As established players have known for years, food and beverage is a multi-trillion-dollar industry with relatively minor variations in water quality and regulatory requirements. Moving forward, major societal drivers are pressing both industry and agriculture toward novel water solutions.
To control water risk, the food industry is expanding its focus beyond processing plants to water savings across the value chain. With deeper pockets and a better market-oriented grasp of costs than municipal water, this industry is rich with opportunity for technologies that can reduce water needs, promote reuse, and efficiently pretreat wastewater for discharge. The industry will be forced as never before to listen both to downstream retailers concerned about sustainability and upstream agriculture that makes up much of their water risk.
The range of applicable technologies is as diverse as the opportunity is large, demanding an analytical framework – the Lux Innovation Grid – for understanding all the emerging innovative entities in the space. Focused solutions are rife, from crop like AquaSpy and UgMO that use moisture sensors and crop knowledge to monitor field conditions and Capilix’s capillary electrophoresis sensor technology for monitoring hydroponics systems, to production plant where the likes of Bilexys and Emefcy look to apply their variants on microbial fuel cells to generate chemicals or energy from process wastewater.
The overall takeaway is clear. With increasing trepidation about population growth in the face of climate change, and increasing world affluence driving more water-intensive foods, industry demand for novel solutions from farm to factory have just begun to accelerate.
US Oil Sands, whose name could be taken as a misrepresentation of their Canadian origins, recently faced a challenge from environmental groups claiming that the company’s water-intensive oil sands mining operations in Utah, requiring up to 84,000 gallons of water daily, would be too environmentally disruptive. Western Resource Advocates, a nonprofit environmental law and policy organization, appealed US Oil Sands’ mining permit, citing state regulators did not assess threats to groundwater when granting the approval. US Oil Sands has leased nearly 6,000 acres, of which 213 acres representing 189.9 million barrels will be initially mined, and targets production of 2,000 barrels per day by 2014. The Utah operation, using proven surface mining techniques deployed in Canada’s oil sands for the past three decades, will use as much as 636,000 liters of water each day in a desert that is already suffering the driest summer since 2002. Although US Oil Sands says 85% of the water can be recycled, an administrative law judge will rule on the company’s mining permit later this month.
Utah is the second driest state in the U.S., getting only 10 to 12 inches of rain every year, and has seen very little commercial development in its oil sands reserves due to water availability. Geological surveys of Utah’s oil sands reserves show that the state holds 25 billion barrels of “mineral matter consolidated” bitumen, in which the sand grains are cemented together with the oil and require the use of a citrus-based solvent, d-Limonene, along with hot water. US Oil Sands, however, struggle to even find adequate water sources to utilize in mining operations. They have drilled 108 holes, at depths of a few hundred feet, and four deeper wells, which all came up dry. Other oil sands reserves, such as those in Canada and Venezuela, are known as “water-wet” deposits, where a thin layer of water surrounds the sand grain, allowing for cost-effective and less water-intensive separation of sand from the oil. US Oil Sands’ second quarter statements identify the need to “source optimal water well locations for the Project’s future processing facilities.”
Potential exists to withdraw from the Colorado River, where Utah has not fully utilized its apportionment, but state regulators facing a growing population and recurring drought are not likely to grant oil sands producers these water rights. US Oil Sands may have two remaining options: the Ute Tribe of American Indians holds a significant quantity of water; and produced water from surrounding oil and gas producers, approximately 46.5 million barrels annually, could be used in the oil mining operation with significant treatment. US Oil Sands’ success hinges on their ability to secure water rights and prove that they are able to extract from Utah’s bitumen deposits.
Despite current rock-bottom North American natural gas prices, frack water treatment companies continue to pile on. While the short-term lull in demand should shake out marginal players, we expect renewed demand in the coming years, barring the emergence of disruptive technology. (See our report “[Risk and Reward in the Frack Water Market: https://portal.luxresearchinc.com/research/report/10190]” Client registration required.) Several U.S. gas companies, including Sempra Energy and Dominion Resources, have sought permits to export natural gas to gain access to higher gas prices in Europe and Asia.
