iWATER Conference summary 2012 - water & EfW innovation crossovers in a £500 bn market

30/11/2012

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The recent iWATER conference objectives were to look at the trends in water innovation needs, how to achieve energy from waste, the technology direction for water and waste technologies and to look at the potential cross-over strategies between the water, waste and energy sectors. These topics were introduced by Mike McCreary of CIR Strategy.

Image: Rt Hon Lord Smith of Finsbury, Chair of Environment Agency, Keynote Speaker iWATER 2012

Conference Slides | Conference Portal | CIR Strategy

Mike spoke of the looming energy crisis and the recent water issues and suggested that as with most things environmental, there is an inter-linkage and inter-dependency that must be addressed to avoid the solution of one issue precipitating a crisis in another. With a water demand curve in some areas of England already significantly exceeding supply and an increasing population density meaning that available water resources per person per year are on average less than that of some Mediterranean countries, solutions for a UK water industry that already uses nearly 3% of the national electricity generating capacity have to mindful of other utility requirements.

The proceedings opened with the Conference Chair, Dr Hans Jensen, CEO of UK Water Industry, outlining what he saw to be the direction for the industry, namely innovation leading to affordable least cost, sustainable solutions that would allow for environmental extremities due to climate change giving good catchment management and the delivery of clean potable water.

The opening address was given by the Right Honorable Lord Smith of Finsbury, the Chairman of the Environment Agency. Lord Smith outlined the current pressures on the industry brought about by the last 16 months being the driest for 150 years leading to temporary ‘use bans’ as a result of ground water levels becoming perilously low, immediately followed by the wettest 3 months for 100 years leading to major flooding, sometimes in the same place!

His view was that we had to have an industry capable of responding to rapid change and that we had to educate the public/society that water was not an infinitely available resource. Innovation in products and processes had to develop draught resistant crops and better methods of irrigation and water use. Indeed, during the draught, several major corporations had reduced their consumption by, for instance, introducing low water methods of washing crops that had lead to an 85% reduction in consumption, and rainwater harvesting.

Building design had to be relooked at; current techniques wasted water by, for instance, requiring pure water to be used for sanitation purposes rather than grey water. This had to be a priority for new build and he cited his own agency as a leader in new thinking with the new Environment Agency HQ reducing consumption by 85% when viewed on a like for like basis with their previous HQ.

He then turned to one of the major industry issues, leakage. A staggering 25% of purified water does not reach the end user. He saw this as an absolute priority for the industry; the leaks have to be fixed. Both Business and Domestic consumers had to be educated in better and wiser ways of using water with innovation being the only way for growth. Demand and use management would be only way to cater for the new housing stock in the South East and prevent further water stress. Water efficiency is key for the future.

Lord Smith closed by summarising the challenges:

• Pressure for innovation

• Disseminate of good practice

• Make it easy for the customers to do the right thing; the green deal must include water.

• Incentivise the water companies to sell less water with OFWAT pricing allowing for the companies to innovate more whilst delivering less.

The mechanisms of change were Regulatory, Government and Pricing.

This excellent opening address led to a lively question and answer session with questions and statements including:

• What is the impact of the lack of genuine competition?

• The need for alternative methods for abstraction.

• The need for alternative storage, catch it when it rains!

• Interconnection between water companies in adjoining regions leading to a Water National Grid whilst being mindful of the energy demands if this entails a pumped system.

• Desalination is seen as a position of last resort.

• Catchment management, we used to lead the world, the new Public Water Resource Framework is driving the need for catchment management.

• The Government do not give enough incentives for innovation unlike, for instance Singapore.

• Market incentives/regulatory frameworks and incentives are all very well but political volatility is a problem for long term water infrastructure project commitment.

Steve Kaye, Head of Innovation at Anglia Water followed Lord Smith by presenting an industry view of the issues and challenges saying that the water industry works in isolation and that there is a need to look at other industries for solution ideas. Whilst feeling that extreme weather does drive innovation there is a requirement for supplier engagement to drive forward the business process leading to a cultural change in the industry and its’ supply chain. Anglia have adopted a suppliers ‘dragons den’ to speed the innovation process with a view to improving current plant and not necessarily just building new assets, e.g. the use of elliptical pipes to reduce the depth of trenches. He felt that there is a resistance to the use of smart meters due to a lack of a clear business case understandable by the consumers. There has been a slow take up of waste combustion from by product bio gas due to legislative issues. Looking further at the inflow and out flow aspects there is a need for ‘Intelligent Sewers’ and ’Intelligent management’ of pipes in terms of both pressure and flow management.

