Water Shortages: Opportunities for Entrepreneurs (Part 2)

By Guest Author Dominique Trempont

The first part of Dominique’s article on the global water shortage introduced the problem and named five categories in which there are opportunities for innovation and funding. The first two were 1) collecting storm water and rainfall in a more comprehensive way and 2) storing and transporting water safely and sustainably. Today’s post discusses two more areas in which there has been some notable progress.

3. Make existing fresh water safe to drink

In India, waterborne diseases such as malaria, typhoid, parasites, cholera and diarrhea kill 1,600 children every day. That is the equivalent of eight downed jumbo jets, every day! In this case, when there is fresh water, consumers do not trust it: they refuse to drink it without filtration they control.

The primitive solution is boiling the water, which is expensive energy-wise. Another solution is to install a filter and chlorinate or bleach the water before consumption. But governments are increasingly concerned about chlorine’s potentially serious long-term side effects. A more recent alternative is UV light purification systems, but they are expensive to install.

New types of purification cartridges, such as the solution developed by Seattle-based HaloSource look promising and are cheap to install. Water runs over a bed of polystyrene beads, and then a charge occurs that releases bromine to zap bacteria and viruses, and releases drinkable water. The venture raised $35 million from Mars, Unilever Technology Ventures, Masdar Clean Tech Fund (Abu Dhabi) and Origo Sino India.

Another venture is Cascade EcoSolutions based in Bothel, WA: it develops and markets water treatment products made from recycled shellfish process waste that remove suspended sediment, heavy metals and organic contaminants from construction water. The company also offers an in-house laboratory that performs treatability analysis of water, consulting services, treatment system design, on-site technical support, training and certification.

This type of solution addresses a major water safety issue and a large target market in Africa, South East Asia, Latin America, China and India, with niches in the US and Europe. Here too, the key to scale is the uniqueness of the solution, its competitive positioning and its go-to-market strategy. This is a large segment dominated by a few players, and one in which there is room for a few new companies and solutions.

4. Convert seawater into drinkable water

Converting seawater into drinkable water is called desalination. This process is enabled by “reverse osmosis” that separates the salt and other contaminants from the fresh water by pushing the seawater though filtration membranes at high speed. Until a few years ago, this process was not affordable: the cost of energy to desalinate seawater was four times the cost of the traditional solution, pumping water from ever increasingly distant sources (as far as 500 miles) away, as cities like Los Angeles have been doing for over 100 years.

This category is the most active in venture capital funding: it is rapidly getting crowded from that standpoint. Innovation in desalination takes different forms: some companies focus on the filtering membranes, others on reducing energy needed for the reverse osmosis process and still others on entirely new approaches that do not require membranes. The question here is which are the companies with demonstrable results, solid patents, sustainably profitable business models and good execution?

One company is taking this energy cost off the table. Sramana and I have followed Energy Recovery Inc. (NASDAQ:ERII) for the past two years on this website: in interviews, as part of cleantech coverage and in Sramana’s Forbes column. ERI, based in California, invented a groundbreaking seawater reverse osmosis technology that recovers the energy of the flow of seawater. It powers the desalination process, dramatically reducing the energy cost and making water desalination an attractive solution to generate fresh water. This new technology impacts fresh water production on a very large scale. In full disclosure, I invested in ERI and share some recent data.

• According to an independent study conducted by the Affordable Desalination Collaboration at the US Navy Facility in Port Hueneme, California, advances in membranes and energy recovery technology makes desalination less energy-intensive than pumping water over the mountains to Los Angeles, as has been documented by Dr. Robert Wilkinson of UC Santa Barbara.

• Desalinated water is cheaper to make today than people are paying their municipalities in most major cities in California. San Diego residents are paying $2.90 per cubic meter for Colorado River water. The fully loaded water price from the proposed Carlsbad desalination plant is one-third of that number.

• Hundreds of affordable desalination plants are being built in places like Australia, Spain, India, North Africa and China. These plants are ecologically sensitive, wherein the marine life impingement and entrainment issues worrying ecologists have been solved through good design. In cases like Perth, Australia, carbon footprint considerations were resolved by building wind farms to power the process.

• Using modern technology, these plants produce affordable water without any kind of government subsidy.

Stonybrook Purification has created a thin, fibrous scaffold for reverse osmosis membranes that increases water flow through the membrane. The company raised $4.1 million last year. It has applied for patent applications and focuses on removing contaminants and salt in drinking water and wastewater, and on re-use or pretreatment.

Water Standard (WS) delivers fresh water out of ships equipped with water desalination technology. It hints on their website that “in the not so distant future, we will also be moving into wastewater treatment and reuse markets, as well as providing complementary products to our environmentally focused desalinated water”. WS does not comment on their patents but announced that they “have received commitments of up to $250 million in equity to develop [their] Seawater Desalination Vessels™.

NanoH2O develops “polymer-based membranes with nanostructured material that allows additional control of key membrane properties: […] improved permeability or flux while maintaining requisite salt and contaminant rejection, both passive and active fouling resistance, as well as flexible membrane performance to address specific water chemistries.” NanoH2O is funded by shrewd venture capitalists at Khosla Ventures and Oak Investment Partners.

Another desalination venture funded by Khosla Ventures is Quos, a Chicago venture, which has applied for patents for a solution that desalinates and removes other pollutants with graphite porous electrodes instead of membranes.

Seawater desalination plants around the world currently produce barely 0.5% of the world’s water supply. The target market could become a lot larger if its energy economics continue to improve and start including the conversion of slightly salted water sitting in estuaries, swamps, marshes and ponds into drinkable water. The water industry calls this water “brackish water”, a mix of salt and fresh water: its salt content is a bit higher than fresh water but substantially lower than seawater.

While fresh water sources on the globe represent 1% of the water available, brackish water represents about 2% of the world water and seawater 97%. Seawater and brackish water are the obvious next bet, given the state of the technology.

The series concludes tomorrow with a final area for innovation, conserving the existing water supply, before touching on the role of the government in the water space and considering the future of the water industry.

This segment is part 2 in the series : Water Shortages: Opportunities for Entrepreneurs
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