Smarter, more advanced asset management strategies will save water utilities US$41.9 billion in capital expenditures by 2027, according to a new report from Bluefield Research. These savings stem from the proliferation of new technology solutions and companies adjusting their business models to serve the municipal water sector.
Utilities rely on asset management solutions to maximise asset service life and prioritise capital investment for critical infrastructure. And in the water sector, concerns over older infrastructure, an aging workforce, and increasing climate volatility are bringing this issue to the forefront.
“By integrating advanced asset management solutions across their business, water utilities can save upwards of 20 per cent on annual capital requirements, while improving operational efficiencies,” Will Maize, Research Director for Bluefield, said. “In its essence, asset management is the core-function of utilities in ensuring a sustainable, safe water supply.”
Utilities in the United States (U.S.), Canada, Australia, and Europe currently manage US$2.9 trillion in water, wastewater and stormwater assets, which provide critical infrastructure services to more than 822 million people around the world. Bluefield’s forecasts indicate that advanced asset management solutions will save these utilities US$1.2 billion in annual CAPEX savings in 2018 and scale up to US$7.3 billion in annual savings by 2027.
Data and analytics drive advanced asset management strategies
Central to this shift toward more advanced asset management solutions is the increasing value in data collection, analytics, and visualisation of network conditions and operations. Utilities are looking for ways to extend the service life of aging infrastructure assets and placing an increasing importance on data-based, predictive decisions, rather than being reactive.
“Municipal water utilities often include dozens of departments managing disconnected data silos to make complex operational and strategic decisions,” Maize continued. “In today’s rapidly changing information landscape, truly transformational companies enable a bridge between these silos, bringing together engineering and finance departments and unlocking the hidden value in relational insights.”
Advances in machine learning and computation systems are disrupting age-old asset planning processes and improving how utilities more efficiently allocate capital. Firms like Copperleaf, SEAMS, and Servelec Technologies look to the U.K. market as a key battleground for advanced asset investment modelling solutions. Early-stage companies such as Fracta and Baseform are compiling utility pipe data from multiple sources and applying algorithms to generate predictive insights into the potential for asset failure.
Asset management segments are emerging as a key battle ground for innovative business models
Bluefield sees a diverse group of players looking to capitalise on this opportunity.
“It is a natural evolution that companies serving water utilities are migrating towards strategic asset management decision-making,” Maize added.
From equipment providers like Xylem, modelling firms like Bentley, to the multitude of engineering firms, strategic asset management decision-making is making its way into their core offerings.
Adding to the sector’s competitive complexity, technology companies, including IBM and SAP, are looking to expand their positions, while diversified industrials ABB, GE, and Schneider Electric, have built-up digital business services through recent industry-agnostic acquisitions that are also applicable to water. At the same time, a number of venture capital backed companies are carving out positions, which could ultimately be rolled-up into larger portfolios via acquisition.
“While the concept of asset management has been around forever, new more advanced solutions are impacting how utilities plan, design, operate and maintain critical infrastructure,” Maize concluded. “Looking ahead, as assets age and data capabilities improve, we expect this critical function to grow in importance for the water sector.”