SAM StudyWater:a market ofthe future2010          Daniel Wild              Marc-Olivier Buffle              Junwei Hafner-...
WAVEFRONT INJECTION       TECHNOLOGY FOR     GROUNDWATER REMEDIATION    This innovative technology is used to clean up haz...
SAM Study “Water: a market of the future”                                                                   Global trends ...
EXECUTIVE                 SUMMARY4   © SAM 2010
SAM Study “Water: a market of the future”                                                                                 ...
1     WATER –                     A GLOBAL CHALLENGE6       © SAM 2010
SAM Study “Water: a market of the future”                                                                                 ...
SAM Study “Water: a market of the future”      Global trends open up new investment opportunities                         ...
SAM Study “Water: a market of the future”                                                                                 ...
SAM Study “Water: a market of the future” Global trends open up new investment opportunities                              ...
SAM Study “Water: a market of the future”                                                                                 ...
SAM Study “Water: a market of the future”         Global trends open up new investment opportunities                      ...
2   GLOBAL TRENDS      IMPACTING THE WATER MARKET                               © SAM 2010   13
SAM Study “Water: a market of the future” Global trends open up new investment opportunities                              ...
SAM Study “Water: a market of the future”                                                                                 ...
SAM Study “Water: a market of the future”Global trends open up new investment opportunities                               ...
SAM Study “Water: a market of the future”                                                                                 ...
SAM Study “Water: a market of the future” Global trends open up new investment opportunities                              ...
SAM Study “Water: a market of the future”                                                                                 ...
SAM Study “Water: a market of the future” Global trends open up new investment opportunities                              ...
SAM Study “Water: a market of the future”                                                                                 ...
SAM Study “Water: a market of the future” Global trends open up new investment opportunities                              ...
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
Sustainable asset management water a market of the future 2010
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Sustainable asset management water a market of the future 2010

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Sustainable asset management water a market of the future 2010

  1. 1. SAM StudyWater:a market ofthe future2010 Daniel Wild Marc-Olivier Buffle Junwei Hafner-Cai
  2. 2. WAVEFRONT INJECTION TECHNOLOGY FOR GROUNDWATER REMEDIATION This innovative technology is used to clean up hazardous waste sites that contaminate groundwater by broadly distributing reme- dial fluids throughout the aquifer. It reduces remedial costs by more than 40 percent.2 © SAM 2010
  3. 3. SAM Study “Water: a market of the future” Global trends open up new investment opportunitiesTable of contentsEXECUTIVE SUMMARY 51 WATER – A GLOBAL CHALLENGE 71.1 A key role in our future 71.2 Supply and demand 72 GLOBAL TRENDS IMPACTING THE WATER MARKET 142.1 Demographic changes 142.2 Aging infrastructure 182.3 Higher water quality standards 192.4 Climate change 223 INVESTMENT OPPORTUNITIES 253.1 Distribution and management 303.2 Advanced water treatment 323.3 Demand-side efficiency 353.4 Water and food 364 CASE STUDIES 394.1 China – the downside of mining 394.2 India’s water availability cost curve 405 CONCLUSION: NEW INVESTMENT OPPORTUNITIES IN THE WATER SECTOR 44 © SAM 2010 3
  4. 4. EXECUTIVE SUMMARY4 © SAM 2010
  5. 5. SAM Study “Water: a market of the future” Global trends open up new investment opportunitiesExecutive summarySupplying water of adequate quality and in sufficient quantities is one of the major challenges facing mod-ern society. In many countries the available water reserves are now being overexploited to such an extent thatthe negative consequences can no longer be ignored. Countries located in arid regions are finding it par-ticularly difficult to irrigate the crops they need to feed their population. At the same time many people stilldo not have access to safe drinking water, because water resources are limited or polluted by domestic andindustrial wastewater.The situation will become even more critical in the years ahead. Four megatrends are shaping the develop-ment of the water market:• Global population growth. Demand for water is soaring, and not just to cater for the personal needs of individuals. In the coming years even more water will be needed to produce food for the world’s burgeon- ing population.• In many countries the infrastructure for supplying the population with drinking water and wastewater treat- ment is badly run down. Major investments will therefore be required in the short term to upgrade aging Many people water mains and sewer systems in particular. do not have access• Higher standards for water quality. One major priority is to ensure that people living in developing and to safe drinking newly industrialized countries have access to clean drinking water. In addition, solutions need to be found to water, because water meet the fresh challenges arising from new micropollutants that are becoming a problem in industrialized resources are limited countries, in particular. or polluted by• Climate change will cause significant variations in the hydrological regime in many regions, culminating domestic and indus- in a water crisis in some areas. trial wastewater.These megatrends will intensify the pressure to manage existing water resources far more efficiently in the yearsahead. The associated investments will inevitably have an impact on the markets in question. This situationopens up attractive opportunities to all businesses offering products and services for the treatment, supplyor use of water. Those companies that are capable of offering sustainable solutions stand to benefit the most.Based on an analysis of the current situation and an assessment of future market demand, SAM has identi-fied four investment clusters that promise attractive upside potential:• Distribution and management: Companies active in this cluster offer solutions for upgrading water mains and sewer infrastructure, develop systems for supplying freshwater and removing wastewater, act as utilities, or are involved in the management of water resources.