The less-than-ideal geology in the Marcellus Shale region, combined with thousands of old shallow oil and gas wells, practically eliminates deep well injection as a viable option for disposal. Approximately 20% of this wastewater is currently desalted, and with a range of treatment and reuse strategies among gas companies it is unclear whether that percentage is likely to increase. Demand for fracking wastewater treatment surged in 2010 when Pennsylvania tightened wastewater discharge regulations for the natural gas industry. Competitors Eureka Resources and Altela (Client registration required.) made critical partnerships in parallel, leaving them well positioned to tap the fraction of water treatment applications where salt must first be removed before the water is blended for reuse or disposal.
In May, Eureka announced plans to construct a new facility in Standing Stone Township, Bradford County, PA, with expected completion in the third quarter of 2013. This facility includes a concentrated brine crystallizer that will generate solid-phase salt cakes and distilled water. The new plant will reduce the need for brine disposal and its associated transportation costs and will recover valuable water for reuse in the industry. There is also potential for the creation of salable salts for purposes such as road deicing. Look for dropping treatment prices and narrow margins as competition heats up for applications of this traditional technology to flowback water.
Lux Research spoke with Latitude Solutions’ Director of Financial Relations, Virginia Dadey, about the recent major shakeup there that saw the replacement of CEO Harvey Kaye and COO Ray Harlow. Industry veteran Jeffrey Wohler is the new acting president.
Latitude is one of the many startup water treatment companies competing for the rapidly evolving shale gas frack flowback and produced water market. As we noted in our recent profile (Client registration required), Latitude’s ongoing manufacturing partnership with Jabil Circuit makes it unusually well-positioned for strong growth. Apparently, however, sales weren’t flowing in to match capacity.
With inventory stacking up, the board decided new leadership and a new, more flexible sales cycle were both in order. Dadey says, for instance, that the company had insisted on one- to two-year contracts for its services, but is now content with contracts as short as six months to get its technology in front of customers and prove its capability.
Latitude isn’t the only company that is finding itself in a buyer’s market. With U.S. gas prices at rock bottom, significant numbers of well operators are saving money by reusing flowback water for new fracks with little or no treatment, regardless of fears the filthy water will reduce well productivity. Increasingly, tech suppliers are touting the usefulness of their products outside oil and gas – Latitude itself has looked into the food and beverage industry, among others. But the company is convinced it’s sitting on a disruptive technology, and is determined to sell it into the unconventional oil and gas industry. With some units already in the gas fields and a newly announced West Texas Permian Basin contract with an unnamed “top tier oil and gas company”, it remains to be seen whether Latitude can gain traction against the likes of the already profitable – if perhaps more conventional – WaterTectonics/Halliburton combination and the many other would-be water service suppliers selling every conceivable method of treating highly contaminated brine. Investors should use extreme caution investing in this field, but pay attention to the evolving technology. With so many innovative players, some really interesting water treatment technologies may become available at bargain prices.
Traditional municipal wastewater treatment deserves some praise for preventing human disease, protecting natural systems, and efficiently disposing of the noxious and unavoidable products of human civilization. But more often it is faulted for gobbling up 3% of all electricity production, and imposing ever increasing sludge disposal costs. Next-generation wastewater treatments will totally revolutionize the practice. But the question is: Which technologies will win out, and where?
This week’s graphic comes from a recently published report, in which Lux Research looked at a number of companies fielding innovative new technologies for municipal wastewater treatment. It illustrates a quick order-of-magnitude assessment of the potential impact for select technologies in the developed and developing world. A quick disclaimer: the graphic presents market size on a relative scale, not in terms of cubic meters or customers served. That said, readers can derive a feel for estimated market size from the fact that, in our analysis, a score of 100 corresponded to an annual market of nearly 70 million people served worldwide.
In our shorthand analysis, the technologies of three companies – Aqwise, Entex and Microvi Biotech – came away a clear lead in our comparative analysis. Each has significant market potential in both the developed and the developing world.
While Aqwise and Entex have huge market potential, so do all of their competitors. Even so, their particular approach to offering fixed or moving media as an alternative to traditional activated sludge has enormous market potential worldwide – especially fixed media, which is a technically simple compromise to activated sludge. Establishing or defending any IP for such a simple technique is more of a challenge. Fortunately, there’s plenty of market to go around.
