Between the Poles

Infrastructure excellence competition

Infrastructure-excellence.com is hosting the second annual competition showcasing Excellence in Infrastructure— highlighting the best projects done in 2012/2013. The winners will be given over US$10,000 in prizes by the competition sponsors.  The competition is open to anyone 21 years and older who is planning, designing, building, and managing infrastructure projects.  Project types may include the following:

• Transportation (roads and highways, rail, airports, or bridges)
• Land development (commercial sites, subdivisions, public parks, or recreation)
• Water (distribution, water resources, dams and levees, or wastewater)
• Energy (electric and gas distribution, electric transmission, and substation design)
• Urban planning

Can alternative business models for water distribution help resolve the water crisis ?

There are several business models for water distribution including investor owned, coops, regional associations, private-public partnerships and municipal.  In the UK there are a small number of regulated regional investor owned water utilities like Thames Water, Northwest Water and Southern Water each of which serves millions of customers.  But in many parts of the world water and waste water are a municipal responsibility.  In France water and waste water are the responsibility of municipalities, but 75% of water and 50% of waste water services are contacted out to private sector companies like Veolia and Suez.  In the Unites States there are about 54,000 community public water systems, which are either publicly owned, cooperatives or privately owned.  But about 50,000 of these systems provide water in localities with less than 10,000 inhabitants.

Water and waste water funding gap

Only a portion of water infrastructure maintenance and operations costs are covered by rates in the United States, the rest comes from grants from several levels of government.  Both the American Society of Civil Engineers (ASCE) has estimated that the water infrastructure funding gap is on the order of $20 billion per year.   As a result most municipalities across North America under-invested in water infrastructure for years and many are now faced with the reality of aging infrastructure with increasing leakage and breakage, competition for more limited (quality and quantity) sources of water, and the increasingly costly impact of regulation from state and Federal regulators.  Assuming every pipe would need to be replaced, the cost over the coming decades could reach more than $1 trillion, according to the American Water Works Association (AWWA).  Capital investment needs for U.S. waste water and storm water systems are estimated to total $298 billion over the next 20 years according to the ASCE.

Municipal water systems are typically departments of the city government and are controlled by the mayor and the city council.  And like public water companies around the world, it has been very difficult to persuade elected officials to raise water rates to cover the funding gap.  From Margaret Catley-Carlson's perspective, the crossover between elected officials and water and water pricing is one of the universals around the world.  She told a story of how even in the great drought of Spain two summers ago Spain was still charging less for water than any of the other European countries.  She talked to people in Spain and they understood that paying more for water was part of the solution, but it was not possible to get elected officials to make the decision to increase water rates.

Utilities that have surmounted the funding gap

At the Canadian Water Network conference we heard about two examples of municipally water companies, both of which are unique  in their own ways, but both have been able to get the needed funding to fill the gap in infrastructure spending.  These companies which may be pointing the way to the future of water delivery. 

The first,  EPCOR Utilities based in Edmonton, Alberta, is run like a private corporation, but is wholly owned by a municipality for which it is a source of revenue, estimated at about $1.5 billion since it was formed.

The second, Greater Victoria Water Services, is structured like a municipal public water company, but because it is a regional water utility it has a board that has an arms length relationship to its constituency.

One important thing that both of them have in common is that they were both able to successfully structure solutions to problems facing their water utility as a result of a major crisis, a financial crisis in the case of EPCOR and a major water main break in the case of Greater Victoria Water Services.

EPCOR Utilities

Don Lowry, past President and CEO of EPCOR Utilities, is a strong believer that the only way to have a functioning water distribution system is that everyone must pay for water.  In his view water is not an entitlement,   it's a hard earned right.  You have to be diligent and work 24x7 on continuously earning that right to have access to water and a sustained, continuous supply of water. 

EPCOR was formed in a crisis.  The city was faced with a significant financial crises during the Canada's National Energy Program.  Facing massive layoffs and job losses, the water system had no choice.  It had to carry its own weight, recover its own costs and start to be a growth engine for the city as opposed to a burden for the city.  As a result EPCOR Utilities is 100% owned by the City of Edmonton, but it is operated completely as aa commercial enterprise.  EPCOR has become the water and waste water provider for a large footprint  of water and waste water utilities in Western Canada. They are also the largest private water supplier in the states of Arizona and New Mexico in the U.S. 