• Advanced water treatment: This cluster includes companies that play a key role in the disinfection of drinking water, the treatment of wastewater or the desalination of seawater, or which provide the neces- sary control systems and analytical instruments.• Demand-side efficiency: This cluster includes companies offering products and services that boost the efficiency of water use in households or industry.• Water and food: Companies in this group develop products that improve water efficiency and reduce pollution in crop irrigation and food production.As the overall social, economic and environmental climate changes, corporate sustainability has become anincreasingly crucial success factor. This study lays the foundation for an attractive and all-inclusive investmentstrategy that is geared toward the sustainable development of the water industry. © SAM 2010 5
  6. 6. 1 WATER – A GLOBAL CHALLENGE6 © SAM 2010
  7. 7. SAM Study “Water: a market of the future” Global trends open up new investment opportunities1 Water – a global challenge1.1 A KEY ROLE IN OUR FUTUREWater is essential for life. We need water for every- • It is unlikely that water can be made available forthing: for our personal use, in order to grow food, all applications in the future at the same low costand to produce virtually all the goods required for as it is today. If the price of water does increase dueour daily existence. It is impossible to imagine our to supply bottlenecks, this will have dramatic con-lives without an adequate water supply. sequences for all areas of our lives that essentially depend on water. These areas include virtually allYet water is not just a life preserver: it can destroy of society’s commercial activities, from agriculturelife as well. It can spread waterborne infectious through to the production of everyday consumerdiseases for example. Millions of people worldwide goods.suffer from serious diseases because they do nothave access to clean drinking water. Companies that identify these changes at an early stage and subsequently take steps to exploit theWater is also vital for economic prosperity. The sale resulting opportunities will be better positioned in theof water-related equipment and services is now market and will achieve greater commercial success.a business with an annual turnover of over USD480 billion. Although water has become a precious 1.2 SUPPLY AND DEMANDcommodity in many areas of the world, the price There are two dominant features in current globalof water charged to consumers in most countries is water consumption patterns:still too low to accurately reflect its value. • The supply of freshwater is limited, but demand is growing steadily.Economic importance steadily growing • Many countries are failing to satisfy the basicOver the coming years the economic importance need to provide sufficient quantities of water ofof water will continue to increase for a number of acceptable quality.reasons:• Global demand for water is soaring. To meet this Limited water reserves demand, a whole range of water services needs to Every year about 90,000 to 120,000 km3 of precipi- be expanded and made to operate more efficiently. tation falls on the world’s continents and islands.• To meet the current challenges, enormous invest- About two-thirds of this precipitation reverts di- ments are required to upgrade and expand the rectly to the atmosphere through evaporation. Of water infrastructure. the remaining 35 percent, two-thirds flow into• For poorer and rapidly growing nations in particu- watercourses and is not fit for human use. A total lar, new technologies need to be developed for of some 9000 to 12,000 km3 of water is therefore treating, distributing and using water. available for drinking, agricultural irrigation and industrial use.1 1 Zehnder, A.J.B.; Schertenleib, R.; Jaeger, C.: Herausforderung Wasser. EAWAG Jahresbericht, 1997. © SAM 2010 7
  8. 8. SAM Study “Water: a market of the future” Global trends open up new investment opportunities Figure 1: Global water cycle The figures in boxes represent the reservoirs of water (in 1000 km3), while the others show water flows (in 1000 km3 per year). Source: Zehnder, A.J.B.; Schertenleib, R.; Jaeger, C.: Herausforderung Wasser. EAWAG Jahresbericht 1997. 13 Atmosphere 505 Evaporation 464 Precipitation 113 Precipitation 72 Evapotranspiration 24,000 Total in ice 100 Lakes 1,380,000 Ocean 41 Direct runoff and drainage via rivers 320,000 Total in rock pores 8200 Groundwater 4 Groundwater runoff to ocean However, there are significant regional differences Demand continues to rise Conversion table 1 km3 = 1 bn m3 in the distribution of the effectively usable water. 2 Water use can be roughly divided into three areas: 1 m3 = 1000 l 1 ha = 10 ,000 m2 In countries with ample rainfall, such as Switzer- urban water management, agriculture and indus- land, more than 7000 m3 of water are available per trial production. Worldwide, 10 percent of water person per annum. In arid regions however, some- flow into domestic use, 70 percent into agriculture times only a few hundred cubic meters are available and 20 percent into industrial production. There are, per person per annum. One worrying trend is the however, major regional differences in water use: In sharp decline in the quantity of water available developed countries, about half the water consump- to each person in many countries in recent years. tion is destined for industrial uses, whereas in devel- The situation is especially critical in low rainfall oping countries, agriculture is the biggest consumer countries. of water, at about 80 percent. Figure 2: Per capita renewable water resources India’s annual per capita renewable freshwater availability is less than 2000 m3, significantly below the G20 average of 9400 m3 Source: Responsible Research: Water in China, 2010. Canada Brazil Russian Federation Australia Argentina Indonesia USA Mexico Japan France Italy2 UNESCO: Water – a shared responsibility. Turkey The United Nations World Water United Kingdom Development Report 2, 2006. China www.unesco.org/water/wwap Germany (5.10.2007). India Republic of Korea South Africa G20 Average 0 20 40 60 80 100 1000 m3/ per capita / year8 © SAM 2010
