publicly available case studies and pilot programs have demonstrated a 25-30% reduction in costs
associated with site development, stormwater fees, and maintenance for residential
developments that use LID techniques,61 cities continue to worry about high design and
construction costs and greater expenses from increased use of on-site landscaping material.
The North American market for green roofs is considered to be immature when compared to
other regions of the world. For example, the European green roof market is relatively well-
established due to government legislative and financial support (at both the state and municipal
levels). As the benefits of green roof technologies become better understood, it is expected that
the North American market will grow.
60 http://cfpub.epa.gov/npdes/cso/demo.cfm
61 Introduction to LID. http://www.lid-stormwater.net/background.htm
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11.2 Policy and Regulation
The move to incorporate green infrastructure initiatives within cities has so far been largely
driven by EPA consent decrees. Communities are, however, increasingly choosing to undertake
green infrastructure projects (especially in the event of a new construction project), even in the
absence of EPA mandates. Federal development and redevelopment projects are subject to strict
stormwater runoff requirements under Section 438 of the Energy Independence and Security Act
of 2007. Specifically, Section 438 "requires federal agencies to develop and redevelop facilities
with a footprint that exceeds 5,000 square feet in a manner that maintains or restores the pre-
development site hydrology to the maximum extent technically feasible."62
Rainwater from rooftops can be collected and stored for reuse rather than reentering the water
cycle through groundwater recharge. Although a few states and local jurisdictions have
developed standards or guidelines for rainwater harvesting, it is largely unaddressed by
enforceable regulations and codes. Building and plumbing codes are largely silent on the subject,
with neither the Uniform Plumbing Code 3 (UPC) nor International Plumbing Code (IPC) directly
addressing rainwater harvesting in their potable or stormwater sections. Consequently,
graywater requirements are often used to govern rainwater harvesting systems, resulting in
requirements that are more stringent than necessary. Codes should instead define rainwater
harvesting and establish its position as an acceptable stormwater management/ water
conservation practice.
Stormwater harvesting, on the other hand, is defined as the water collected from roads, drains,
and parks (as opposed to being collected from roofs). A similar lack of uniform national guidance
around stormwater reuse has resulted in differing use and treatment guidelines among state and
local governments, presenting an impediment to the market. Some jurisdictions require
stormwater to receive some level of treatment before being discharged directly into waterways.
Treatment requirements are ultimately based on exposure risks, with risk of bacterial exposure
62 'Technical Guidance on Implementing the Stormwater Runoff Requirements for Federal Projects under Section
438 of the Energy Independence and Security Act". EPA, December 2009.
http://www.epa.gov/owow/NPS/lid/section438/pdf/final_sec438_factsht.pdf
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determining the most stringent levels of treatment. For example, Texas promotes harvested
rainwater for any use including potable uses provided appropriate treatment is installed. For
non-potable indoor uses, the state requires filtration and disinfection. Portland, Oregon, like
many other jurisdictions, generally recommends rainwater use for non-potable applications such
as irrigation, water closets, and urinals. Portland requires filtration for residential non-potable
indoor uses, but requires filtration and disinfection for multi-family and commercial applications.
A recent memorandum of understanding from the City and County of San Francisco, California,
allows rainwater to be used for toilet flushing without being treated to potable standards.
11.3 Technologies
11.3.1 Products
Cities invest millions in green infrastructure, with common solutions including green roofs,
permeable pavements, gravel ditches, and retention basins. Other technologies that play a role
in green infrastructure include moisture sensors and soil probes (to measure infiltration), roof
flow measurements, and flow meters.
Green roofs: One of the most popular solutions to stormwater management is green roofing.
The addition of vegetation and soil to roof surfaces can lessen several negative effects of
buildings on local ecosystems and can reduce buildings' energy consumption through
temperature moderation. Additionally, living, or green, roofs can increase sound insulation and
fire resistance, and prolong the longevity of the roof. Most importantly, green roofs can mitigate
stormwater runoff from exposed surfaces by collecting and retaining precipitation, thereby
reducing the volume of flow into stormwater infrastructure and urban waterways. Communities
are becoming more aware of these benefits and are more open to the idea of incorporation of
green infrastructure in new builds and upgrades to existing infrastructure. The energy savings
and prolonged roof life can serve to make green roofs more economical than conventional roofs
over the life span of the roof. Sedum is the most commonly used genus for green roofs.
