Could Greater Regulatory Acceptance Turbocharge Digital Water Market Growth?

27 Sep 2021  |  Eric Bindler

In August 2021, the U.S. Environmental Protection Agency (EPA) announced its decision to amend the City of South Bend, Indiana’s Clean Water Act consent decree. Issued in 2012 to address the City’s combined sewer overflow problems, the consent decree originally required South Bend to invest as much as US$700 million dollars in upgrading its wastewater collection and treatment infrastructure. But because of its innovative use of digital technology—in particular, a wastewater network monitoring and optimization system developed by Xylem acquisition EmNet—South Bend is on track to exceed its pollution control targets for less than 40% of the cost of the original consent decree investment program. Annual operating costs are projected to decline as well.   

What’s the Big Deal?

The EPA’s decision to acknowledge South Bend’s wastewater network optimization system as an acceptable alternative to traditional gray infrastructure-based pollution control measures represents an important early milestone, particularly as local authorities, nationwide, seek ways to squeeze more from every available dollar. While the announcement certainly doesn’t equate to a carte blanche approval of digital water solutions for compliance purposes, it does signal an increasing recognition of the value, reliability, and maturity of digital water technology on behalf of the U.S. water, wastewater, and stormwater sector’s top regulatory authority.

Solutions providers have long argued that innovative digital water technologies can enable utilities to meet their regulatory objectives more effectively and efficiently than status quo approaches. For example, intelligent network management platforms, such as those offered by Xylem and OptiRTC, can help utilities to optimize the storage capacity of their existing wastewater and stormwater infrastructure, allowing them to reduce sewer overflows for a fraction of the cost of new storage and treatment facilities. Similarly, remote monitoring systems give utilities a real-time view of water quality across their vast service areas without the need for labor-intensive, grab sampling. Further, geostatistical modeling can help utilities identify which households are most likely to have lead service lines without the need to dig up customers’ pipes.

Historically, water industry regulators and policymakers have been slow to accept these arguments, hurting what could otherwise be a rock-solid business case for digital solutions. Digital water technologies can provide a wide range of both tangible and intangible benefits, such as more proactive and efficient operations and maintenance, greater water conservation and environmental sustainability, increased customer engagement and satisfaction, and improved worker safety and productivity. But the fact of the matter is that in an industry in which budgets are razor-thin and any outlay of ratepayer dollars is subject to intense scrutiny, utility managers often must be able to draw a clear line between technology investments and reduced capital or operating expenditures—a line which would be much clearer if regulators permitted utilities to replace costly legacy compliance processes and workflows with more efficient digital solutions.

In an industry in which budgets are razor-thin, utility managers must be able to draw a clear line between technology investments and reduced capital or operating expenses—a line which would be much clearer if regulators permitted utilities to replace costly legacy compliance processes and workflows with more efficient digital solutions.

What’s the Global Picture?

Regulators and policymakers in other key global water markets are even further ahead of their U.S. peers in embracing digital water adoption and innovation. U.K. water regulator Ofwat, for example, encourages utilities to use real-time data and digital technology to meet their stringent operational performance, leakage reduction, and customer satisfaction targets, with further support for U.K. utilities’ digital water transformation in the form of a £200 million innovation fund launched earlier this year, and an innovation center of excellence opening in late 2021. Meanwhile, the state government of New South Wales, Australia unveiled a smart infrastructure policy in June 2020, setting forth new requirements for large-scale state infrastructure projects—including water infrastructure—to embed digital monitoring and control systems, adhere to strict guidelines for data management and cybersecurity, and invest in open standards and platforms.

What’s the Bottom Line?

The digital water market is one of the fastest growing segments of the global water industry, with utility investment in digital solutions scaling at least 3 to 4 times as quickly as broader industry spend. By creating mechanisms which facilitate, incentivize, de-risk, or flat-out require digital adoption and innovation, forward-thinking regulators and policymakers can further strengthen the business case for digital water investment, and accelerate the pace of needed change in the industry. To that end, the Bluefield team anticipates that the recent news out of South Bend will be just one of many such announcements in the coming months and years.