  9. 9. SAM Study “Water: a market of the future” Global trends open up new investment opportunities Figure 3: Water use in different regions Source: FAO: Aquastat. www.fao.org/nr/water/aquastat (5.10.2007). 100% 80% 60% 40% Agriculture 20% Industrial 0% Domestic World Africa Asia North America Europe Overall, water consumption has risen sharply in re- Water shortage is already a serious problem in cent decades. In 1900, annual water extraction vol- many regions of the world, including southern umes totaled approximately 770 km . By the middle 3 Spain, the Maghreb, the Middle East, Central Asia, of the century, this figure had doubled to 1480 km3. Pakistan, Southern India and Northern China. In the Current consumption is estimated at 4500 km . 3 3 Americas, the U.S. Midwest, Mexico and the Andes are the worst-hit areas. Eastern Australia is also This trend is likely to continue in the coming years, badly affected by drought. with consumption surpassing 6500 km3 in 2030. The extra demand can be explained by relentless population growth as well as higher per capita con- sumption due to improved living standards. Figure 4: Water Exploitation Index (WEI) for European countries The Water Exploitation Index (WEI) specifies the percentage of renewable water resources consumed. If it moves above the 20% threshold, this is an alarm signal. Countries with a WEI of more than 40% suffer from extreme water shortage. Source: European Environment Agency: EEA Signals 2009 Climate Change Adaptation: Water and Drought. Cyprus Bulgaria Spain BelgiumRepublic of Macedonia Italy England/Wales Malta Germany Turkey Poland France Romania Czech Republic Greece Netherlands Lithuania Estonia Hungary Switzerland Austria Denmark Luxembourg Slovenia Finland Ireland Sweden 3 2030 Water Resources Group: Portugal Charting our Water Future, 2009. Slovakia Latvia Iceland WEI – latest year Norway WEI – 1990 0% 10% 20% 30% 40% 50% 60% 70% Water Exploitation Index (WEI) © SAM 2010 9
  10. 10. SAM Study “Water: a market of the future” Global trends open up new investment opportunities Figure 5: Use of water reserves in different regions of the world The map shows the river basin areas where the available water reserves are being overexploited by humans. In these regions, the long-term survival of the ecosystems is under threat. Source: UNDP: Human Development Report, 2006. I Overexploited I Heavily exploited I Moderately exploited I Slightly exploited Countries such as Countries such as Yemen, Uzbekistan and Israel Wales) – have a WEI of more than 20 percent. Yemen, Uzbekistan are currently consuming more water than can be Countries with a WEI of more than 40 percent and Israel are replenished by natural means. China and India suffer from extreme water shortages and no longer currently consuming – the two countries with the largest populations – use their available reserves in a sustainable way. more water than can are also heavily exploiting their available water be replenished by resources. But there are also some regions where the situation natural means. China has improved. This is particularly the case in Eastern and India are also The availability of water in individual countries is Europe, where water consumption has dropped heavily exploiting measured by the Water Exploitation Index (WEI). significantly since 1990, mainly thanks to infrastruc- their available water This index records water consumption as a percent- ture improvements and more efficient use of water. resources. age of annually renewable water reserves. A WEI of 20 percent is a critical value that signals the Private consumption: Water brings prosperity beginning of a water shortfall. Nine countries in An average European uses between 150 and 400 Europe – Belgium, Bulgaria, Cyprus, Germany, Italy, liters of water every day for his personal require- Macedonia, Malta, Spain and the UK (England and ments. Consumption in the U.S. is almost twice as Figure 6: Water use and global population 1900–2025 A comparison of global water consumption since 1900 and predicted water consumption up to 2025 against global population trends demonstrates that water consumption has increased more rapidly than the overall population. Sources: FAO: Aquastat, www.fao.org/nr/water/aquastat (5.10.2007); United Nations Secretariat: The World Population Prospects, 2006. 6000 12 Annual water extraction (km3) World population (billions) 5000 10 4000 8 3000 6 Agriculture 2000 4 Industry Urban water management 1000 2 Losses (dams) 0 0 Population (right axis) 1900 1925 1950 1975 2000 202510 © SAM 2010
  11. 11. SAM Study “Water: a market of the future” Global trends open up new investment opportunitiesFigure 7: Percentage of the population with access to sanitationSource: UNDP: Human Development Report, 2006. I <50% I 50–75% I 76–90% I 91–100% I No datahigh, at 580 liters per persons per day. In China, by Agriculture: The major consumercontrast, the figure is only 90 liters per day on Agriculture is easily the world’s heaviest consumer ofaverage. In many developing countries, individual water, most of which is used for irrigation. It takesconsumption is well below the limit of 50 liters per about 2500 kcal per day to meet one adult’s en-day specified as the critical threshold by the Food ergy requirements. One kilogram of bread containsand Agriculture Organization (FAO).4 about 3500 kcal, and it takes roughly 1000 liters of water to produce this bread under optimumIn many countries, wastewater is not adequately growing conditions. Based on this assumption, ittreated (or not treated at all) before being chan- takes about 260 m3 of water to feed one person forneled back into the water cycle. These countries one year with a vegetarian diet.therefore have to cope with undesirable impactson human health and the environment. About The more meat contained in a person’s diet, the2.4 billion people