Factors affecting the rate of stormwater runoff (and therefore the quality of green roofs) include
the depth of substrate, slope of roof, type of plant community, and rainfall patterns. According to
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one study, green roofs reduce total building runoff by 60-79% on an annual basis.63 Leaching
from substrate, however, may result in runoff rich in nitrogen and phosphorus, resulting in a new
source of surface-water pollution. Reduced fertilization of green roof vegetation to decrease the
presence of these nutrients or other organic matter, however, may harm plant growth or survival.
A natural solution would be to instead select plants that optimize the uptake of nutrients and
contaminants.
Soil moisture sensors: Soil moisture sensors estimate volumetric water content based on the
soil's ability to transmit electricity (or dielectric constant), which is increased with the presence of
water. Dielectric methods have gained acceptance in the market due to their nearly
instantaneous measurements, automated readings on a continuous basis, and low maintenance
requirements. The technology, though, is relatively expensive given its complex electronics.
Additionally, the volume of soil that can be analyzed is often limited to a small radius around the
sensor.
11.3.2 Services
As opposed to some of the other water sectors explored in this report, green infrastructure is a
service-heavy industry. Rather than having a well-defined value chain of vendors, design
engineers and implementers for each project, many players act as full-service contracting firms
specializing in the design and installation of green roofs or other green infrastructure alternatives.
These firms will buy various components from small suppliers and nurseries that serve a variety
of architectural and landscaping needs. For example, CONTECH Construction Products is a civil
engineering site solutions company. The company's UrbanGreen Grass Pavers solution can
provide lightweight volume storage to increase retention capacity of a green roof and add
aeration to the root zone for healthy plants, and its UrbanGreen BioMedia solution can provide
essential soil properties to support plant growth on green roofs. CONTECH provides its product
along with any engineering or installation services required.
63 Kohler, M., Schmidt, M., Grimme, F.H., Laar, M., Paiva, V.L.A., and Tavares, S. 2002. Green roofs in
Temperate climates and in the hot-humid tropics - far beyond the aesthetics. Environmental
Management and Health. 13(4) 382-391
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Other services include testing soil moisture and monitoring rain absorption rates to ensure green
infrastructure is serving its purpose. These tests can be done by local engineering firms.
11.4 Vendor landscape
Engineering firms rely on testing and flow monitoring equipment provided by vendors like
Campbell Scientific, Stevens Water, Hach, Teledyne Isco, Accuron, and ADS. Other component
vendors include those that provide waterproofing membranes for green roofs (American
Hydrotech and Barrett Company) and those that provide plants specifically for green roofs (Etera
and Motherplants).
11.5 Venture activity
As this is primarily a service-driven sector that involves municipalities and engineering firms,
there is no VC investment data to report.
11.6 Company Profiles
• Aquanomix
• Hydro International (UK)
• CSO Technik (UK)
a st Water
Ballast Water is the water that marine vessels intake at one coastal port and discharge at another
in order to maintain stability during transit. Invasive species are being migrated from port to port
through discharge of dirty ballast water, causing economic and environmental damage all around
the world. Hundreds of thousands of jobs in fishing, recreation, and tourism in coastal economies
depend on healthy, functioning coastal ecosystems. According to a Pew report, "invasive species
are responsible for about 137 billion dollars in lost revenue and management costs in the U.S.
each year." 64 As impacts cannot be contained specifically to the United States, or even to North
64 Panetta, L E. (Chair) (2003). "America's living oceans: charting a course for sea change." Electronic Version, CD.
Pew Oceans Commission.
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America, it is worthwhile to first analyze and understand the current state of global and federal
policy and regulation before exploring the different facets of the ballast water market. Key
market drivers and challenges are highlighted below:
Drivers
• Regulatory driver - if IMO 2004 Convention global regulations are
passed and enforced, a strong market for ballast water treatment
systems is anticipated
• Social driver - even without regulations, some shipowners may
purchase a system to appear more environmentally friendly (system
costs will drive decision)
• Technology driver - most treatment solutions have been adapted from
trusted land-based water treatment technologies
Challenges
• Regulatory challenge - if IMO 2004 Convention global regulations fail,
the market will falter
• Economic challenge - IMO approval process can take up to 2 years and
cost anywhere from $350,000 - $500,000.
