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Investments in Water and Desalination

Guest Post

When researching green investment opportunities, it’s easy to be drawn to the transportation or energy sectors. Not only have new technological developments created a lot of activity in these arenas, but both have been traditional focuses for investment over many decades. This article takes a look at a different sector that has not attracted a lot of attention over the years, but is a resource that is even more fundamental and critical: water.

Why Water?

Like power, water has depended on a large-scale production and distribution model that is predominantly owned and operated by government and large corporations. This model has been a reliable underpinning to our modern society for well over a century.

But things are beginning to change, and that change will soon accelerate. The growth of opportunity in water investments will be driven by two factors:

1. Growing water needs and declining traditional resources
2. Technological innovations that create opportunities for new players to enter the market

Water Scarcity is Increasing

There are ominous signs of water shortages in nearly every country and region on the planet, developed and undeveloped alike. Even if everything else remained stable, worldwide population growth alone has created growing pressure on the current supplies of clean water.

But the accelerating pace of climate change means that current supplies are not stable. Droughts have become more frequent and more severe. Aquifers and reservoirs are being emptied faster than they refill. In coastal areas, rising sea levels endanger fresh water supplies; in Florida, tap water is already noticeably brackish in much of the state.

Our planet still has plenty of water — 71% of the earth is covered by it! Unfortunately, 97% of that is salt water. But if the salt can be removed by desalination, the fresh water problem will be well on its way to being solved.

Desalination technology already exists, but the high power demand made it too expensive to use in most of the world. Only certain Middle Eastern countries like Saudi Arabia and the Emirate states had the combination of wealth to invest, access to cheap energy to run the plants, and a complete lack of other water options.

As cheaper fresh water options decline in other areas and the need becomes more critical, desalination will have a much wider appeal. In the last decade alone, Israel and numerous island nations have responded to growing water shortages by building desalination plants.

Technological Innovations Are Making Desalination Cheaper

The largest hurdle for widespread use of desalination is the energy factor: as long as energy was expensive and water was cheap, desalination was too costly to be feasible in most locations.

As we have seen, scarcity is making water a more precious commodity. But the other side of the equation, cheaper energy, is also a major factor. As wind and solar production continues to expand, desalination has become both less expensive and more environmentally friendly.

New methods of desalination have also brought the cost down. Traditional desalination relied on heat: boiling the water to make it evaporate, leaving the salt behind, and then collecting the steam and condensing it back into water.

Advances in thin membrane technology have made reverse osmosis the current method of choice for newer desalination plants. This method uses pressure to force water through special membranes that filter out the salt, and requires far less energy to operate. Israel has built a plant based on this method that now supplies twenty percent of that nation’s water needs.

Another promising development is building power and desalination plants side-by-side. Most traditional power plants require a lot of water for cooling purposes and salt water is too corrosive to use. Power production thus adds to the burden on fresh water resources. But a power plant that includes desalination can produce its own cooling water as well as providing water for the surrounding community.

Even with the lower costs of desalination, governments face massive expenditures in transitioning to this method. This will make the prospect of public-private partnerships very appealing. Private companies will shoulder some of the burden of building the new plants, in return for a portion of the revenues of those plants over years or decades.

General Electric, LG Chem, and other large corporations have already been exploring water production opportunities for some time, and more recently new companies like AquaVenture Holdings have formed to combine desalination and other water purification techniques in a water-as-a-service (WAAS) model in the mainland United States as well as various Caribbean islands. As innovations continue to make desalination and energy production cheaper and more efficient, investment opportunities in the water sector can be expected to grow.

December 14, 2018

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