The way that EPCOR is setup is that it is 100% owned by the City but has an independent board of directors under a universal shareholders' agreement that puts it on a standalone basis.   It must finance its operation completely from earnings of the business or what it raises on the capital markets.  It has a BBB+ credit rating.  EPCOR pays its shareholder a dividend.  Since 1998 the dividend was $67 million annually, today it is $144 million.  The company has returned back to the shareholder over $1.5 billion in cash, taxes, fees and dividends and this is growing.  EPCOR pays tax in every jurisdiction in which it does business and it competes in the capital markets.  Most importantly EPCOR fully costs its water, there are no subsidies.  They are able to compete and EPCOR's water utilities are thriving and growing..

The three key challenges EPCOR sees facing water today is the scarcity of it, the deterioration of the infrastructure and and most importantly the fragmented approach that we in North America take to its operation, regulation and financing.
 
Scarcity

The increasing scarcity of water is an absolute growing concern.  In southern Alberta it has been fully allocated.   There can be no further development unless there is trading of water rights or the diversion of water from one use to another.  EPCOR is working to make better utilization of the water that they use.  For example, they are capturing the water that we would have previously diverted back into the river after processing it through their waste water treatment plant and are piping 15 million liters per day to a Suncor refienry ro make petrochemical products.  But in the long run the scarcity of water is going to lead to longer pipes, bigger pumps, more chemicals,  more competition for water, higher costs and Don believes that the current service delivery model is not going to make it.

Aging infrastructure

North American infrastructure is getting older.  Most of the infrastructure that was put in Canada and most in the US was put in major chunks.  A lot of it in the 60s and 70s and it is old and deteriorated and needs to be replaced.   On top of that you need to layer the growth requirements and the replacement requirements.  In Canada alone it is estimated to amount to about $80 billion for replacement and to plan for the growth of infrastructure, pumps, pipes, valves, plants, and meters necessary to deliver that essential service.  In the US it's estimated to be over a trillion dollars.  In Edmonton EPCOR has a major program underway to replace the cast iron pipe that was put in shortly after the Second World War, that  has deteriorated dreadfully, causing leaks and water main breaks.  As a result they are starting to see results, fewer leaks and less breakage.  This is an example of a program EPCOR expects that that other municipalities are gong to have start to aggressively implement to replace ageing infrastructure.  \

Fragmentation

North America is backward in terms of how we approach the treatment, the delivery, and the recycling of water across Canada and US in terms of the shear number of companies.  There are over 54 000 water companies in the US, ranging from the local water company in a town of 10 people up to millions of people in New York,  However, 8% of those companies serve 81 % of the entire population.  The other 92% serve 19% of the population.  The story is not much different in Alberta.  Of the over 530 water companies in Alberta, the top 10 water utilities serve 76 % of the population, the other 520 or so  serve 24% of the population.  Don's point is that with such a fragmented structure we can't get the economies of scale that we see in other industries in our society, such as airlines, telephony, wireless, natural gas, and electricity.  The present fragmented state of the industry it brings its own stream of inefficiencies and concerns such as how do you adequately train people in very small water utilities and how do you fund all these water utilities.  Even more critically how do you ensure that what happened in Walkerton and North Battleford (well publicized outbreaks of water borne disease outbreaks in small communities) don't get repeated.

According to Don, the Government of Alberta has taken a first step in this direction and has embarked on a conversation with the regions within the province to look at the watersheds and consider the creation of utilities similar to EPCOR that could achieve an economy of scale for all of the water needs for each region.  This could be a first step toward shrinking the over 530 existing water companies down to perhaps 10 or 12 to begin to achieve some efficiencies of scale.

Water Services, Capital Region District, Greater Victoria, British Columbia

Jack Hull, General Manager of Water Services of the Capital Region District in Victoria, British Columbia, gave an overview of some of the successes Greater Victoria Water Services have had in implementing some of the measures that have been implemented by EPCOR. 