• Market challenge - to succeed, it is essential to have deep relationships
within the marine industry
12.1 Market
Global sales of ballast water treatment systems generated an estimated $37 million in revenues
in 201065, and are expected to increase rapidly upon ratification of the IMO Convention. Based
on a mid-2012 ratification (which indicates a mid-2013 enforcement), global sales are expected to
reach approximately $950 million by 2013.66 Services for this sector are estimated to be
approximately 200%, or $1.9 billion, of the equipment market. The regulations put in place by
USCG did not create an existing market for ballast water treatment systems as the discharged
ballast water was not expected to meet any specific quality requirements. As with IMO
Regulation D-l, the early ballast water management regulations that the Coast Guard
65 Global Ballast Water Treatment Systems Market (Frost & Sullivan 2010).
66 Global Ballast Water Treatment Systems Market (Frost & Sullivan 2010); Cleantech Group Analysis
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implemented for vessels entering the Great Lakes and other US ports only required vessels to
conduct ballast water exchange. As a result of organism discharge criteria not being included,
system vendors were not motivated to develop ballast water treatment systems and ship owners
were not compelled to purchase them. If stringent global regulations are passed and enforced, a
strong market for ballast water treatment systems is anticipated; if regulation fails, the market
will falter.
Overall, the sector is estimated to experience a 52.8% CAGR through 2020.67 From 2013 - 2016,
the global ballast water treatment systems market is expected to experience slow to moderate
growth, with revenues coming predominantly from Asia Pacific, as newly built vessels install
solutions. The subsequent period (2016 - 2018) should experience more rapid growth, with the
majority of revenues expected from both Europe and Asia Pacific, as existing vessels are
retrofitted and new vessels continue to be brought to market. Based on primary interviews and
secondary research, North America is not forecasted to be a large revenue market for ballast
water treatment systems due to a limited shipbuilding capacity and relatively small fleet when
compared to Europe or Asia Pacific.
12.2 Policy and Regulation
In 2004, the International Maritime Organization ("IMO"), a specialized agency of the United
Nations, adopted the International Convention for the Control and Management of Ship's Ballast
Water and Sediments ("the Convention"). The agency's primary purpose is to develop and
maintain a comprehensive regulatory framework for shipping. Currently, the IMO has 170
Member States and three Associate Members.68
According to the Convention, a vessel is defined as any ship or offshore structure designed to
carry ballast water. As it currently stands, this Convention would apply to all new vessels built
from 2012 onwards, while older vessels will be held to phase-in requirements, leading to a total
ban on transfer of harmful organisms by 2016. As ratification has not yet occurred, it is widely
67 Global Ballast Water Treatment Systems Market (Frost & Sullivan 2010).
68 http://www.imo.org/About/Membership/Pages/Default.aspx
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expected that the IMO will revise the timelines set out in the Convention. Regardless of its age or
size, all vessels will be required to comply with ballast water exchange standards per the
regulations outlined below.
Regulation Dl: Ballast Water Exchange Standard - This regulation governs the exchange of
ballast water during ship operations, and requires pumping through three times the volume of
the ballast water tank to achieve efficiency of 95% volumetric exchange.
Regulation D2: Ballast Water Performance Standard - This regulation governs the treatment of
ballast water to ensure specific standards are met at discharge. The chart below outlines the
ballast water quality regulations in the Convention.
* cfu = colony forming unit
Regulation D4 - This regulation applies to ships participating in approved programs to test and
evaluate ballast water treatment technologies. These vessels will have a 5 year leeway before
having to comply with requirements set out in the Convention. However, each vessel will be
required to maintain ballast water management records and monitor for residual oxidants if
active substances are used by the experimental technology during the testing period.