worldwide have no access to higher the associated water consumption. Whereadequate sanitation. The situation is particularly meat accounts for 20 percent of a person’s diet,critical in Africa, Southeast/Central Asia and parts twice as much water is consumed for its production.6of South America.4 This calculation does not take into account the fact that conditions for food production are seldomCountries with an efficiently run urban water ideal. Much of the water used is wasted due to cropmanagement system have invested large sums in failures and losses in irrigation. If production lossestheir infrastructure in recent decades. In Switzer- are factored in as well, it takes 550 m3 of water toland, the specific repurchase value of the entire provide one person with a purely vegetarian diet 4 UNDP: Human Development Report,public and private sewer system, along with all the for one year. 2006.wastewater treatment facilities, comes to almost 5 Herlyn, A.: Status quo der SchweizerCHF 100 billion. This works out to CHF 13,600 per Because rainfall is distributed so unevenly, not all Abwasserentsorgung. Gas Wasser Abwasser 3, 171-176, 2007.head of population.5 Many of these installations are countries are able to produce enough food for their 6 Zehnder, A.J.B.; Schertenleib,now decrepit, and need to be replaced within the own population. Many governments therefore R.; Jaeger, C.: Herausforderung Wasser.next few years. have to resort to importing food, which in some EAWAG Jahresbericht, 1997. cases accounts for up to 35 percent of all imports. © SAM 2010 11
  12. 12. SAM Study “Water: a market of the future” Global trends open up new investment opportunities Table 1: Water quantities used in food production Volume of water (in liters) needed to produce 1 kg of the food specified. Source: UNESCO – IHE: http://www.waterfootprint.org (5.10.2007). Liter Beef 15,500 Lamb 6100 Pork 4800 Goat 4000 Rice 3400 Soybeans 1800 Wheat 1300 Corn 900 Not all countries The situation becomes even more critical for these manufacture, electricity generation, mining or oil are able to produce countries if food prices are forced higher by adverse exploitation. In Europe, industry accounts for just enough food for their weather conditions or competition from biofuel over half of water consumption, while in the U.S. own population. production. It is perhaps surprising to find that arable the figure is just below 50 percent. Many governments farmland registered only an insignificant increase therefore have to worldwide in the period from 1960 to 2000. As a In contrast to agriculture and urban water manage- resort to importing consequence, the area of cropland required per ment, where consumption is steadily rising, the food, which in some person fell from around 0.45 to 0.23 hectares from situation is slightly more positive for industrial water cases accounts for 1960 to 2010. use. Global water consumption by industry rock- up to 35 percent of eted from about 150 km3 per year in 1950 to over all imports. This reduction has been achieved through massive 800 km3 in 1990.8 Since then, industrial water con- intensification of farming methods. This has in- sumption has continued to rise worldwide, but at a cluded not just the use of fertilizers and crop pro- much slower pace than in previous decades. Indus- tection agents, but also crop irrigation. A total of trial water withdrawal is projected to be 1500 km3 in 275 million hectares of land is now under irrigation, 2030.9 At the same time, there are significant equivalent to over 20 percent of the total area regional differences. In Europe and North America, under cultivation. 7 industrial water consumption after 1980 settled at about 200 km3 per annum (Europe) and 300 km3 Industry: Consumption stabilized at a high level per annum (North America). In Asia, the water con- Water also plays a crucial role in industrial pro- sumption by the industrial sector is still increasing duction, whether it be for paper production, tire every year. 7 UNESCO: Water in a Changing World. The United Nations World Water Development Report 3, 2009. Figure 8: Cropland per person trends It is interesting to note that the cropland per person figure has dropped sharply.8 UNESCO: Water – a shared responsibility. Sources: United Nations Secretariat: World Urbanisation Prospects: The 2007 Revision Population Database; SAM. The United Nations World Water Development Report 2, 2006. 1400 0.5 www.unesco.org/water/wwap 1200 (5.10.2007). Hectares per person 0.4 Million hectares 1000 9 2030 Water Resources Group: 800 0.3 Charting our Water Future, 2009. 600 0.2 Irrigated 400 0.1 Rainfed 200 Cropland hectares 0 0.0 per person (right axis) 1961 1970 1980 1990 2000 2010 2020 2030 2040 2050 12 © SAM 2010
  13. 13. 2 GLOBAL TRENDS IMPACTING THE WATER MARKET © SAM 2010 13
  14. 14. SAM Study “Water: a market of the future” Global trends open up new investment opportunities 2 Global trends impacting the water market The global crisis threatening the management of 660 m3 by the year 2009. Given the improving water resources is likely to intensify in the coming living standards in regions such as Asia, in particular, years. Four trends are shaping the future develop- this underlying trend is unlikely to be reversed for ment of the water sector: some time. 1. Demand for water is increasing further as a result of demographic changes. Increasing urbanization 2. In many cases, the aging water infrastructure Rapid population growth is occurring in tandem needs to be replaced. with increasing urbanization. More and more 3. Water quality improvements are necessary in people are moving from the country to the city, many places. usually because of a real or perceived lack of em- 4. Climate change is altering the availability of water ployment opportunities in rural regions. The urbani- resources. zation trend is clearly reflected in the number of megacities. In 1950 there were only 86 cities with a 2.1 DEMOGRAPHIC CHANGES population of more than 1 million, but this figure There are three ways in which demographics are rose from 387 to 431 cities between 2000 and 2007. affecting water consumption: • The world’s population will continue to grow in The number of megacities is increasing rapidly in future decades. Asia, Africa and Latin America, in particular. The • More and