First of all he said categorically that there is no infrastructure deficit in the Greater Victoria water supply system.  It was eliminated over a 15 year period.  Like a lot of municipalities the Greater Victoria Water started off in the early 90s with underinvestment.  “If it breaks, we'll fix it,  but we won't be proactive.”  Greater Victoria Water put a strategic plan in place to address water supply, water quality, and infrastructure and pricing issues.  They moved to a utility model for pricing, which is based on the asset base.   Over the next 15 years with over $200 million in investment Greater Victoria Water eliminated its infrastructure deficit and addressed its water quality and quantity issues. 

All the decision making was ultimately done by a group of politicians who recognized that if they didn't invest,  there was going to be a major negative impact on the quality of life within the capital region.

Greater Victoria Water also runs the distribution systems that serves about 60 000 people in five neighbouring  municipalities.  Similarly to EPCOR's cast iron pipes problem in Edmonton, it was necessary to replace asbestos cement pipes.  Greater Victoria Water recommended a 10 year program to address this issue, but the politicians came back and said no we want to do it in five years and they put the money behind it to do it in five years.

Greater Victoria Water has been able to successfully promote water conservation.  A utility model obviously is able to generate revenue.  According to Jack every cent of that revenue goes back into improving the infrastructure and eliminating the deficit.  During the same period, particularly in the last 10 years, Greater Victoria experienced 14 % growth in population, but water demand dropped by 8% during that same period.  In 2001 Greater Victoria Water had a ban on outdoor water use for 9 months of the year.  Last year normal water use was down to that level without anything extraordinary in terms of water restrictions.  

From Jack's perspective, given the right group of politicians and the right group of managers you can achieve much of what EPCOR has done without going to the fully corporatized model.

Jack said that he fully supports what EPCOR has done with small systems because that is where the real issue is.  Small systems do not have the resources to deal with some of these issues and that is where an organization like EPCOR can  provide significant assistance, which a regional government  can't do because of the legislation that controls regional government.
 
With respect to governance the Greater Victoria Water board is one step away from the electorate because they are members of local councils who are appointed to the regional board.  They are elected officials at the local level, but appointed to the regional board and appointed to the water commission so they are one step away from being directly elected to the board.

The other thing that contributed to this achievement was a crisis.  On New Year's Eve in 1992 Victoria had a major water main break.  A 36" water main burst and caused a lot of damage.  So when Greater Victoria Water reviewed its budget that year they had lots of photos of all the damage caused by the water main break.  The fact that it took 18 hours to shut the water off because the valves hadn't been serviced probably since 1915 when they were installed.  There were photos of air release valves that couldn't be recognized as valves, because they were just  clumps of rust.  As a result when at the budget review Water Services asked for some money to do a study on infrastructure, Jack related that this was one of two times in the last 20 years when politicians asked him if he was sure he had enough money in his budget, didn't he need some more ?

Conclusions

The most important conclusion I take from this is that water needs to be fully costed from the water source to treatment and reinjection if we are going to have sustainable water systems that work.  The second is that there are several ways to skin the cat but setting up a governance structure that allows the water utility to be run an arm's length from the elected politicians seems to be key. Thirdly, small water systems are facing a crisis, because it is going to be increasingly difficult and expensive for them to access the resources they need and it may be regional companies based on the EPCOR model that can resolve this problem.  And the moral of the story is don't waste a good crisis.

Does water as a basic human right mean free water ?

Recognizes the right to safe and clean drinking water and sanitation as a human right that is essential for the full enjoyment of life and all human rights
and
Calls upon States and international organizations to provide financial resources, capacity-building and technology transfer, through internationalassistance and cooperation, in particular to developing countries, in order to scale up efforts to provide safe, clean, accessible and affordable drinking water and sanitation for all.

At the Canadian Water Network conference one topic that came up repeatedly related to pricing water equitably and how to do it in a way that benefits the 780 million people without access to clean and safe water and the 2.5 billion who don't have access to basic sanitation (UN GLAAS 2012 Report).

In response to a question from the audience, Margaret Catley-Carlson rephrased the question like this. 

• First,  is there a consistency between the UN declaration on water as a basic human right with the kind of charging for water that a number of speakers are recommending?
• Secondly, what is the corporate responsibility to the water challenged or to people where there is a resource insufficiency ?

Margaret Catley-Carlson's response is very interesting, especially bearing in mind that her background is government and NGOs, not the private sector.  By way of background she has been active at the board level in the international water sector for over 15 years.