In order to bring the Convention into force, it must be ratified by 30 countries representing >35%
of world merchant shipping tonnage. To date, 32 countries have ratified: Albania, Antigua &
Barbuda, Barbados, Brazil, Canada, Cook Islands, Croatia, Egypt, France, Iran, Kenya, Kiribati,
Republic of Korea, Lebanon, Liberia, Malaysia, Maldives, Marshall Islands, Mexico, Mongolia,
Montenegro, Netherlands, Nigeria, Norway, Palau, Saint Kitts & Nevis, Sierra Leone, South Africa,
Spain, Sweden, Syrian Arab Republic and Tuvalu. However, these countries only represent about
Regulation
Organism Category
Plankton, >50 [am in minimum dimension
Plankton, 10-50 [am
Toxicogenic Vibrio cholerae (01 and 0139)
Escherichia coli
Intestinal Enterococci
< 10 organisms / m3
< 10 organisms / ml
<1 cfu*/100 ml
<250 cfu*/100 ml
<100 cfu*/100 ml
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27% of world tonnage 69, short of the 35% requirement. Based on primary interviews with key
equipment vendors, Panama, the largest Flag Country in the world by tonnage, is largely believed
to be the final ratifying state to satisfy tonnage requirement and enable the Convention's entry
into force. The flag state has already joined the IMO GloBallast Partnerships Project as a lead
partner country.70
Enforcement of the Convention is slated to occur 12 months after ratification, per the following
timeline (compliance depends upon ship's age and water capacity), which was developed in
anticipation of a 2011 ratification and 2012 implementation:
1 Application dates (subject to ratification of Convention)
I MUST BE IN COMPUANCE
Date of Construction
Ballast Water
Capacity (m3)
2009 2010 2011
2012 2013 2014 2015
2016
- Before January 1, 2009
1500
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water management best practices that vessels must choose from, but does not specify ballast
water quality standards to which discharged ballast water will be held.
The USCG has proposed a two-phase standard for ballast water discharge. Phase I (numerical
discharge standard) is in line with the 2004 IMO Convention, while Phase II is expected to be
more stringent. Additional regulations may surface on a state-by-state level but a recent bill
passed by the US House of Representatives prohibits states from enacting ballast water
regulations that exceed federal standards.
12.3 Technologies
12.3.1 Products
A large majority of ballast water treatment technologies have been adapted from trusted land-
based water treatment technologies, with the most prevalent systems those that combine
mechanical separation/filtration with UV radiation or chemical disinfection. They can be
categorized into three distinct categories: Mechanical Systems, Physical Disinfection, and
Chemical Treatments. Mechanical systems include filtration, surface separation,
coagulation/flocculation, and hydrocyclone. Physical disinfection methods include ozone, UV,
heat, deoxygenation, and gas injection. Finally, chemical treatment methods include peracetic
acid, hydrogen peroxide, menadione/Vitamin K, and chlorination. The initial mechanical
separation/filtration removes larger organisms and increases the effectiveness of secondary
treatments.
All technologies must be approved by the IMO. The IMO certification process consists of G8
(Type) and G9 (Basic/Final) approvals, which can take up to 2 years and cost anywhere from
$350,000 - $500,000. Type Approval is required for all ballast water treatment systems, and
involves land-based and shipboard testing of equipment by a flag state. Only technologies
utilizing active substances need to obtain Basic Approval (laboratory or bench-scale testing of
system for persistency, bioaccumulation and toxicity) and Final Approval (a technical review of
the physical equipment by the Group of Experts on the Scientific Aspects of Marine Pollution
("GESAMP"), an advisory body established by the UN). GESAMP will make approval/denial
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recommendations to IMO's Marine Environment Protection Committee, who then makes G9
approval decisions.
