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Water is conceivably the most fundamental human resource – and perhaps the most undervalued. Before we reach the next decade, global demand for freshwater is expected to outstrip supply by 40%.1 While the world’s population has grown ~5x in the last century, freshwater use has increased ~7x, unsurprisingly most concentrated in the U.S. and China.2
Water is essential, not just for human subsistence, but for nearly every product, service, and system we rely on. The World Wildlife Fund puts the total global quantifiable economic use value of water (as of 2021) at nearly $58T – 60% of global GDP.3 Despite its importance, the actual cost of water (and the negative externalities resulting from its use) are not appropriately priced into global markets. As reality sets in on the critical shortages and disruptions to human activity inherent to a dwindling freshwater supply, the impetus for aggressive action, investment, and innovation, is rapidly mounting.
Putting aside regulatory and policy uncertainties in the midst of a new U.S. political regime, market forces alone should spur both public and private sector stakeholders to prioritize investments in water solutions: higher demand (e.g., from rapid electrification), diminishing supply (largely due to climate change), increased systemic risk (e.g., from aging infrastructure, public health concerns, and fear of supply-chain disruptions) will all inevitably raise the cost of water. As advanced technologies gain commercial appeal and large-scale adoption, the return on investment is becoming more and more compelling. And if some of the most water-intensive sectors begin to mobilize in earnest, we may yet be able to (quite literally) turn the tide.
Thermoelectric power generation (natural gas, coal, petroleum, and nuclear) accounts for the largest share of water withdrawals in the U.S. – using over 130 billion gallons per day (as of 2021).4 Even as some of the biggest culprits to climate change, these industries are retiring highly water-intensive processes like once-through cooling in the face of more stringent regulations, and increasingly tapping into more efficient water reuse technologies.
Agriculture is responsible for over 70% of water use in the world (and over 40% in the U.S.). In addition to the USDA and NSF granting millions toward research & development efforts, external capital has poured into upstream food and agriculture technologies – $18.2 billion in 2021, up an average of 38% year-over-year since 2013.5 Farmers are now leveraging software, hardware and service-based solutions to increase efficiencies and solve major pain points – dialing into precision agriculture, water-lean crops, and better biosolids management.
Industrial sectors (e.g., oil refineries, pulp and paper mills, primary metals factories, chemical manufacturing, food & beverage production) draw roughly 18 billion gallons of water per day. These industries are also integrating more sophisticated treatment and filtration mechanisms that enable higher water reuse and safer discharge – to optimize operations, lower long-term costs, avoid regulatory penalties, and de-risk supply chains.
Across energy, agriculture, and industrial sectors, some companies are focusing on extracting valuable byproducts (e.g., heavy metals & PGMs, organics, and fuel material) from concentrated brines, wastewater, and flowback – revalorizing them as inputs to create additional revenue streams or offset costs to facilitate commercial adoption.
Public and private utilities are increasingly seeking innovative, cost-effective solutions to a wide range of challenges. In April 2024, the EPA introduced the first-ever national, legally enforceable drinking water standard to reduce PFAS exposure,6 incentivizing accelerated investment in water treatment and quality monitoring solutions. Labor shortages and cost pressures are also driving increased adoption of automation mechanisms (e.g., leak detection sensors, smart valves, remote control capabilities), advanced data & analytics (to better predict demand and weather patterns), and infrastructure monitoring technologies (like unmanned drones) allowing for more precise and cost-effective interventions.
Aging infrastructure is of particular concern in the U.S. – the EPA estimated a total water infrastructure funding deficit of over $1.2 trillion in the next two decades.7 While the Infrastructure Investments and Jobs Act (IIJA) earmarked $55 billion toward water infrastructure8 – a key focus being the removal and replacement of lead pipes – much more remains to be done. And it should be worthwhile – making the needed investments in U.S. water infrastructure could add $4.5T and ~800K jobs to the U.S. economy by 2039.9
As large sectors of the economy begin to deploy advanced water technologies to enable greater resource efficiencies, reduce costs, and manage risks, this sector of innovation should experience meaningful growth. ClimateHaven is launching the Water Innovation Hub, in partnership with the Regional Water Authority, to support emerging research and commercialization of critical water technologies – enabling companies to pilot and test solutions, bolstering Connecticut’s emerging blue economy, and providing industry partners with a collaborative space to ideate and catalyze growth in this sector together.
This blog post is the first of a series – over the coming weeks and months, we will dive deeper into key market dynamics, investment trends, high-impact technology areas, and fresh perspectives from industry players at the forefront of innovation in this space.
References
1 Global Commission on the Economics of Water. (n.d.). Turning the tide. Retrieved from https://turningthetide.watercommission.org/
2 Our World in Data. (n.d.). Water use and stress. Retrieved from https://ourworldindata.org/water-use-stress
3 World Wide Fund for Nature (WWF). (n.d.). High cost of cheap water: The true value of water and freshwater ecosystems to people and planet. Retrieved from https://www.worldwildlife.org/publications/high-cost-of-cheap-water-the-true-value-of-water-and-freshwater-ecosystems-to-people-and-planet
4NAWI Master Technology Roadmap 2021: https://www.nrel.gov/docs/fy21osti/80705.pdf
5 McKinsey & Company. (2022). Agtech: Breaking down the farmer adoption dilemma. McKinsey & Company. https://www.mckinsey.com/industries/agriculture/our-insights/agtech-breaking-down-the-farmer-adoption-dilemma
6 Environmental Protection Agency (EPA). (n.d.). Key EPA actions to address PFAS. Retrieved from https://www.epa.gov/pfas/key-epa-actions-address-pfas
7 Pew Trusts. (2024). Water system upgrades could require more than $1 trillion over next 20 years. Retrieved from https://www.pewtrusts.org/en/research-and-analysis/articles/2024/09/05/water-system-upgrades-could-require-more-than-$1-trillion-over-next-20-years
8Pew Trusts. (2024). Water system upgrades could require more than $1 trillion over next 20 years. Retrieved from https://www.pewtrusts.org/en/research-and-analysis/articles/2024/09/05/water-system-upgrades-could-require-more-than-$1-trillion-over-next-20-years
9 Council on Foreign Relations (CFR). (n.d.). How U.S. water infrastructure works. Retrieved from https://www.cfr.org/backgrounder/how-us-water-infrastructure-works