She was very direct, saying that "it has been the cruelest of constructs to equate a human right with free water, because of all those that cannot afford free water the poor are the ones that can least afford it."  She went on to explain why.  In city after city, village after village, systems where water is free or undercharged, particularly those that are run publicly, respond to those that have the most resources.  When there isn't enough to go around, these systems favour more powerful people. You can wish that it weren't so.  Mark Twain said water flows uphill, meaning it moves towards power.  The last person in the irrigation line, the slum dweller, those that depend on water vendors, these are the people who have a theoretical right to water but because the systems don't work or break down they are the ones that are in fact under-served or not served at all.   They are the ones we include in the billion people around the world that don't have access to clean and safe water.  

She emphasized that these people [do better] when they live in areas that charge for water, but where there is a subsidy to them personally, not to the water company, for water usage.  This is a very important distinction.  Many cities and countries have a subsidy for the poorest people within the jurisdiction.   This is done in a number of ways.  In South Africa everybody gets a small amount of free water and then the next tranche of water delivery costs more, the next costs even more and at the swimming pool level both the rate and the volume are very high.   In New York it is done by postal code numbers.   In the UK and France it is done in a different way.  In Chile the poor pay their water bill, but if they are receiving social assistance at the end of the year they get a heavy percentage of that water bill returned to them.   They pay, but they get it back.   Margaret applauds those jurisdictions that do have a subsidy for those that can least afford to pay their water bill.  But she fully agrees with everybody being charged for water because that is the only way that you can make the water systems work.  

She also pointed out that there is a right to food, but we all pay for food . Some say there is a right to education, and we certainly pay for education in one way or another through taxes or through direct school fees.  From Margaret's perspective it has been "a cruel juxtaposition of issues to say that if it's a right, it has to be free.  Because the ones that it has penalized are exactly the one billion people that don't  have access to clean and reliable water.  It's when you have a system that functions that the poor have access to clean water."

She added that in many of the countries where these people live there is no tax base and so therefore you cannot rely on the tax base to pay for water for  the poor.  The numbers that are involved are so much larger than any development assistance numbers that it is implausible to have development assistance pay for water for the poor.   In short there are either taxes, tariffs or transfers.  Those are the only things that have ever paid for water anywhere.  You can charge people as taxpayers, but you have to transfer the money from general tax revenues.  Then you'll get distortions in favour of certain neighbourhoods and away from others.  

She sees tariffs as the best alternatve. "Over time the tariff is actually a poverty alleviation mechanism, and as a fulfilment of rights it does the superior job.  So it's a question I like to receive because it think it is a cruel linkage to perpetuate [equating human right and free].  If you really care about poor people,  then you will have a system that charges them slightly for water. "

Her experience supports this.  "By the way poor people agree with me.   When you go out to villages and you ask, if you had reliable water systems would you be willing to pay for it ?  They say yes, absolutely, because they already pay now.   They are paying vendors now and are often paying much more then they would be paying if they had a proper functioning water system."

Don Lowry's view, Don is past President and CEO of EPCOR Utilities, is that water is not an entitlement. It's a hard earned right and you have to be diligent and work 24x7 on continuously earning that right to have access to water and the sustainable, continuous supply of water. If you look at cost and usage of water in the OECD, you see the symmetrical difference.   The highest price for water is in Germany and the cheapest price for water is in Canada. The highest consumption per capita is in Canada, and the absolute lowest consumption per capita is in Germany.   Don's view is that you can't give it away for free, because we don't have it for free in the first place.. And it's proven by the leading countries that by pricing it appropriately it spurs innovation and conservation. 

But for people who can't afford to pay much for water, Don said that EPCOR has what is called a lifeline level, a minimal level that ensures that you have enough water within your home or family for basic needs at an affordable price.  But as you use more water, for example, if you have a swimming pool or if you want to have a jungle in your front yard and it's a desert, you're going to pay a lot for that.   "We are going to reward customers that conserve,  industries that find ways like PepsiCo and Suncor to make maximum use of every drop of water they've got."

Water myths: unlimited water and who makes the decisions

In her introduction to the session she was chairing at the Canadian Water Network conference Margaret Catley-Carlson, who has been involved with water internationally for about 15 years, focused on some of the myths about water that need to be dispelled if we are going to come to grips with the water challenges facing the world community.