The other company, Microvi Biotech, also shows enormous market potential. It is inexpensive, widely applicable, imposes a small footprint and offers numerous possible uses. While the most striking potential of its technology is sludge reduction, the company is currently focused on reducing nitrate and phosphate using a specialized set of microbes. Its technique is simple and contained in a small footprint. But if the company doesn’t capitalize on its technology’s broader potential, it could miss out on a significant part of their huge projected market, not to mention their most noteworthy claim.
There has been an explosion of frack water treatment companies, especially in the Marcellus, where geography and water disposal challenges favor small-scale solutions. Companies like WaterTectonics*, NeoHydro*, Produced Water Solutions*, Latitude*, Watervap*, and Altela* have pinned their hopes on a robust fracking market despite soft gas prices and strong regulations that fall just short of banning the practice outright. So far, the market has developed well regionally, with notable bans in New York State and in France. But we’ve expected a shakeout in the number of companies in the space, and the technologies applied to it.
Enter GasFrac, a startup that uses hydrocarbons like propane instead of water to fracture the rock. Already deployed at one site in the Marcellus, the company’s technology promises performance superior to water fracking, as well as capabilities that would be impossible using water – namely, reduced fluid volumes and near-complete recovery of used fluid.
Reducing the volume of water used in fracking won’t shut down demand for technologies that treat and dispose of produced water. GasFrac may not even be competitive in regions that generate an excess of produced water for disposal. But it has the potential to replace water fracking in dry climates, where water supply is problematic. That includes sites in the Middle East and China. Plus, if accepted by regulators as a more environmentally friendly way to frack, it could carve major inroads into regions where water is the current method of choice. Clients considering investing in this space should watch GasFrac’s progress carefully.
Innovative new water treatment technologies have long struggled to gain a toehold in markets where age-old, cheap, commodity solutions remain deeply entrenched. The exception is the oil and gas industry, where drilling companies see value in new technologies that can help eliminate the cost and logistics of transporting wastewater offsite for treatment. Several emerging technologies offer small footprints that allow treatment to occur at the wellhead.
This week’s graphic ranks the strongest contenders on the Lux Innovation Grid according to how they score on technical value, business execution, and maturity. Focusing on the Dominant quadrant, Ecosphere, WaterTectonics, and Aquapure all solve the same problem through different technologies.
WaterTectonics – which has an exclusive arrangement with Halliburton – removes heavy metals from produced water using electrocoagulation. Ecosphere, now expanding its footprint as part of an entity called Hydrozonics, uses a combination of ozone, cavitation, and electrochemistry to prevent heavy metal build up rather than removing it. AquaPure eschews subtlety altogether and simply distills fresh water off.
All three solutions minimize chemical use and disinfect the water. The biggest distinction between them is the amount of energy required. Were all things equal, this might make AquaPure the loser. But water treatment is a service business for oil and gas, and energy costs don’t matter if they aren’t passed on to the gas company. Despite the huge energy differences, Aquapure may charge gas companies $9.40 to $25 per cubic meter, which is competitive with WaterTectonics at around $12.50. Ecosphere undercuts them both at $4.70 to $5.66 per.
Other contenders in the Dominant quadrant produce polymers that absorb oil and remove it from water. Gradek Energy targets high-concentration tar-sand wastewater with a reusable product, while MyCelx uses a disposable product for low-concentration wastewater. GE Water distributes MyCelx products, adding significantly to their clout, but clients should keep in mind that this is a crowded and relatively low-tech space.
Earlier this month, Lux Water Intelligence traveled to Zurich, Switzerland to deliver a keynote at WaterVent, an entrepreneur- and investor-oriented event regularly held in Europe with plans to expand to the U.S. next year. The crowd included a healthy mix of deep-pocketed investors and small companies seeking funds. As befits a meeting like this, proposals ranged from the excellent to the iffy, but overall exhibited a very healthy European water innovation field. Expect some of the better companies to be profiled in the Lux Water Journal soon – at least those we haven’t already profiled. And keep in mind those we have profiled – like Puralytics*, Epuramat* and Aquaporin* – were there because they’re actively seeking investors.
