Water, Wastewater and Their Fading Boundaries

Traditionally, most people in the industry have tended to think about water and wastewater as two pretty different businesses.

by Steve Maxwell

Traditionally, most people in the industry have tended to think about water and wastewater as two pretty different businesses. The boundaries between the two, however, are slowly and surely fading over time. The primary drinking water industry and the wastewater treatment industry face very similar problems and challenges. And today, we hear more frequently that “water is water” - regardless of its type, or the amount of treatment it may need to undergo before we use it to generate power, to manufacture pharmaceuticals or processed foods, or to drink.

The two parts of the business aren’t that different. The total market - or fee revenue generated - for municipal wastewater treatment is about $37 billion per year, and water utility revenues are about the same - $36 billion per year. Worldwide, it’s estimated over a billion people on this planet lack adequate access to clean drinking water, and about 2.5 billion people lack access to sanitation services.

Second, both sectors use many of the same technological approaches and integrated systems. Treatment technologies and management systems are experiencing a similar advance and proliferation in both water and wastewater treatment. As regulatory requirements become tougher and more comprehensive, newer technologies are coming into broader usage - membrane filtration, advanced oxidation treatment techniques such as ultraviolet irradiation and ozonation, as well as constructed wetlands and other approaches that mimic “natural” treatment systems.

Third, the overwhelming need for infrastructure replacement and capital expenditure is probably the most critical challenge facing both parts of the industry. Although studies abound and dollar estimates vary, most observers put total investment required in each sector over the next 20 years at about $300 billion. Upgrading and maintaining the wastewater and sanitation infrastructure is clearly just as critical as upgrading and replacement of the primary water infrastructure - to human health, the environment, and well-being and growth of our economy.

Fourth, since both industries have the economic characteristics of natural monopolies, they exhibit similar tendencies or imperatives toward consolidation. Bigger regional systems, if operated properly, can often provide service to customers at improved efficiency or lower costs. Bigger operations can allow greater economies of scale, and hence there’s a trend toward consolidation of systems. This process will naturally be very slow, though, due to political challenges of merging municipal operations.

So, over time, distinctions between the water and wastewater industries we’ve assumed or recognized in the past will begin to fade. Increasingly, we’ll realize that water really is just water. Wastewater, just like ground and surface water - even pristine mountain lake water, will be increasingly viewed as just another potential source of raw water for water utilities to utilize in the provision of clean water to their customers. In the future, they may well compete fiercely over rights and access to wastewater streams, as various raw feed sources become more restricted and hard to find. Some in more arid areas already are. Still, representatives of both industries should all be fighting for the same ideals. One day, we’ll probably recognize them as one and the same business.

About the Author: Steve Maxwell is managing director of TechKNOWLEDGEy Strategic Group, a Boulder, CO-based management consultancy specializing in merger and acquisition advisory services, and strategic planning for the water and broader environmental industries. He’s also the editor and founder of The Environmental Benchmarker & Strategist, a comprehensive source of competitive and financial data for the environmental industry. Contact: 303-442-4800 or maxwell@tech-strategy.com

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