As of August 2011, IMO had granted approvals to systems of the following suppliers:71
Suppliers with Type Approval
1. Alfa Laval
2. Hamann AG
3. Techcross
4. OceanSaver
5. NK
6. Panasia
7. Hitachi Plant Technologies
8. Qingdao Sunrui
9. JFE Engineering
10. Resource Ballast Technologies
11. N.E.I. Treatment Systems
12. Hyde Marine
13. Optimarin
14. China Ocean Shipping (COSCO)
15. Brightsky Electronic
16. MAHLE Industrial Filtration
17. Severn Trent De Nora
18. RWO Marine Water Tech (Permascand)
19. Qingdao Headway Technology
20. AQUA Engineering
Suppliers with Basic Approval
1. China Ocean Shipping (COSCO)
2. Aquaworx
3. Siemens V\Mer Technologies
4. DESMI Ocean Guard
5. Kwang San
6. AQUA Eng Co
7. Kuraray
8. ERMA FIRST
9. Envirotech
10. Katayama Chemical
11. GEA Westfalia Separator Group
Suppliers with Final Approval*
1. Hamann AG
2. Techcross
3. Mitsui Engineering & Shipbuilding
4. RWO Marine Water Tech (Permascand)
5. Alfa Laval
6. NK
7. Hitachi Plant Technologies
8. Resource Ballast Technologies
9. Panasia
10. OceanSaver
11. JFE Engineering
12. Hamworthy Greenship
13. Ecochlor
14. Hyundai Heavy Industries
15. Qingdao Sunrui
16. 21st Century Shipbuilding
17. Qingdao Headway Technology
18. Severn Trent De Nora
19. Samsung Heavy Industries
*all companies with Final approval also have Basic approval
In collaboration with EPA, the USCG developed a protocol for verification of ballast water
treatment systems. Systems with Type Approvals from foreign administrations will need to
undergo a separate evaluation procedure to ensure they are substantively the same as the US
testing procedures.72 Independent registration by EPA may also be required for systems that
utilize biocides under the Federal Insecticide, Fungicide, and Rodenticide Act.
12.3.2 Services
Ship Owners/Operators (customers/users in the ballast water market)
71 IMO.
http://www.imo.org/OurWork/Environment/BallastWaterManagement/Documents/table%20updated%20in%20A
ugust%202011.pdf
72 http://www.uscg.mil/hq/cg5/cg522/cg5224/docs/White%20Paper%20-
%20Ballast%20Water%20Discharge%20Standard%20v3B.pdf
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There are more than 1,000 ship owners, with leaders evenly split between Asia (China, Korea,
Japan) and Europe (Germany, Greece). The top two ship owner countries - Japan and Greece -
control 31% of the world's fleet.73
Large ship owners will typically contract with multiple system vendors to ensure each ship's
unique needs are met. When choosing a system, ship owners will look at: IMO Approvals, total
lifetime cost (installation and maintenance), technology (system's impact on ballast tank and
piping coatings, substrate corrosion rates), footprint (size), power consumption, and user
friendliness (crew training considerations). Ship operators have no voice in choosing ballast
water treatment systems.
Shipyards
There are over 1,000 shipyards globally for an estimated 68,000 vessels in the world, with an
average of 1,000 new builds annually. In Asia, shipyards may maintain a "Maker's List," which is a
list of preferred system vendors. System vendors must present detailed technical information
(e.g., flow rates, operating pressures, instrumentation, insulation needs, power demands, weight,
etc.) and interface with shipyards on an engineering basis to ensure understanding of system
integration with ships. With the expected increase in demand once the Convention enters into
force, there are market concerns around shipyard capacity to install ballast water treatment
systems in accordance with IMO's compliance timeline.
Agents/ Distributors
An Agent is typically used for introductions and access to ship owners, with the purchasing
contract held between the ship owner and system vendor. In contrast, a Distributor will resell
systems through a licensing agreement with the system vendor.
Currently, there are no large global players. However, there are more than 100 regionally-
focused companies to accommodate clusters of ship owners in various countries and to develop
73 Global Ballast Water Treatment Systems Market (Frost & Sullivan 2010).
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long-term relationships. Companies in this sector include Allweiler, Marubeni, and Daiki Ataka.
System vendors will typically partner with a global network of agents and distributors, and
separately cooperate with ship resupply and maintenance organizations at various ports for a
global network of service providers.
12.4 Vendor landscape
According to research, there are estimated 40-50 system vendors at various stages of
development or commercialization around the world. System vendors include traditional marine
equipment and systems providers, specialized water and wastewater treatment system suppliers,
start-ups, shipbuilders and ship owners. With the exception of the Middle East and Africa, where
there are only an estimated 2% of system vendors, systems vendors are fairly evenly distributed
around the globe, with North and South America accounting for 31%, Asia Pacific for another
31%, and Europe for the remaining 37%.
While the presence of system vendors in North America is strong, particularly within the United
States, vendors will likely target Europe and Asia given the large shipbuilding industry in those
regions. Within the United States, vendors are not concentrated in any one state, and as such, no
state can claim to be the leader in development of ballast water treatment solutions at this time.
