Standing on the precipice of a new year, the water industry finds itself, once again, at a crossroads of tradition and transformation. This year represents a pivotal juncture for water industry stakeholders across the value chain. At times, it seems that water is in the news more than ever before and it feels like we, as an industry, are addressing some of the same age-old issues.
Taking stock of 2023, there were some notable developments:
Water quality took the spotlight with regulatory strides for PFAS. At Bluefield, our team of analysts adjusted our PFAS forecast to almost US$13 billion in anticipation of new MCLs and legal settlements with chemical companies. In addition, lead service line replacement initiatives began to gain real momentum, particularly with the administration’s proposed Lead and Copper Rule Improvements (LCRI) which would require most water systems to replace 100% of lead services lines within 10 years.
- 2023 saw a wave of government funding allocated for the water sector through the Infrastructure Investment and Jobs Act (IIJA) and Europe Recovery Funds. While the rollout has been slow, the impacts of IIJA funds will continue to be top of mind for leading water companies.
- 2023 deal flow was slightly down from 2022, however, key deals in which publicly traded water companies (e.g., H20 Innovation, Logistec) were taken private and (decentralized) water treatment firms (e.g., Cambrian and Natural System Utilities), including a “water unicorn” Gradiant, which grabbed the spotlight.
- Water found its way onto the stage and into discussions at key climate conferences, such as the UN Water Conference in New York and COP28 in Dubai.
- Inflationary pressures and supply chain constraints, caused by a number of geopolitical issues (e.g., China, Russia-Ukraine) raised market concerns but now seem to be waning.
- ChatGPT and the role of artificial intelligence captivated us, all while utilities and companies in water faced cybersecurity threats.
As a market research company, we must look to the past, analyze the data, to move forward. Already in 2024, we’ve seen Badger Meter acquire Trimble’s water monitoring and telemetry business. Will other metering companies follow suit? Will we see more consolidation of the utility sector? How much will recessionary concerns impact company strategies going forward?
As we head into the new year, here a few of our predictions for the coming year:
- Water will be a key part of the climate discussion around resiliency, stormwater, and alternative water supplies. In 2023, the National Centers for Environmental Information (NCEI) documented 25 billion-dollar weather and climate events in the U.S., surpassing the 22-year annual average of 8.1 events. These events, totaling US$81 billion included drought, floods, large storms, winter storms, and wildfires. Within this context, businesses are being compelled to redefine their priorities, placing an increased emphasis on infrastructure capable of withstanding extreme weather events and adapting to environmental shifts. Innovative solutions, from advanced drainage systems to water storage facilities, are being deployed to insulate cities and businesses from the unpredictable impacts of climate change. These advancements not only ensure resilience but also contribute to the safeguarding of corporate bottom lines, irrespective of ESG mandates and measures.
- Digital water technologies, specifically those that impact consumers (such as, real-time monitoring and leakage management) will see significant investment. As a result, digital companies will continue to diversify their strategies and infrastructure companies will invest in digital.
Global digital water spend will scale at an 8.8% CAGR, from US$25.9 billion to US$55.2 billion by 2030, transformed by a wave of new technologies for connectivity, mobility, automation, and analytics. The advent of smart meters, sensors, and Internet of Things (IoT) technologies heralds a new era in water management. Real-time monitoring and data-driven decision making empower businesses to optimize processes, from leakage management to asset maintenance. Efficiency in the digital age translates into enhanced business performance that fosters more sustainable, data-backed approaches to water management by utilities, industrial facility operators, and homeowners. - Europe will be at the forefront, not only around circular economy and the PFAS discussion but also around water reuse.
Droughts in Europe will drive investment in reuse, sustainability and circular economy. The ten-year water reuse forecast in Europe (€360 million or US$396 million in 2030) propelled regional water scarcity concerns from diminished shipping channels to water rationing. Europe’s emphasis on a circular economy to address competition for water among key stakeholders (i.e., residential, agriculture, industry) will drive significant change across the water sector from demand management to supply offerings. Technologies that can guarantee both water supplies and energy efficiencies, while mitigating operational risks will see investment. Smaller-scale, decentralized water treatment and recycling systems, coupled with innovative business models (e.g., water energy purchase agreements), are emerging as viable alternatives to larger centralized systems. - Industrial water—from semiconductors to food and beverage—will see significant growth. Clean fuels and energy will remain at the forefront with electric vehicles and hydrogen driving opportunities for water providers. Corporates will incorporate water into their ESG strategies driving investment.
Over 1,684 water-intensive hydrogen projects globally, signal emerging opportunities for water technology vendors, solutions providers, and utilities. While we are in the early stages of hydrogen hubs and valleys worldwide, even for enthusiasts of the hydrogen economy, the long-term water demand for these facilities should not be underestimated. A conservative estimate suggests that 284 million gallons per day (1 million m3 per day) will be required for these early-stage projects, many of which are in pilot phases, aligning with the global shift from fossil fuels (e.g., coal) to renewable energy sources.
Beyond this, the ascent of carbon-neutral power and transportation, such as hydrogen and electric vehicles, represents a substantial shift in opportunities for water solutions providers on a global scale. As these markets and their supply chains evolve, the management of water, a critical input for their viability, must be advanced. The impacts will be evident from the lithium triangle in South America to hydrogen valleys in Spain and water utilities in Australia. - Forever chemicals in drinking water, with pending guidance slated for 2024, will remain a top priority. U.S. Environmental Protection Agency has made relatively quick progress towards addressing PFAS in drinking water. The agency is expected to finalize the proposed MCLs in Q1 2024, although the Final Rule may be revised to reflect the feedback of 121,000 public comments, many of which raised concerns about the cost of compliance and lab testing levels/capabilities. At the same time, proposed rulemaking for CERCLA designation of PFAS are still pending. Seemingly, for every thread we pull in terms of these contaminants, the more complicated and technical the challenge becomes, including wastewater and biosolid management.
Water is in for 2024. What’s out is ‘out of sight, out of mind’ thinking in terms of water infrastructure needs and priorities.
There is no doubt in my mind that water is “In” for 2024. What’s “Out” is “out of sight, out of mind” thinking in terms of water infrastructure needs and priorities. With an ever-increasing focus on global climate and carbon mitigation strategies, water cannot be overlooked as a critical solution and change agent. At Bluefield, we look forward to continuing to support our clients’ water strategies in the coming year.