more people are moving from the cities are growing not just in number, but also in countryside to towns. size: In 2007, the world’s 100 largest cities had an • General living standards are improving, especially average population of more than 7 million people. in the two countries with the largest populations China and India. UN forecasts indicate that almost 60 percent of the world’s population will be living in urban areas by Continuing boom in global population 2030. The proportion is roughly 50 percent at pre- The world’s current population of approximately sent, compared with 29 percent in 1950. Rapid 6.8 billion people will continue to swell over the growth of cities creates a huge challenge for the coming decades. The UN predicts a global po- water sector. Demand for water services, especially pulation of 9.2 billion people by the year 2050. for wastewater treatment, is booming. Extending Demand for water will of course escalate purely basic sanitation will require huge investments in the in response to this population growth. Experiences coming years. Over the next 5 years, approximately in recent decades even show that water con- an additional 880 million people will require access sumption has grown at a faster rate than the gen- to improved drinking water sources and approxi- eral population. This trend is mainly attributable mately 1.4 billion will need to be connected to to continuous improvements in living standards. proper sewage treatment facilities in order to meet In 1950, per capita annual water consumption the 2015 Millennium Development Goals (MDG) averaged 580 m . This figure had already risen to 3 targets.10 10 United Nations: The Millennium Development Goals Report, 2009.14 © SAM 2010
  15. 15. SAM Study “Water: a market of the future” Global trends open up new investment opportunitiesTable 2: Demographic trends and urbanization of global populationSources: UN Population Division Department of Economic and Social Affairs: The Urban Agglomerations 2007; SAM.No. of cities >1 million inhabitants 1950 2000 2007World 86 387 431Africa 2 35 42Asia 31 194 218Europe 30 62 63Latin America 7 49 54North America 14 41 46Oceania 2 6 8Average size of world’s 100 largest cities (1000 inhabitants) 2200 6300 7000% of population in urban areas 29 47 50World population (million inhabitants) 2530 6125 6600Drinking water target on track Soaring demand for foodThe world seems to be on track to meet the MDG The rise in the world’s population and the improve-drinking water target, even though some countries ment in living standards are also having an impact onface enormous challenges, especially in Sub-Saharan food production. The FAO expects demand for foodAfrica. While water supply goals seem achievable, to be 55 percent higher in 2030 than in 1998. Foodit appears that the MDG sanitation target will be production must increase by 1.4 percent per annumdifficult to reach. in order to meet this demand. The surge in demand will be driven mainly by developing countries. Inten- sifying the farming methods used in these countries should help to meet most of the increased demand for food. The FAO expects the overall area under
  16. 16. SAM Study “Water: a market of the future”Global trends open up new investment opportunities cultivation to expand. At the same time, the amount exploitation is posing a threat to the Doñana of cropland under irrigation is likely to increase by national reserve in particular, which contains one 20 percent. This will in turn push up water con- of the most important marshlands in Europe.12 sumption by 14 percent, potentially causing local • On occasion, China’s second-largest watercourse, bottlenecks in areas such as the Middle East and the Yellow River, does not even reach the sea, or North Africa, where there is likely to be less water peters out into no more than a stream.13 available for agricultural use. These countries will • In the southern Indian state of Tamil Nadu, the UN forecasts indicate therefore be forced to import even more food than expansion of agriculture has led to a situation that almost 60 at present. where the Kaveri river, once 300 m wide, dries up percent of the on occasion. In some places the water table has world’s population Overexploitation of resources fallen between 300 and 400 m.11 will be living in urban The consequences of overexploiting water re- • Farmers in the southwest of the U.S. are feeling areas by 2030. sources are already manifesting themselves in dif- the effects of the overexploitation of groundwater: ferent parts of the planet. Once mighty rivers now The level of the Ogallala aquifer, the world’s carry only a fraction of their former water volume, third-largest underground water table, has fallen and the groundwater table is steadily falling. Eleven several meters in recent years. This has caused countries accommodating almost half the world’s many fertile regions to dry out. Many farmers population – including China, India, Pakistan, the have had to revert to more basic crops, which U.S., Israel, Egypt, Libya and Algeria – currently generate less income. Although the size of the have a negative groundwater balance. 11 irrigated area has shrunk again, it will take only another 20 to 30 years before the Ogallala 11 Lanz, K.: Wem gehört das Wasser? Lars Müller Publishers, 2006. Overexploitation of water has dramatic conse- aquifer dries up completely.11 quences at local level:12 Reye, B.: Knallrote Früchte mit üblem Beigeschmack. Tages-Anzeiger, 2007. • In the region around the Spanish city of Huelva In view of these problems, some countries have www.tagi.ch (5.10.2007). the water table has been steadily falling for some plans for large-scale canal systems to divert water 13 Den Flüssen den Weg weisen. years because many farmers illegally siphon off and alleviate the shortage in arid regions. India has Neue Zürcher Zeitung, 2006. www.nzz.ch (5.10.2007). water to irrigate their fruit crops. This over- launched a river-linking project to combine 14 rivers