There is a growing problem in the industry from the use of farm insecticides that are now finding their way into the reservoir system. He closed by agreeing with the final floor comment after Lord Smiths’ introduction that the 5 year regulatory window restricts long term growth.
The issues of waste water treatment was then picked up by Kieran Healey, the Synergies and Integration Manager for Veolia Water Solutions and Technologies stating that Waste Water Treatment plants waste energy and generate waste. The plants need to use the bio gas generated within the process to drive generators and improve electricity consumption. With 62% of energy being used in biological management, innovation is required in the field of bio refineries producing bio gas for energy and usable by-production of plastic materials. Veolia are looking to establish themselves as the benchmark for sustainable growth.

After another Q&A session and networking break, Professor Annie Brooking , CEO of Bactest demonstrated their latest portable contamination tester, ‘Speedy Breedy’. This is a field deployable fast test capability that can be used for all new and repair pipe-work projects that require a fast Yes/No answer as to whether contamination is present or not. If a ‘No’ answer, then supplies can be connected but if a ‘Yes’ answer the results of test samples sent off to laboratories for parallel examination can be used to determine what is present and what remedial action is required.

Ian Bernard, Technical Manager of British Water then spoke of the work done within his trade association and of the roller coaster demand cycle due to the 5 year plan changing. With the UK spending £10 billion a year on capex and the world wide industry around £500 billion, there is a large market that requires focus and direction. Ian outlined the use of the BWISE data base of emerging technologies to assist investment decisions.

Picking up the theme of investment decisions, Andy Slater Director of Sensus concentrated on the need for all stakeholders to act in tandem to fulfil a smart water vision. He introduced conference to the need to make smart actually be intelligent and utilise the data available from an independent survey that looked at the issues within the industry. With 20% of water lost through leakage and leakage being linked to pressure management we have to move to intelligent water networks.

The research also highlighted the need for media management to assist in cultural and behavioural change of consumers and publicise the wastage caused by both the industry and the consumer. The morning Q&A session was moderated by Fiona Griffith of Isle Utilities. Immediately prior to the lunch break there were ‘rapid pitches’ from Fiona regarding her Technology Approval Group (TAG), a global innovation forum for water utilities and operators and Laurie Reynolds CEO of Aquamatix who develop and apply web services and standards to connect sensors, actuators and people by working with water and wastewater organisation to enable the realisation of Smart Water networks and related applications.

Charles Lee of Futureneering opened the afternoon session on Energy from Waste with a discussion on the need for a closed loop approach to land fill avoidance and the use of local by-products to generate energy. Clearly, mass burn incineration is an alternative to land fill but would breach emission limits giving an impetus to localised sources. He also highlighting that ‘free in the field’ was not necessarily ‘free in the generating plant’ if it were to be transported for any distance. He then summarised the various energy recovery from waste techniques currently available but issued the cautionary note that Waste materials become valuable commodities as soon as a use is found for them.

Doug Stewart CEO of Green Energy UK followed Charles. He ran through the rationale behind the establishment of Green Energy UK. The company sources power from green suppliers and seeks to engage with ethical consumers who are willing to adopt a specific tariff structure. Interestingly, many of his suppliers were not in business at the start of Green Energy but have commenced as the market for sustainably produced electricity has grown. Part of the company rationale is to offer shares to all customers to ensure their continuing commitment to innovation in the green energy field. Doug showcased a number of his suppliers and customers and closed with an overview of the regulatory incentives and closed with his view that we have to:
• Use less electricity, not more!

• Capture waste as a resource

• Liberate the energy

• Increase public awareness

• Make something useful out of what we throw away

Philip Gaffney CEO of L2S2 picked up on these themes as he put the case for data clarity and availability in making the investment decisions necessary for measurable and sustainable change in the energy/water/waste industries. L2S2 has developed a framework for data collection, management, reporting and device control that can operate over real world networks. The Metabase system has been developed recognising that:
• Change is a constant

• Sustainability demands high efficiency

• Rapidly adapted, accurate, current information needed to respond and plan

• Highly detailed, immediate data from and feedback to operations is essential for efficiency
He overviewed some interesting applications of the data base including an Anglian Water Wet Well photography system whereby data from cameras inserted into sewers and pipes can be analysed in real time in the central control room enabling timely corrective actions to be made. Data generated in a variety of applications can be displayed in customised KPI dashboard form to allow informed executive decision making.

Nick Boyle CEO of Lightsource Renewable Energy followed with a presentation on how a solar installation or Power Purchase Agreement with Lightsource can benefit heavy industry users and property owners by cutting electricity costs and providing better control on budget forecasting. He started with a cost curve showing how Solar energy costs of generation has fallen from a price 10 years ago of €3.8M per MW to a current price of €0.5M per MW as the cost of solar panels has been driven down. Lightsource look for unused land/reservoir/roof space and via their financing collaborators Octupus Investments, they pay for the installation and maintenance of the solar plant and can return to the land owner a 20% reduction in energy costs. He ran over a number of options including a floating solar system for use on reservoirs and other systems linked to waste recycling centres. Lightsource believe their approach can generate 10MW per 50/60 acres of land giving a discounted saving of £14.7M over 25 years.

