By: Katie Sola
Source: IMAGE: JUSTIN SULLIVAN/GETTY IMAGES
At a recent gathering of young professionals in the Bay Area, Scott Bryan, the chief operating officer of Imagine H2O, asked the 60-strong crowd how many were considering going into the water business.
Just one hand went up. About a third were interested in energy and the rest of the crowd planned to enter tech and social media.
California is in the depths of a historic, disastrous drought that has cost the state $7.5 billion and sucked some communities dry. But there’s a startling lack of progress in water technology, be that new desalination systems, intelligent meters or water recycling.
Just take a look at this chart, from the Hamilton Project, which shows the number of water patents versus energy patents filed in the U.S. as a whole.
Source: THE HAMILTON PROJECT AT BROOKINGS
The amount of money invested in the water sector is also pitifully low. According to Cleantech Group, 2014 has been the best year for private venture investments into water technology with $110 million invested so far.
Compare that to the $165 million interior design website Houzz raised this month. Or the $100 million biofuel company Cool Planet picked up in March.
“There’s not a lot of talent and innovation happening in water,” said Dominique Gomez, director of market development at WaterSmart, a software company that intelligently analyzes noisy water data to give consumers better insight into their habits. “But it is so important if we’re going to live in the places that we live.”
Why does America’s most innovative state have such a serious water innovation problem?
For a start, water prices are artificially low. Unlike Uber, water doesn’t become more expensive when it’s scarce.
“Far fewer people think about their water use, because water prices are so low,” Barton Thompson, a professor of natural resources law at the Stanford Woods Institute for the Environment told Mashable. “People don’t think about the economic benefit of saving water.”
Bryan of Imagine H20 said California doesn’t have a shortage of water technology, but the state needs an innovative business model in order to bring that technology to market. Traditional venture capitalists work on a seven year investment cycle, but it takes five to ten years to develop a successful water business model, he said. Imagine H2O is trying to solve that problem with water innovation competitions and an incubator, Bryan said.
The fragmentation of the water industry also stymies innovation, Thompson, the professor, said. There are more water agencies than schools in the U.S., for example.
Water recycling technology is just one example of the fragmentation. Local municipal jurisdictions can have different quality standards for recycled water. Adapting new technology to each individual system takes time and money, he said.
In her efforts to sell WaterSmart software to water utilities, Gomez discovered that “they’re not really used to trying anything new.” Developing the software was fairly easy, she said, but most water utilities have been doing the same thing for the last 50 or 60 years, and they’re not used to the procurement process.
“When we contract with municipalities we often find the only contract they have available is a consulting contract,” because they haven’t purchased new technology in the past 20 years,” Gomez said. The patchwork nature of the water industry also makes selling a challenge, as each municipality has its own complex politics.
What’s the solution?
In a recent paper titled The Path to Water Innovation, Thompson and his co-authors proposed that Western states should form Offices of Water Innovation. The office would coordinate price increases, drive policy and redirect money toward innovation.
A California Office of Water Innovation would cut through the red tape involved in bringing new water tech to market, Gomez said. For example, water ideas are not eligible for government grants like the Integrated Regional Water Management Grants because they require an established business model first.
Thompson also suggested that California should have renewable portfolio requirements for water just as it does for energy. For example, some states mandate that you can’t use drinking water to irrigate golf courses. You could go further and encourage water suppliers to use the new technology, he said.
But cash-strapped utilities spend their low profits on maintaining aging infrastructure rather than installing new technology. More efficient tech would include smart meters and software to analyze messy water data and pinpoint leaks. Higher water prices also drive consumers to save more water.
The East Bay Municipal Utility District (EBMUD) raised water rates two years in a row to compensate for aging infrastructure, and adopted a tiered rate system so customers are charged more once they exceed a particular limit.
But increasing water prices is politically challenging. Water agencies aren’t allowed to charge more than their costs, and they’re governed by publicly elected boards, explained Abby Figueroa, chief spokesperson of the East Bay Municipal Utility District.
That’s a challenge Thompson said can be overcome by customer education. Once consumers appreciate the need for new technology, they’ll be willing to pay for it.
That’s been true at EBMUD. The devastating Loma Prieta earthquake initiated a 25-year, $4.7 billion upgrade to seismically reliable pipes — though the technology was invented in Japan.
“That’s always the case,” Figueroa said.
When a public utility invests in a new technology and it fails, it’s disastrous for the public trust. For that reason, Figueroa said “government agencies tend to err on the cautious side before throwing new sums of money into new technology.”
Tyrone Jue of San Francisco Water said water shouldn’t be a consumer good, priced according to demand. “It’s a challenge because the more expensive something is, the less people will use it. But you have to balance that with water is a basic essential human right. You cannot make it too expensive.”