  17. 17. SAM Study “Water: a market of the future” Global trends open up new investment opportunitiesTable 3: Major water transfer projectsSource: GWI: Global Water Market 2011, 2010.Country Project Capacity (million m3/day) Capital costLibya Great Man-Made River 6.5 USD 11 billionChina South to North Water diversion 110 USD 58 billionSpain River Ebro diversion 2.9 EUR 18 billionKuwait Karun transfer (from Iran) 0.75 USD 2 billionJordan Disi Amman Water Conveyor 0.27 USD 950 millionflowing from the Himalayas with rivers from the There are now over 14,000 desalination plantssouth. China has started work on a huge project to online, with other 244 known to be under contractdivert water away from the Yangtze into the arid or in construction, which represent an additionalregions of the north at estimated investment costs capacity of 9.1 million m3 per day.14of over USD 60 billion. And Spain also has plans forchanneling water from the north to the south. One One reason for the boom in desalination plants is One reason for thecommon thread of these numerous projects is that that production costs have dropped dramatically in boom in desalinationthey are often a source of public controversy and recent years. Especially for plants using reverse plants is thatare bound to have serious consequences for the osmosis membrane technology, operating costs are production cost hasenvironment. now 3 to 4 times lower than they were 30 years dropped dramatically ago. With production costs of less than USD 1 per in recent years.Tapping into new water sources cubic meter of water, these plants are achievingAlthough the water supply infrastructure is in a price levels that are getting much closer to conven-very dilapidated state in many countries, with large tional water sources.15volumes of water being wasted through leakage,countries where water is scarce are increasingly Saudi Arabia is already the world’s largest producertrying to expand freshwater supplies through the of desalinated water with 1420 online plants pro-use of desalination plants. The installed capacity of viding for a total capacity of over 10 million m3 perthese plants has increased enormously in recent day.16 One of the largest projects is a 1 million m3decades. per day plant at Ras Azzour.In 1970, the amount of water desalinated globally Israel continues to expand its desalination andper day was less than 0.8 million m3. This figure water recycling programs and has planned projects 3has now increased to well over 59 million m per including the Red-Dead Sea Canal. The project is aday in 2009. There is no sign of this trend abating, 180 km aqueduct consisting of tunnel and channel 14 The International Desalinationgiven that newly installed capacity is constantly sections, which would carry 1.8 billion m³ of sea- & Water Reuse Quarterly industry website, http://www.desalination.bizincreasing. water from the Red Sea to the Dead Sea area /news/news_story.asp?id=5121 (08.11.2009). 15 Pacific Institute: Desalination, With a Grain of Salt – A California Perspective, 2006. 16 GWI: Global Water Market 2011, 2010. © SAM 2010 17
  18. 18. SAM Study “Water: a market of the future” Global trends open up new investment opportunities each year. Of this total, 800 million m³ would be tury. In many areas huge investments are now desalinated to use as drinking water for Israel, Jor- required in order to repair and upgrade the aging 3 dan and the Palestinian Authority, and 1 billion m infrastructure. Water supply and sewer systems a year would be pumped into the Dead Sea, which have a service life of roughly 60 to 80 years and in has been drying up. many cases have reached the end of their useful lives. Furthermore the water mains are not being Apart from facilities to desalinate seawater and adequately maintained in some countries: brackish water, plants are also being built that are • The standard of maintenance for the U.S. water capable of treating wastewater for reuse in other mains and sewer system – like many other areas applications. California’s Orange County Water of the infrastructure – is far too low. Leaking District and Orange County Sanitation District to- pipes mean that large volumes of precious drink- gether have invested approximately USD 481 million ing water are wasted. The City of San Diego, for in a water supply project to expand the county’s example, buys in 300 million m3 of water every water purification and seawater intrusion barrier year, 25 million m3 of which are never actually facilities, as well as to install a 13-mile pipeline along used, costing the city approximately USD 22 mil- the Santa Ana River for the reuse of advanced lion.18 The total water loss nationwide is probably treated wastewater. The reuse of treated wastewater in the region of 23 million m3 per day, which is helps Orange County recharge its groundwater equivalent to the combined water consumption basin, protecting it from further degradation due to of America’s 10 biggest cities. seawater intrusion. This represents a more cost- • The U.S. Environmental Protection agency EPA has effective and energy-efficient solution, compared identified a huge financing gap for the mainte- 17 Groundwater Replenishment System Progress Report, 2008. to importing water from northern California. 17 nance of drinking water and wastewater treat- 18Davis, R.: The case of San Diego’s ment facilities over the next 20 years: If spending vanishing water, 2007: 2.2 AGING INFRASTRUCTURE continues at the current level, the total gap by the http://www.awwa.org/publications/ MainStreamArticle.cfm? In contrast with many developing countries, where end of that period will amount to some USD 540 itemnumber=29525 (5.10.2007). many people still do not have adequate access to billion. Even if investments rose by 3 percent per 19U.S. EPA: Clean Water and safe drinking water, industrialized nations originally annum in real terms, the shortfall would still Drinking Water Infrastructure Gap Analysis Report, 2002. built their water mains back in the early 20 cen- th come to USD 76 billion.19 Figure 9: State of the US water supply system If the standard of maintenance of the water supply system continues at its current level, more than half of the pipework will be in a poor condition or worse by 2020. Source: U.S. EPA: Clean Water and Drinking Water Infrastructure Gap Analysis Report, 2002. 1980 2000 2020 68% Excellent 42% Excellent 32% Excellent 19% Good 17% Good 11% Good 3% Fair 18% Fair 12% Fair 3% Poor 14% Poor 13% Poor 2% Very poor 2% Very poor 23% Very poor 5% Life elapsed 7% Life elapsed 9% Life elapsed18 © SAM 2010