The final session of the day was introduced and moderated by Rupert Kruger, Head of Innovation at Thames Water. In his opening remarks Rupert reminded the conference that water supply was the ultimate closed loop supply and demand system with, for instance, Thames Water delivering 2M tons of clean water to customers daily and collecting nearly the same amount as waste in the sewers.

An overview of investment trends in the VC market and what investors look for in investee companies was then given by Francis Wright of Turquoise (Low Carbon Investment Fund). He started from the point that there are fewer independent VC’s and an increasing number of Corporate VC’s leading to a change in the dynamics of the market. Francis gave an overview of what investors are now looking for and indicated that the market is now demanding the shortening of investment horizons from 5 - 7 years down to 3 – 5 years.

Generally investors are looking for:

• Experienced Management Team

• Scalable business model

• Low capital intensity

• Market leading product

• Fast route to market

• IP protection or other barriers to entry

• For projects:

• No technology risk

• Long term price and volume certainty on feedstock

• Creditworthy counterparties for feedstock and offtake

Moving on from supply and investment, Dr James O Jenkins from the University of Hertfordshire gave a presentation entitled ‘Water efficiency by stealth: time for a rethink on how we use water meters’. The basic premise of the talk was that there is a very low level of consumer understanding regarding water usage and the need for meters. Water meters are normally inaccessible, normally 0.5m underground and therefore not checked by the consumer. Add this to a commodity consumers do not consider price sensitive, means that a 10% price increase results in a 1% drop in consumption, i.e. price would have to double to achieve a modest 10% consumption reduction. There is a public perception that all price increases go to ‘fat cat’ companies aiming to get rich from what is seen as a basic need. In plain words, there is institutional distrust of the water companies. The reality is that we need smart water meters that are visible and easy to use aimed at enabling consumer control over the amount of water they use. Consumers do not purchase washing machines and dish washers based on water consumption, more on energy consumption. Other countries, e.g. Australia where there is already a high awareness of the need for water conservation, have subsidised the purchase of water efficient machines to aid the consumers.

He closed with the following based on survey results:

• Consumers need to be targeted with a diverse range of policies:

• consumers were very positive towards the fitting of free water saving devices (70%)

• the subsidisation of more water efficient household appliances (75%)

• the offering of a rebate on their water bill, if they were to reduce their water usage (70%)

• Make all water meters accessible

• Use water meters to educate

• Cost-neutral regulatory framework is not effective

• Bolder and stronger regulation needed

• Effective and engaging resource management approaches are going to cost more – ‘nudge’ your customers!

⇒ Change by stealth!

Following the theme of water efficiency, Sam Bose, CEO of AquaMW illustrated how Energy and Water sectors are interconnected since copious amount of energy is required to treat, move and distribute water while significant amount of water is required in the energy generation process and for cooling the steam generated. This is more pronounced in the industrial sector with industrial processes generating heat and requiring enormous energy, water to run them optimally.

The session discussed the energy – water nexus in industrial processes and highlighted possible solutions to improve efficiency. The AquaMW products ‘Smart Water’ and Smart Energy’ are retro-fittable wireless network systems using cloud computing techniques for delivering actionable intelligence.

He closed with the conclusions that to gain Industrial Resource Efficiency there are ‘3 takeaways’:

• Reducing resource (Energy, Water) demand through conservation programs

• Data Analytics to unlock insight for process efficiency and improve plant performance

• Resource, System and Process efficiency are all connected which can be delivered through Conservations Programs

 

Following a Q&A session moderated by Rupert Kruger, the conference chair, Dr Hans Jensen, summarised the day’s proceedings:

• The industry had to learn to live with a volatile weather pattern

• The industry needs to ‘fix the leaks’

• Intelligent data and resource collation systems need to be adopted

• Innovative ways of directing scarce resources need to be adopted

• New product innovations need to be adopted

• That the energy and water industry need to share best practice regarding the re-use of waste and metering techniques

• There needs to be a concerted effort to promote public understanding of the issues and to gain public trust

 

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Please contact CIR on 01223 303500 for more information on our strategic consultancy in routes to market, segmentation & focus strategy, market research and commercial diligence.

This summary by Mike McCreary, CIR Strategy & iWATER Conference Moderator.

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Cambridge Investment Research Ltd

CIR (founded 2002) is a growing independent management consultancy based in Cambridge, England. We offer routes to value, business intelligence, market entry strategy, financial consulting, in various tech sectors such as printing, electronics, nanotech, instruments, energy, healthcare & ICT. CIR also works with corporate & financial investors on their portfolios and with young tech companies on business development and finance.

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