Several worthwhile ideas we’ll profile later indicate the direction of the water market today. From Eawag, for example, we heard (again) that six hours of sunlight can kill waterborne pathogens inside a clear PET bottle. The company sought help manufacturing cheap collapsible plastic bags that will be easier to ship than bottles. This transparently simple water purification method kills any hopes for a high-tech treatment market among the rural poor. Can a flow-through version for the more environmentally conscious parts of the developed world be far behind?
On a more high-tech note, Neoplas told us about a number of possible university spin-offs. Its sunlight-catalyzed hydrogen generator was predictably three to four orders of magnitude too slow for practical use, with the obligatory note that researchers expect to reach the requisite reaction rates in another three to five years of research. We were intrigued, though, by the company’s plasma technology, especially a prototypical mercury-free plasma UV lamp. No word on efficiency yet, but watch this space.
The market for technologies that help inspect and repair the world’s aging water infrastructure is approaching $20 billion worldwide and is growing at a healthy 10%. Currently, that growth is mostly paid for by spiraling consumer water bills rather than government grants, leading municipalities to desperately seek more cost-effective new ways of maintaining their pipe networks. In a recent report, Lux Research argues that the most lucrative solutions will arise from technologies that can monitor the entire water infrastructure and allow owners to target sections in most urgent need of repair.
This week’s graphic ranks how those monitoring technologies stack up according their relative maturity and technical value. Not surprisingly, tried and true monitoring techniques remain popular in the conservative water industry. Most drinking water companies still rely on acoustic techniques to find leaks, while both drinking and wastewater companies use closed-caption TV to survey pipe systems. Both techniques, however, are labor-intensive and scale poorly, offering scattershot and often poorly documented information about pipe networks.
But the Current Winners quadrant clearly highlights the current and future potential of smart meters. Backed by large vendors, like General Electric, and largely accepted by the industry, smart meters have grown into a $200 million industry. Plus, the data they generate heightens the potential of other technologies that help automate collection and application of smart meter data. This helps explain the relatively high potential of computer management, asset awareness and automated inspection technologies.
The big move is toward smart infrastructure monitoring options. Possessing a clear and comprehensive picture of the entire infrastructure could save a water company tens or hundreds of thousands in repairs each year. The first part of that goal is now widespread: Survey-quality GPS, sometimes combined with electromagnetic methods or ground-penetrating radar, can map pipe infrastructure, creating three-dimensional maps that show exactly where the pipe is, correcting the widespread errors in existing maps, and at least ensuring that repair crews will find a pipe when they dig.
Mercury is set to ooze back into the news as the E.U. mercury export ban comes into effect next year, and a similar ban in the U.S. comes into force in 2013. The bans were enacted to prevent large amounts of cheap mercury from reaching destitute gold miners in gold-bearing regions, mostly South America and Africa. Currently miners who cannot afford the most basic equipment are able to afford mercury, which greatly improves their gold production yields. Attempts to push alternatives among these populations have made little headway. So the bans are intended to raise prices on the toxic metal, and reduce its low-end allure.
For some perspective, about half of the mercury released in the environment is man-made, and much of that is released from coal-fired power plants. About 11% comes from gold mining. Unfortunately, subsistence gold miners commonly practice their trade in streams that local populations use for drinking, and subsequently flow to heavily fished coastal waters, making the practice a profound health issue.
However, the ban will have its share of collateral damage. For example, European chlor-alkali manufacturers, like Akzo Nobel and Solvay, use an older mercury-intense method of generating sodium hydroxide and chlorine gas. The process, developed in 1892, produces sodium hydroxide and chlorine gas in equal parts via electrolysis of brine with the help of a massive mercury electrode. This dinosaur of a method has somehow survived to the present (likely due to low margins and little working capital) with surprisingly little bad press, and despite a longstanding voluntary agreement to phase out traditional processes that use mercury by 2020.
More modern, mercury-free and less energy-intense processes have appeared. They either use asbestos membranes or newer perfluorinated ionomer membrane technologies from players such as Asahi Kasei Chemicals. Yet banning the export of mercury eliminates a ready market for the expensive metal waste, and thus counter-intuitively de-incentivizes a shift to more modern chlor-alkali production methods. In the E.U., manufacturers will now have to store the old mercury electrode material in steel drums at the bottom of old salt mines. On the other hand, expect commodity chemical manufacturers who are out ahead of the curve, like Dow Chemical, to benefit from being out of the coming mercury spotlight.