Global market opportunities exist most readily for those companies who develop agent
partnerships with companies that have a global brand known throughout the marine industry.
Additionally, it is crucial for a systems vendor to have a global service presence through regional
service centers.
The ballast water treatment systems market is nascent, and equipment vendor market shares
(based on number of systems contracted) fluctuate fairly readily. In addition, market shares are
expected to alter significantly upon ratification of the Convention due to an influx of orders from
ship owners and new market entrants. Of extreme importance in the ballast water market is
developing and maintaining relationships within the marine industry, as this poses quite a large
barrier to entry for new market entrants with no maritime experience or connections. Alfa Laval,
a global supplier of products and solutions for heat transfer, separation and fluid handling, is
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estimated to lead the sector with nearly 30% of the market share. The company has partnered
with Wallenius to incorporate patented advanced oxidation technologies in its solution, which
also relies on filtration and UV, and is currently believed to lead the market with sizeable
contracts from Maersk, Wallenius and E.R. Schiffahrt. Optimarin, a company wholly focused on
providing ballast water treatment solutions, is also considered to be a market leader with 22%
market share. The company has secured major slices of the Norwegian offshore BWT market,
with clients like Gulf Offshore, K-Line, Siem Offshore, Farstad, Eidesvik, STX, REM and Grieg.
Other major vendors include RWO Marine Water Technology, OceanSaver, N.E.I. Treatment
Systems, HydeMarine, and Techchross.
Vendors can gain a competitive advantage in the marketplace by establishing relationships with
shipyards and, ultimately, being placed on their "Maker's List," which is a list of preferred system
vendors. Additionally, according to primary market research, vendors with small, scalable
systems are more likely to be favored by ship owners due to the limited space for treatment
systems on existing ships (as they were not originally designed and engineered to house this
equipment).
12.5 Venture activity
The ballast water market is very new and has not yet garnered a lot of attention in the venture
capital market. As such, most of the funding has so far been raised from angel investors that
choose not to disclose transaction values. In 2011, we recorded $1.7 million in VC funding, up
from $0.7 million in 2010. The chart below highlights all the investment activity we have tracked
for this sector, with each transaction accompanied by the year the investment was made.
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Com pany
Country
Description
Capital raise
Round
Aqua Mats
Holdings
China
Developer of pollution control products for aquatic
environments with additional applications in aquaculture
and wastewater treatment.
$10,000,000 (2007)
Growth Equity
Echochlor
USA
Developer and manufacturer of proprietary ba 1 last water
treatment system.
$1,700,000 (2011)
$681,543 (2010)
Growth Equity
Growth Equity
N.E.I. Treatment
Systems
USA
Developer of a ballast water treatment system that induces a
hypoxic condition to ki 11 aquatic organisms and prevent
corrosion in ballast tanks of oceangoing ships.
Undisclosed (2011)
Undisclosed (2009)
Undisclosed (2004)
Series B
Series A
Seed
Optimarin
Norway
Developer of ballast water treatment systems based on solid
separation (filter) and high doses of UV irradiation.
Undisclosed (2007)
Undisclosed
(unknown)
Follow-on
Follow-on
EnSo
Norway
EnSo has developed a technology that uses electricity to
neutralise unwanted marine organisms in ba 1 last water.
Undisclosed
(unknown)
Seed
Other companies have not been so fortunate in attracting VC funding. MARENCO, an Anaheim,
CA-based company, developed a ballast water treatment system up to prototype phase, but has
chosen not to be the manufacturer of the systems. System testing successfully resulted in 100%
elimination of zooplankton and 99.99% elimination of hydroplankton, but the company was co-
founded by a group of experienced naval officers that lack the business vision to carry out
marketing and distribution activities. The Company is now seeking a strategic partner to license
its technology to produce and market systems, develop a joint venture partnership, or to secure
an outright acquisition of the IP portfolio.
12.6 Company Profiles
The ballast water market is still in very early stages of deployment and no specific treatment
solution has emerged as the innovative market leader. As such, we have identified three
equipment vendors in the North American region that offer unique ballast water treatment
solutions. N.E.I. Treatment Systems and Ecochlor have both received IMO approval and Trojan
Marinex expects approval by early 2012.
• N.E.I. Treatment Systems
• Ecochlor
• Trojan Marinex
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