"The water industry" and water users

From Margaret's perspective it is important to realize that there is a very real disconnect between the powers that within societies are thought to have the power or responsibility for shaping the way that water is managed and the very real way that water is managed in many societies around the world.

She pointsout that the entities that talk, declaim, analyze, and write books about water and the environment really are in many ways not the managers of water.   Real water management decisions are made by millions of farmers every day in countries all around the world.   Some of them are big farmers and some are very small farmers.   Water management decisions are also made by hundreds of utilities, by energy producers and operators, by industries that use water such as mining, and by people who manage value chains.  What is presented in textbooks and in speeches is not the reality of water management.   The important water management decisions, the ones that have significant impact on water quality and quantity,  are made by the sectors of the economy that use water.   And far too often water users are not not involved in discussions about water.  Margaret recollected that she has been working in the water sector for close to 15 years and has been to more conferences and meetings than she cares to remember and at too many of these people who are in the water sector talk about how people who are outside of the water sector should be behaving rather than actually listening to water users.  From Margaret's perspective, the water users are the people we have to listen to and understand if we want to know how the future of water is going to be written.

The water nexus

Margaret's persective is that the management of water suffers completely by being caught up in the rhetoric of the past century, that water is plentiful and unlimited.  This is especially prevalent in Canada with the result that it is very difficult to undertake any meaningful dialog, let alone change, because of the myth that there is an unlimited amount of water in Canada.  As an example, water has been fully allocated in southern Alberta.  Increasing energy production there will require either diverting water from agriculture, meaning less beef much of which is exported, or by diverting water from north-flowing rivers as has been done with significant environmental impacts in Russia.

She also points out that limited water resources mean that we can no longer look at drinking water, irrigation, and using water for cooling at electric power plants as completely independent of one another.  About 5 years ago a number of people began to realize that talking about water and agriculture or water and energy provided a limited view because the outlook for the next hundred years is going to be written by something more complicated.   The nexus is often represented by a triangle with water in one corner, energy in another corner and agriculture in the third.  Municipalities and utilities would be included in the water corner.   Just looking at the bilateral  flow of water between these sectors is not as useful as considering the complex interplay between all three.  For example, if you start to use a lot more water in the energy sector or the energy sector starts to return water to the system in a condition by which it cannot be used by agriculture or other industries,  the whole system is affected. It is no longer the case as it was when we were three billion people and the impact of the activities of one sector on water could be analyzed by itself.  Now we've got to look at the impact in the context of the water nexus.  For example, what happens in Mongolia when a major coal industry goes into an area which depends on agriculture but is already water-stressed ?  This was in reference to images shown at the conference by Carl Ganter of Circle of Blue of a Mongolian farmer standing in a field desiccated by the lowering of the water table by a new coal mine.

Margaret believes that we live in the water nexus which is where competing demands for water are what is going to write the book about the future of water. The good thing about this is that there are possible synergies. For example, cleaned city water can have important agricultural applications. Water and energy can link together in some very important synergies.  For example, in Western Australia solar power generation is being linked to desalination.

But she also feels that there are also some troubling linkages.  Some countries decided to reduce their dependence on Middle Eastern oil and to switch to bio-fuels, even making them statutory.  Some countries mandated that in the future all transport had to use X % of bio-fuels.  The nexus impact of that was to move water away from the food function and crops such as corn or oil palm toward the energy function, with the result that the prices of those commodities went sky high resulting in food riots in some countries. 

What this means is that we can no longer talk about a single sector and how it uses water.  We have to diiscuss water usage in the context of competing uses in the water nexus.

Water conservation in industry: Why does using less water often cost more ?

At the Canadian Water Network conference we heard a fascinating presentation by Helmi Ansari, Director, Sustainability and Organizational Capability, PepsiCo Foods on how PepsiCo has reduced its water (and energy and waste) footprint and some of the business challenges specific to the water industry they have encountered.

PepsiCo is known internationally for its water conservation efforts.  Last year it won the Stockholm Industry Water Award for its 20 percent improvement in global water efficiency since 2006.

PepsiCo Foods Canada has 8 plants and 16 distribution centres in Canada and about 7000 employees.  PepsiCo's sustainability mantra is "leave no trace".  The long term vision is to run its business so as to leave no trace on the planet.  The vision is very aspirational, but I was quite surprised by how much real progress has been made. 

