Although 2017 is still fresh in various minds, it is time to look to the future in 2018 instead of staying in the past. 2017 was a thought-provoking year for water, with a rising trend in mergers and acquisitions (M&A), continuing repercussions from lead pipes in Flint, Michigan, United States (U.S.), a greater focus on smart water technology, a dearth of government investment in water, and more weather events making impacts on water infrastructure.
Now, with 2018 upon the world, a number of queries regarding the outlook of the water sector remain unanswered. On one hand, the water industry has literally been around since the beginning of time, but on the other, the industry is also balancing on the tip of change, slowly turning to Internet of Things (IoT) solutions in order to address infrastructure issues.
And with 2018 already in full swing, the year has the potential to be exciting for the industry, and at the forefront are these key trends.
After three separate hurricanes slammed into the U.S. in 2017, the need to improve the resiliency of water and wastewater infrastructure became not only longstanding, it also became critical.
And as climate change continues to alter weather patterns and high-intensity weather events are expected to become more common, utilities need to be able to manage the extreme flow of stormwater as well as be able to quickly resume operations as normal after an event.
According to Bluefield Research, the hydraulic fracturing sector – which was contracting as recently as an estimated year ago – has been experiencing a new wave of activity, increasing demand for water management solutions. Now, with drilling activity rebounding, new business models are coming to the fore, concentrating on midstream water investments as well as raising scrutiny on the availability of water, and its costs and distribution.
In addition, the mining sector is also experiencing a boom, with mining companies increasingly utilising advanced water management solutions.
Water reuse is an option for long-term supply
More and more companies are beginning to invest in recycled wastewater, and more firms are expected to invest in water reuse in the coming year, with industrial applications forecasted to increase by up to 72 per cent, and according to Bluefield Research, potable applications will make up some 19 per cent.
In the U.S., states such as California, Florida, and Texas will continue to be in the middle of the growing demand for water reuse systems. Moreover, companies in this arena are adopting various strategies, ranging from promoting and developing new technologies to forming partnerships with municipalities.
Lack of government funding and the private sector
Growing capital expenditure coupled with a lack of government investment in the water industry among other factors such as rising water and sewer rates – which outstrips the inflation and average income growth of 2.5 per cent and five per cent respectively at seven per cent – has allowed the private sector to play a bigger role in the water sector, according to Bluefield Research.
As the role of private companies in the water sector continues to change, with numerous M&A’s taking place and the market growing to include third-party operation, maintenance contracts, ownership, as well as public-private partnerships in the water sector.
Pipe and hardware industry
With concerns regarding the municipal water infrastructure in the U.S. and its estimated US$300 billion bill over capital expenditures over the coming ten years, pipe and hardware companies are set to benefit from the various improvements in store. Bluefield Research has estimated that replacing pipe and hardware infrastructure as well as adding new ones would account for over 57 per cent of municipal utility total capital expenditure.
Water in agriculture
Though demand for water in the agriculture industry remains high, the changing water landscape, hit by various weather events, is behind the drive to adopt smarter irrigation solutions, water reuse applications, as well as groundwater management, with the international market for advanced irrigation solutions largely consolidated among five major players in the sector.
With water utilities coming under more pressure to not only optimise operations, but also ensure the efficiency of their capital expenditure with consumers resisting rising water rates.
With regulatory factors, including others, forcing utilities to lower their non-revenue water (NRW) alongside power consumption to lessen the load on aging infrastructure all while keeping the levels of demand and revenue either flat or decreasing it. With all these in mind, asset management has become crucial, with utilities extending their offerings to include asset-centric products and services.
Mergers and acquisitions
Bluefield Research has kept track of nearly 650 M&A deals since 2014, not including other undisclosed deals. This rising number points to the growing interest in the water sector across the value chain and also highlights the opportunities open for improvement of infrastructure for water and wastewater.
Source: Bluefield Research