From a market research perspective, the municipal wastewater sector lives in the shadows of its water counterpart. This extends from fewer media hits and public conversations to the limited availability of wastewater datasets essential for market development.
What’s the story behind this? To begin, the big picture of wastewater treatment in the U.S. is far less transparent for stakeholders across the wastewater value chain. On the consumer side, it tends to be a matter of ‘out of sight, out of mind.’ But for businesses and vendors whose livelihoods revolve around conversations of wastewater, it comes down to data availability and quality; speak to a business development professional in the water and wastewater industry and they’ll likely confirm that the EPA’s water data is significantly easier to work with than its wastewater equivalent.
Comparing U.S. wastewater data to U.S. water data is a little like comparing apples with oranges: The industry-standard water data (made available through the Safe Drinking Water Act) is reported at the system level, while the baseline wastewater data is disclosed at the permit or facility level (made available by the Clean Water Act). The Clean Water Act regulates and monitors discharge, which is ultimately released at the treatment facility—not system—level; as a result, the available wastewater data does not include several metrics key to understanding market size and opportunity, including population served and customer connection count.
Here lies the inspiration for Bluefield’s recent analysis, Total Addressable Market for Water & Wastewater Utilities: U.S. Benchmarks for Owner Market Share and Consolidation Opportunities. This report and its underlying data stemmed from our team’s desire to bring the wastewater data out of the shadows and onto the same playing field as water. As part of this exercise, we established a new methodology for estimating population served and connection counts using readily available discharge flow data and informed conversion factors for flow to population served.
So, what were we able to learn about the U.S. municipal wastewater landscape from our improved wastewater treatment facility dataset?
Putting things in perspective. Out of hundreds of thousands of municipal, industrial, and stormwater wastewater discharge permits, Bluefield narrowed the EPA dataset to 23,481 municipal wastewater treatment facilities. These are public and privately owned facilities treating sanitary sewage from homes and businesses and discharging the treated effluent into surface waters. Our team estimates that these municipal treatment works serve 267 million people or 75% of the U.S. population. The majority of these facilities (70%) are publicly owned facilities, which contrasts with the water landscape’s fairly even split between public and privately ownership.
Regulatory compliance violations are an issue. Of the 14,426 wastewater facilities reporting one or more effluent violations in the last three years, 69% are small and very small facilities serving fewer than an estimated 3,300 people. These noncompliant systems represent US$329 billion of the total addressable market value for consolidation when valued according to average costs per customer connection paid in utility acquisitions over the past several years.
Private participation in wastewater by leading investor-owned utilities (IOUs) is limited but rising. Of the 81 million total wastewater connections estimated by Bluefield, just 3% fall under private ownership (i.e., systems tagged as not publicly-owned treatment works or non-POTWS by the EPA). Within this pocket, the country’s top IOUs—the largest and most competitive privately held or publicly traded companies providing water and wastewater services—only represent approximately one-third of these private connections. In aggregate, this equates to about 1% market share by total wastewater connections across the top 30 investor-owned utilities tracked by Bluefield Research.
When compared to the water sector, where leading IOUs have about 7% market share, there is a clear discrepancy in ownership trends across the water and wastewater landscapes. It comes as no surprise that in recent years, front-running players such as Essential Utilities and American Water have publicized strategic interests in acquiring more wastewater assets. Since 2015, stand-alone wastewater acquisitions have only accounted for 17% of total connection added, compared to 47% for water acquisitions and 36% of combined water and wastewater deals. We anticipate that other leading IOUs will follow suit.
Municipal wastewater is a space to watch. Given the mounting financial, environmental, and regulatory pressures, our team is confident that the municipal wastewater segment is a space to watch, and we expect companies (including IOUs) to do the same. By completing our in-depth, state-by-state analysis of the Total Addressable Market, our team of water experts is better equipped to support the industry in understanding the wastewater market—from identifying trends and key players to finding white spaces across the wastewater value chain.