It started started in the early 90's when Pepsico created "green teams" in their plants.  The teams were responsible for environmental compliance. Then in the late 90s resource conservation teams were added.  Their goals were to reduce use of natural gas, electricity and water by 30 %, 25 % and 50 %, respectively, for every unit of food that they made.  Then in 2008 an initiative aiming at "net zero" plants  was started.  

Their interim commitments are aggressive

• Improve water efficiency by 75 %,
• Reduce manufacturing fuel usage by half
• Reduce fleet fuel usage by half
• No manufacturing plant and distribution centre waste going to landfills
• Lead in sustainable packaging innovation

The latest data shows that water efficiency has improved by  46 %.   Over 99% of the waste generated in PepsiCo Foods plants and distribution centres does not go to landfills.  According to Helmi this is the highest in the world for this type of industry and PepsiCo Canada was the first Pepsico subsidiary to achieve this objective. Fuel usage is down by a quarter, and fleet fuel usage is down by a quarter as well.  They have implemented heat recovery in every one of their plants.  According to Helmi they have the largest all-electric fleet in the world, and have just  completed the one millionth mile driven in all electric vehicles.

Reusing waste heat

Helmi gave an an example of energy saving through repurposing waste heat.  PepsiCo makes SunChips at their plant in Cambridge, Ontario.  They had a large boiler burning natural gas to produce steam to cook the chips.  After about a three year research and engineering effort, they were able to turn the boiler off because they are now cooking potatoes using waste heat from another process. SunChips for all of Canada are now being  cooked using waste heat that used to go up the stack into the atmosphere.

Net zero plant

Another impressive example is an entire plant that can run virtually off the water and electricity grid.  The Frito-Lay plant in Casa Grande, Arizona produces over a 100 million pounds of food a year.  In 2010 the plant received LEED Gold certification, apparently the first for a renovated food production plant.  Last year the whole plant was declared "near net zero" meaning it runs 90-100% off the grid,  90-100% of the water is recycled and over 99 % of its waste does not go to a landfill.  It has 36 acres of solar cells in an adjacent field; its own membrane bio-reactor  waste water treatment plant, with the treated water being reused in the plant, and a large boiler that burns landscape waste from a 75-mile radius, providing all of the plant's steam.  According to Helmi it is the only large scale food plant with this level of  sustainability.

Net zero using "potato water"

To make 4000 or 5000 pounds of potato chips per hour used to require about 120 gallons of water per minute.    A few years ago recycling technology was introduced which reduced water consumption to 60 gallons per minute.   After investing in more technology this was further reduced to  25 gallons per minute.  They are now looking at running the plant with "potato water", using the water in potatoes (potatoes are 80% water) much of which now goes up the stack as steam during the cooking process.  They calculate that if they can run their large chip plants entirely on potato water that would save a billion liters of water per year.

From a water conservation perspective, these are impressive achievements.  And you might expect that there were financial benefits that contributed to motivating PepsiCo to improve water efficiency, but surprisingly this is often not the case.

Business benefits ?

A major business benefit of a plant that can run on little or no water, is that it can be located in arid parts of the world, like Phoenix, Arizona, which is near where the Casa Grande plant is located.  Most of us would expect that another important business benefit of using less water is that it woud reduce costs.  The reality is quite different because of the way the water industry works.

At one of their plants in a small town where PepsiCo was the only major industry they were able to reduce water consumption by 40%, but they found that next year their water bill went up 40 %.  When they talked to the water utility, they were told that the utility worked on a fixed cost basis, and since the Pepsico plant was the only major industrial water consumer, rates had to be increased otherwise the water utility wouldn't be able to meet its obligations to its suppliers.

There is another problem.  When a plant uses a lot of water the effluent is very dilute, but as less water is used the effluent becomes more concentrated.   For example, reducing water consumption from 120 gallons/minute to 25 gallons/minute means the plant's effluent becomes roughly five times more concentrated.  At one of their plants that managed to reduce water usage by 55-60%, they are now having to pay much more for waste water treatment and their total water-related costs have actually increased.

Pepsico is at a point where as they continue to be more water efficient in North America, they're not seeing a financial benefit.   Their most water efficient plants are in Europe, North, Africa, and Australia where the pricing structure is very different and they are rewarded for conservng water. 