  19. 19. SAM Study “Water: a market of the future” Global trends open up new investment opportunitiesFigure 10: Yearly maintenance capital expenditure in Canton of Schwyz, SwitzerlandThe sewer network in the Canton of Schwyz is a good example of the expected capital expenditure (capex) required for maintenance of the sewer infrastructurein Switzerland. The green curve reflects the projected capital investments needed to maintain the existing network.Source: Environmental Protection Agency, Canton of Schwyz. 50 45 Index adjusted (in millions of CHF) 40 35 30 25 20 Trendline Sewer 15 10 Sewer Trendline Wastewater Treatment Plant Trendline Sewer 5 Wastewater Treatment Plant 0 Trendline Wastewater 1964 1972 1980 1988 1996 2004 2012 2020 2028 2036 2040 2048 Treatment Plant Source: Environmental Protection Agency Canton Schwyz• London loses 30 percent of its fresh water through 2.3 HIGHER WATER QUALITY STANDARDS leaks in its antiquated pipe system. Under pres- 20 In many countries, the population is suffering not Even in extremely sure from the industry regulator, the network only from a shortage of water, but also from the arid countries, very operator Thames Water is replacing more than poor quality of the water that is available. More little care is taken in 1500 km of the aging supply network within five than 1 billion people worldwide have no access to using this precious years. A planned GBP 200 million desalination safe drinking water. resource. plant will eventually supply 15 percent of the fresh- water currently lost through leaking pipes.21 This situation is mainly caused by three factors:• Water use is also unefficient in France and Spain: • In developing countries, many residents of urban Around 30 percent of water is lost before it areas are not connected to a proper sewer system. 20 Dow Jones Newswires: reaches the end consumer. 22 The wastewater from these households is released SAM sees steady growth in world water sector, 2010.• There is also a continuous effort to renovate the into the environment without any form of treat- sewer system in Switzerland, most of which was ment, polluting groundwater and surface waters 21 Telegraph.co.uk (24.07.2007). constructed in the second half of the 20 century th in the process. Solid waste is also frequently 22 European Environment Agency: http://www.eea.europa.eu/themes/ and needs to be renewed over the next few dumped into watercourses. climate/ (5.10.2007). decades.23 About 23 percent of the sewer net- • In many countries, industrial effluent is inade- 23 Lehmann, M.: Volkswirtschaftliche work currently has significant or serious defects quately treated. This is a critical problem in China, Bedeutung der Siedlungswasser- wirtschaft. Gas Wasser Abwasser 6/94, and needs to be renovated in the mid term.24 The for example. 1994. situation is even more critical in the residential • The fact that farmers have managed to increase 24 Herlyn, A.: Status quo der Schweizer property sector, where up to 85 percent of the their food production so significantly in recent Abwasserentsorgung. Gas Wasser Abwasser 3, 171-176, 2007. pipe-work is substandard.25 decades is mainly due to the increased use of crop 25 Gränicher, H. U.: Die neue VSA-Richtlinie – Baulicher Unterhalt von Abwasseranlagen. Kanalisationsforum, Bern, 2006. © SAM 2010 19
  20. 20. SAM Study “Water: a market of the future” Global trends open up new investment opportunities Figure 11: Water treatment and the creation of industrial value-added The higher the value created by manufacturing industry, the higher the level of spending on water treatment tends to be. Source: Nalco; Freedonia, 2006. 35 Spending on water treatment 30 United States Germany Sweden Austria 25 United Kingdom Japan Taiwan (USD/person) France South Korea Italy Belgium 20 Netherlands Spain Australia 15 Russia Czech Republic Mexico Hungary 10 Argentina Indonesia India Brazil China 5 0 500 1000 1500 2000 2500 3000 3500 Value added created by manufacturing industry (USD/person) protection agents and fertilizers. In many regions, system as typically found in industrialized nations is these substances are now contaminating the not feasible within a reasonable timeframe, mainly water and polluting the groundwater. because cities in these countries are growing so rapidly. Because of this, simpler solutions to the The range of potential pollutants is enormous: sanitation problem in these countries are being Organic matter decomposing in the water removes sought. In China, more than the oxygen that is vital for sustaining life; feces 75 percent of rivers contaminate the water with bacteria and micro- One point worth raising in this context is that a flowing through organisms that spread disease; the runoff from correlation has been found to exist between water urban areas are con- overfertilized fields floods rivers and lakes with treatment and economic prosperity. A comparison sidered unsuitable for harmful nutrients; overwatering and excessive of different countries shows that those with a high drinking or fishing. groundwater extraction increases soil salinity; acid level of value-added spend more money per capita rain changes the pH value; heavy metals and toxic on water treatment than less prosperous countries. compounds from industrial processes contaminate drinking water; and inappropriate cultivation meth- It is interesting to note from this comparison that ods release large quantities of fine particulates China spends comparatively little on wastewater into the water, which also causes the water quality treatment.26 The growing number of reports about to deteriorate. severely polluted watercourses in the world’s most populous country is less surprising. Many rivers in The lack of adequate sanitation facilities in countries China are so badly polluted that not even industry with poor infrastructure is one of the major causes can use the water. In China, more than 75 percent of widespread gastrointestinal disorders. This can of rivers flowing through urban areas are con- have fatal consequences for children, in particular. sidered unsuitable for drinking or fishing. About The number of deaths caused every year by contami- 700 million people drink water that is contaminated nated water is estimated at up to 5 million world- with animal or human waste and water pollution wide. The installation of a comprehensive sanitation causes about 60,000 premature deaths every year.27 26 Nalco Freedonia, 2006. 27 Responsible Research: Water in China, 2010.20 © SAM 2010
