Last year at this time, I wrote in GreenBiz that the year ahead for water could be viewed as the roaring 20s and as a period of creative destruction. As I reflect on 2021 and the year ahead, I am doubling down on this view with three trends that are proof points that water innovation is accelerating and disrupting the status quo.
1. Extreme decentralization is moving into your home
The move to diversify from centralized water and wastewater treatment systems has been underway for years. This is not to imply that centralized systems will be completely replaced. Instead, there are now alternatives for water supply and treatment.
The trend to provide options to centralized systems is accelerating with a recent move to technologies that can be viewed as "extreme decentralization," as outlined in this essay, "The Third Route: Using Extreme Decentralization to Create Resilient Urban Water Systems." The authors frame a complementary path to centralized systems that includes "household-based personalized water systems."
In my view, these personalized water systems include technologies for off-grid water supply systems (such as the panels from Source), home water reuse (including technologies from Hydraloop) and real-time water data information sources for quantity (Conservation Labs) and quality (Safespout).
Off-grid water supply, reuse and home water performance will be enabled by these real-time data digital technologies. View these technology categories as augmenting centralized water and wastewater treatment systems and delivering access to water where centralized systems are unavailable. An important initiative in this trend is the work of the 50 Litre Home Coalition, which has a vision to create abundance for water through the adoption of advanced water technology in the home.
2. Exponential technologies are taking off
Deloitte defines exponential technology as "innovations progressing at a pace with or exceeding Moore’s Law" that "evidence a renaissance of innovation, invention and discovery … [and] have the potential to positively affect billions of lives."
Xponential Works adds that "exponential technologies are those innovations that continue to advance exponentially, with disruptive economic and lifestyle effects."
Examples of technology categories in the water sector include digital technologies and advanced materials. Digital technologies encompass artificial intelligence, augmented and virtual reality (AR, VR) and robotics.
The applications of these technologies are appearing in the utility and private sector to vastly improve resource use, reduce carbon emissions and manage infrastructure, manufacturing assets and supply chains. Company examples include Plutoshift and Fido Tech, the work of KWR Water and WatchTower Robotics. Advanced materials are being applied in off-grid water supply technologies (such as Source) and treatment membranes (evove).
Typically, water technology innovation is linear: slow and evolutionary not revolutionary. But these exponential technologies are disruptive, not just evolutionary, innovations that will transform public sector and private sector water management. One just has to look at how exponential technologies have disrupted other sectors such as the energy sector. The rise of residential solar is one example that is illustrative of what could happen for water.
3. The hydration revolution
This is not an indictment of tap water but instead, a recognition that consumers are moving to alternative hydration methods and in-home water treatment solutions. The reality is that an estimated 60 million Americans don’t trust tap water. The reasons are complex but can be broken down into perceived risks from tap water, such as the taste; real risks such as lead contamination; and brand preferences for bottled water. Regardless of the motivation, this lack of trust in tap water is driving innovation and consumer preferences about how they hydrate.
According to research by Asher Rosinger, Anisha Patel and Francesca Weaks, 60 million Americans don’t trust the water from their tap. The two state, "Taking that into account that an estimated 2 million Americans don’t have access to safe drinking water, about 59 million people have tap water access from either their municipality or private wells or cisterns but don’t drink it. While some may have contaminated water, others may be avoiding water that’s actually safe."
Since the 2013 to 2014 timeframe (just prior to the lead crisis in Flint, Michigan’s water system), the prevalence of adults who don’t drink their tap water has increased by 40 percent. The number of children not consuming tap water rose by 63 percent. The authors reference a 2020 study by anthropologist Sera Young, which found that tap water avoidance was declining before the Flint water crisis that began in 2014. In 2015-2016, however, it started to increase again for children.
The implications of this trend are that consumers seek alternatives to tap water and installing in-home treatment systems. They are attracted to "personalized water" options (such as SodaStream or rocean) and tracking hydration as part of the trend in personal wellness (via bottles and apps such as Rebo). While these supplies will not replace traditional water utilities, they will challenge them to manage customer perceptions and consider potential partnerships with alternative hydration businesses.
What this all means: Investors just add water
The rush is on to invest in the water sector. Disruption of the water industry (I view the "water industry" as very broadly defined beyond water utilities and water technology providers) is accelerating and being driven by investors.
This increasing interest is being driven by the impacts of climate change on our hydrologic cycle resulting in water scarcity in places such as the American West. Organizations such as Nasdaq and the Financial Times ( Water stress drives investor interest to address supply shortage) recently reported on investing in water in response to water-related risks to the private and public sectors.
Investors are looking for innovative solutions to address water scarcity, poor quality and access to safe drinking water. It is likely that most investments will be in evolutionary innovation technologies; however, some will go towards hydrating disruptive technologies and new business models such as water as a service.
These three trends fueled by increasing investor interest will continue to challenge and disrupt the water sector status quo. The traditionally slow pace of innovation and scaling of new technologies and business models is giving way to faster adoption in response to the harsh reality of the impacts of climate change; democratized access to data and actionable information; and failing aging infrastructure and outdated public policies.