Unsustainable water service delivery model

Don Lowry, past President and CEO of EPCOR Utilities, gave his perspective on what is a pervasive North American water problem, a water service delivery model that is not sustainable.  North American industries that use water are caught in yesterday's paradigm of regulation which does not recognize the total cost of water, from acquisition through to treatment and re-injection.  Because water is managed on a fragmented basis, top water efficiency performers like PepsiCo are being penalized.   PepsiCo is being charged at the top rate because the pricing structure was designed with a view to punish people who have high concentrations.  According to Don breweries are in a similar situation.  As they have become more efficient, their effluent has become more concentrated and as a result their water-related costs have gone up, to the point where many of them are looking at how they can convert their effluent into something else so they can avoid high waste water treatment charges.

Water as a free commodity

According to Don the fundamental problem is that water is treated as a free commodity.  The water pricing model means that you are not being charged based on the volume of the commodity you consume, but on the cost of processing it to convert it to a potable state. If it was priced as other commodities are, such as natural gas or oil, conservation would be very financially rewarding.

Estimating the unsubsidized cost of clean water production

At the Canadian Water Network conference we heard that it is estimated that 800 million people don't have access to clean drinking water and 41 percent of the world’s population, 2.3 billion people, live in water-stressed areas.  Cash-stressed governments are increasingly being forced to turn to the private sector to fund the construction and maintenance of water networks.  But estimating the cost of producing freah water is difficult because of such things as entitlement typically involving givernment subsidies.

At the conference Geoff Riggs from IBM mentioned a joint Waterfund LLC and IBM project that was signed in January of this year to develop a Water Cost Index (WCI).  This will use IBM's big data analytics technology to analyze data from sensors and smart meters as well as large and diverse unstructured data sets to estimate unsubsidized cost of freshwater production in different regions around the world.  Index values will reflect estimated water production costs measured in US dollars per cubic metre for a variety of major global water infrastructure projects ranging from retail water utilities and wholesale water utilities to major transmission projects.  

It is estimated that the backlog of investment in water systems around the world is about $1 trillion, and this does not include the 800 milllion people that currently don't have access to clean water.  The idea is that the WCI will provide a financial tool will make it easier for private investors to estimate costs and returns of water infrastructure investment.

Major water organizations ask Congress to ensure funding for water and wastewater infrastructure

I have blogged previously about the issues facing water/wastewater systems in the U.S. and the challenge of funding replacement of aging infrastructure and upgrading to meet the requirements of the Clean Water Act. One of the most important funding mechanisms are state revolving funds which provide low interest loans for water and wastewater infrastructure. The Clean Water State Revolving Fund (CWSRF) provides loans for water quality improvement projects including municipal wastewater facilities, estuary protection projects, and nonpoint source pollution control.  The Drinking Water State Revolving Fund (DWSRF) supports loans to improve drinking water quality,

According to the ASCE, the problem is that most jurisdictions are spending between 1 and 1.5 percent on infrastructure, which is down from 5 to 6 percent spent in the 1960s and '70s.  In September 2002, an EPA Gap Analysis concluded that if there is no increase in investment, there will be a $6-billion gap between current annual capital expenditures for wastewater treatment ($13 billion annually) and projected spending needs.  The EPA has estimated that total investments of $187.9 billion for wastewater and $334.8 billion for drinking water is required over the  next 20 years.  The American Water Works Assn (AWWA) has estimated that the cost of repairing and expanding U.S. drinking water infrastructure will exceed $1 trillion in the next 25 years and $1.7 trillion over 40 years.

In late June of this year the House Appropriations Subcommittee on Interior, Environment and Related Agencies of the U.S. House of Representatives approved a FY2013 funding bill that will cut state revolving funds for water and wastewater.  The cuts are significant

• CWSRF - 53 percent cut from the $1.47 billion 2012 to $689 million in 2013
• DWSRF - 9.7 percent cut from $918 million in 2012 to $829 million in 2013.

Eight U.S. water organizations including the AWWA have just sent a letter to Congress encouraging Congress to ensure funding for the Clean Water State Revolving Fund (CWSRF) and the Drinking Water State Revolving Fund (DWSRF) is maintained at the Senate proposed figures of $1.47 billion and $918 million.