  21. 21. SAM Study “Water: a market of the future” Global trends open up new investment opportunitiesFigure 12: Annual consumption of bottled waterSource: CLSA Asia-Pacific Markets: Thirsty Asia 2, January 2010. USA +6.7% (CAGR) Mexico China +19.6% Brazil ItalyIndonesia +9.6% Germany France -1.28% Thailand 2003 Spain -0.8% 2008 0 5000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 in millions of litersNew pollutants in the water the help of the latest technologies in sewage treat-In industrialized countries, decent water quality is ment systems.31more or less guaranteed nowadays thanks to theprovision of advanced water and wastewater treat- Greater health awarenessment. But these countries are increasingly facing For increasing numbers of people in developednew challenges. Investigations in Switzerland have countries, water is not only a basic commodity butshown that despite the construction of new sewage also a lifestyle product. In Germany, for example,treatment plants, hazardous chemicals are still en- today’s consumer can choose from about 500tering the watercourses. Especially in times of heavy different domestic water brands, all of them dif-rainfall, acute concentrations of toxic nitrogen com- ferent in terms of taste and origin. And these arepounds, such as nitrites and ammonium, are being complemented by many other types of mineraldetected at sewer overflows and large quantities water imported from abroad.32 28 EAWAG, Dübendorf; BUWAL, Bern:of pesticides and nitrate find their way into the Fischnetz – Dem Fischrückgang auf der Spur. Schlussbericht des Projektsgroundwater when they are used in farming.28 In many countries, people rely on drinking bottled Netzwerk Fischrückgang Schweiz, water due to the insufficient quality of local tap 2004.Another problem is the constant stream of new water. Growth in this industry has been very strong 29 Wild, D.; Reinhard, M.: Biodegradation residual of 4-octylphenoxyacetic acid insubstances and compounds entering the water for many years now, averaging 8 percent by volume laboratory columns under groundwatercycle that wastewater treatment systems are unable per annum for the last 10 years, even though the recharge conditions, Environmental Science and Technology, 33, No. 24,to remove entirely. 29 The trickiest are endocrine- growth rate is now slowing or even negative in 4422-4426, 1999.active substances, which can have a negative impact certain countries such as the U.S. On the other 30 Buffle, M.-O.: Treatment of Endocrineon any living organisms in the water.30 Another hand, demand for bottled water is growing faster Disrupting Compounds by mean of Advanced Oxidation, EDC workshop,problematic aspect as far as wastewater treatment in developing countries, driven by contaminated Montgomery Watson, London, UK, 2007.is concerned is that many of these substances are and unsafe drinking water. During the period 2003excreted in human urine. The water used for flushing to 2008, demand for bottled water in China grew 31 European Environment Agency: http://www.eea.europa.eu/themes/heavily dilutes these substances however, thereby at a CAGR of 15.6 percent, while consumption in climate/ (5.10.2007).making it more difficult to remove them, even with the U.S. grew by 6.7 percent.33 32 Informationszentrale Deutsches Mineralwasser: http://www.mineralwasser.com/ (5.10.2007). 33 CLSA Asia-Pacific Markets: Thirsty Asia 2, 2010. © SAM 2010 21
  22. 22. SAM Study “Water: a market of the future” Global trends open up new investment opportunities Figure 13: Runoff volume from the Indus river under changing climate conditions The runoff pattern could vary widely, depending on how quickly the average global temperature changes in the coming years. Even if drastic measures are taken to combat climate change, the runoff volume will still drop significantly over the course of this century. Source: UNDP: Human Development Report 2006. 60 Projected change in flows (%) 40 20 0 Temperature increase – 20 per year – 40 0.15 °C 0.10 °C – 60 0.06 °C – 80 0.03 °C 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 In many regions of 2.4 CLIMATE CHANGE century. This means that after a phase of increased the world, climate In many regions of the world, climate change will discharge there will be less water available in change will have have a significant impact on water resources in the regions supplied by meltwater running off from a significant impact coming decades. In its latest report, the Inter-govern- major mountain chains. This is an ominous devel- on global water mental Panel on Climate Change (IPCC) anticipates 34 opment, because more than one-sixth of the resources in the the following trends: world’s population currently lives in these regions. coming decades. • In the high latitudes and in some tropical regions, the average annual runoff will increase between Impact will vary from one region to the next 10 and 40 percent by the middle of this century. In addition to these general statements, the IPCC • It is likely that even more areas will be affected also provides forecasts on the effects of global by drought and water shortages will be more warming on specific regions: common. • Within Europe, the Mediterranean countries will • An overall increase in the frequency of heavy be most heavily affected by climate change. The downpours is predicted. This also makes it more IPCC predicts that Southern Europe will generally likely that human settlements will experience have to cope with far more difficult conditions, severe damage. including high temperatures, extreme drought, 34IPCC, WMO/UNEP: • The volumes of water stored in glaciers and the poor water availability and subsequently limited Climate Change 2007: Summary for Policymakers, 2007. snow pack will decline over the course of the next potential for exploiting water as an energy source. Severe glacial erosion illustrated by the photos of the Grinnell glacier in the Glacier National Park in Montana (U.S.). Source: Northern Rocky Mountain Science Center. Image 1: 1938 Image 2: 1981 Image 3: 1998 Image 4: 200622 © SAM 2010

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