In addition they asked for $238 million for the Clean Water Act §106 Operating Grant program and  $190 million for the Public Water Work System Supervision Program.

Dry-cooled concentrated solar power plants to be built in North Cape Province

Construction on the first utility-scale concentrating solar power plants (CSP) in Africa has been announced.  The plants will have a combined capacity of 150 MW.  The output from the plants will be purchased by Eskom.

Technically the most interesting aspect of these plants is that to minimize water use, both plants will employ dry cooling technology.  Dry cooling is critical technology in deserts such a those in South Africa and the Sahara (e.g., Desertec) where the need for water for evaporative cooling for conventional CSP plants has inhibited the deployment of CSP plants.

Survey reports that Americans support water reuse

GE has releases the results of a consumer survey that asked 3000 consumers in the U.S., China and Singapore what they thought about reusing waste water. 

According to the EPA water recycling is reusing treated wastewater for purposes such as agricultural and landscape irrigation, industrial processes, toilet flushing, and replenishing a ground water basin.  Wastewater treatment can be tailored to meet the water quality requirements of a planned reuse. Recycled water for landscape irrigation requires less treatment than recycled water for drinking water.   A common type of recycled water is water that has been reclaimed from municipal wastewater, or sewage.   Another type of recycled water is "gray water".  Gray water is reusable wastewater from residential, commercial and industrial bathroom sinks, bath tub shower drains, and clothes washing equipment drains.

Accoding to the GE survey 66 percent of the American respondents responded positively to the concept of water reuse.  More than 80 percent of the Americans surveyed said that they support using recycled water for “toilet-to-turf” uses such as agricultural irrigation, power generation, landscaping, industrial processing and manufacturing, toilet flushing and car washing. However, the majority of American respondents were hesitant about “toilet-to-tap” recycling,

The American respondents felt that the largest water users are most responsible for contributing to water scarcity.  The respondents reported that those most responsible for water scarcity are large industries (74 percent), agriculture (69 percent) and utilities and power companies (67 percent).

The GE survey also reported that Americans are aware of the connection between energy and water.  86 percent reported that they understood that energy is required to deliver water.   74 percent said they are aware that water is needed to generate energy.  To put this in context, half of all water withdrawals in the U.S. are used for electric power generation and about 3% of total electric power generated in the U.S. is used by the water industry, primarily for pumping.   87 percent of the American respondents said they support using recycled water for power generation, more than any other application of recycled water.

84 percent of the American respondents said that protection of water resources should be a national priority, meaning that the Federal government has a key role to play.  Nearly half of the American respondents said they are williing to pay more, on average 12 percent more, to ensure that future generations will be less vulnerable to water scarcity.

USGS confirms EPA's draft report on contamination of ground water in Wyoming

I blogged about a draft EPA report that linked groundwater contamination to fracking.  In response to complaints by domestic well owners regarding objectionable taste and odor problems in wellwater, the U.S. Environmental Protection Agency (EPA) investigated ground water contamination near Pavillion, Wyoming. The objective of the EPA's investigation was to determine the presence of ground water contamination and to differentiate shallow source sources (pits, septic systems, agricultural and domestic practices) from deeper sources (gasproduction wells using fracking).

EPA delayed convening the peer review panel on the draft Pavillion report until a report containing USGS data collected from the EPA's two wells is publicly available.  The USGS report is now available, but the USGS provided only the raw data and no interpretation. However, according to a preliminary analysisby the EPA,  the results are consistent with the EPA's draft report.  An analysis of the USGS data commissioned by the Sierra Club also concluded that "the organic chemistry at MW01 [one of the EPA's wells] has not changed substantially since the EPA sampled the well. The chemistry of MW01 found by the USGS is similar to that found by the EPA."

The EPA plans to complete its own analysis of the water samples and then turn over all of the data for an independent peer review later this year.

Proving that ground water is contaminated is one thing.  Proving that fracking is the cause is another.  A major review of hydraulic fracturing by the University of Texas, Fact-Based Regulation for Environmental Protection in Shale Gas Development, found "no direct evidence that fracking itself has contaminated groundwater."  But it did find that contamination of groundwater can happen when chemicals used in the fracking process escape into the water table closer to the surface from poor well-bore casings and inadequately lined storage ponds.  However, there is now some question about the objectivity of the University of Texas report.