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A Site Selection Web Exclusive, January 2012
WEB Exclusive story

The Pressure Builds

Need to go where the water is? Need to know where the water is?
Either way, you need to read this.

by Adam Bruns

Even as corporate awareness of internal energy use and waste has grown, awareness of water and wastewater is still catching up.

William D. Bellamy, PhD, is senior vice president and global water service team leader for CH2M Hill.
William D. Bellamy, PhD, is senior vice president and global water service team leader for CH2M Hill.
photo courtesy of CH2M Hill
The Water Factor 2012
Martin Stuchtey is the director of McKinsey & Co.’s sustainability and resource productivity practice.
Photo courtesy of McKinsey & Co.

Swooping in to correct that perspective are a host of water experts, advising entities ranging from municipalities and water districts to the industrial companies those districts serve. Last year we talked to GE Power & Water's Chief Sustainability Officer Jeff Fulgham.This year we checked in separately with two more thought leaders: William D. Bellamy, PhD, senior vice president and global water service team leader for CH2M Hill, and Martin Stuchtey, the director of McKinsey & Co.'s sustainability and resource productivity practice, who responded via email from the firm's Munich office, which he leads.

Both men get around in their work advising companies and countries on water strategies, waste reduction and water reuse, and recovery of valuable byproducts from wastewater. Bellamy, speaking from his office in Englewood, Colo., in early December, said his work in the previous six weeks had taken him to Columbus, Ohio; Atlanta, Ga.; Rio and Sao Paulo in Brazil; Saudi Arabia and Istanbul.

For his part, Stuchtey led the formation in 2008 of the 2030 Water Resources Group, a consortium comprising Nestlé, the International Finance Corporation (IFC), McKinsey, and a group of leading companies with an interest in promoting fact-based debate and solutions to the world's water resource challenges. Recent examples of his work include creating an open-source Internet resource on water productivity; helping the government of a Middle Eastern country develop a national water strategy; and working with a major petroleum company to develop sustainability strategies.

Site Selection: Would you agree that, even as energy awareness has grown in lockstep with corporate sustainability mandates, an equivalent mission with water and wastewater has for the most part been lagging?

William Bellamy: Overall, yes. I have confidential clients on the industrialside, and one of them is working hard on sustainability. It's interesting — they have identified problems with existing plants, but have not gone that extra step to say, "What if there is climate change?" It's in their sights, but water is not as big a factor in siting plants, and they're just now getting into it — unless you have to have water there.

At the other extreme, I'm working with a client doing things with some of the notable environmental groups such as Greenpeace and the World Wildlife Foundation, looking at supply chains, especially where large habitat might be impacted by water use.

Martin Stuchtey: Energy is a global commodity and subject to a global agenda. Water, and surely wastewater, is not. It is governed by the most local conditions. Many countries lack national regulations and leave it to municipalities to regulate. Water tariffs are often absent and if not, they reflect (parts of the) costs but not scarcity. Often they are so low, that even double-digit price increases wouldn't be noticed by corporates. That is why the global insight — that under business-as-usual conditions the world will run into a significant deficit soon — has not translated into a consistent and concerted action.

That is what we observed so far. It might not be true in the future, mainly for three reasons:

1) Consumers and investors are increasingly holding MNCs accountable for their water practices. Examples include Nestlé Waters having to scrap plans to bottle spring water in McCloud, California, recognizing that, despite the license, abstraction would bring them in conflict with local residents. And in Peru in 2004, residents protested against the expansion of a Newmont Mine. Newmont's stock price plunged.

2) Water authorities and operators leave their centennial isolation, start comparing their practices and converge in standards and operating modes. Look at the many benchmarking and training efforts that IWA and others started driving. This development came quite late but the utility sector has now started looking at itself as an industry with common challenges and common practices to pursue.

3) Most importantly, with or without tariffs, in many countries sheer scarcity starts biting now, triggering much higher levels of investments into clean water just to ensure supply.

Let me argue that it is changing, but the corporate response has been incomplete. Water is reaching the boardroom, because CEOs read about it, NGOs are applying pressure, high-profile events are discussing the water challenge (e.g. World Economic Forum). Yet they are not sure how to deal with it — is water an operational issue? Or something they throw CSR money at? Or should capital expenditure related to water have a new risk-return profile?

SS: Water and wastewater expert Edward Fiss told us a few years ago that to stay ahead of the curve in terms of cost justification for water conservation projects, industrial companies need to "assign a value to the resource that's really higher than the current value." Where do you see evidence that this prioritization is occurring?

Stuchtey: We see (agricultural) water pricing in some schoolbook systems like Chile or Australia. In Australia, 65 percent of irrigators in the Murray Darling Basin changed their practices as a result of limited supply of water due to a basin-wide cap. Agricultural productivity increased 36 percent.

In Chile, water prices rose by 38 percent between 1998 and 2002. Usage declined by 10 percent during the same time. Yet customer satisfaction increased, sewage treatment coverage increased from 17 percent to 81 percent in eight years, and share of household metering is at 96 percent now. More importantly, however, even in the absence of explicit pricing the conservation incentive is getting stronger by the day, because (non-priced) water allocations are insufficient, operating licenses are bound to zero-liquid discharge, financial risks of water outages are prohibitive, etc.

Bellamy: Setting a value on water, often debated, is suggested as a way to encourage sustainable water management. The reality is, though, that the cost for water defines standard economic planning. It's not that highly valued until you just plain lose it. There aren't many CEOs saying "How did you price that water?"

What I have seen though is analysis looking at water energy and the solids that come out. Take a look at the efficiencies, and you find that just through doing proper planning or institution of a new reuse system, conservation and tightening up the system, you can save money. Even if not, you can see what your product costs for another unit of water. For each incremental increase, how does it change the product?

California has its greenhouse gas laws moving forward. Anytime you reduce water [consumption] you reduce energy, for the most part. So reducing water might have another revenue stream in offsetting carbon, via the carbon credits that will be coming back. We'll see that occurring as we get better at how we measure that.

SS: A recent white paper from Veolia mentions multiple U.S. states where water concerns have prevented industrial facility projects from moving forward. Casting a global view, where do you see this occurring today most frequently?

Bellamy: One was for a concentrated solar power farm, a 150-MW project, looking across a four-state area, and looking for appropriate water resources to locate a facility. Then another client was looking at where they may need to actually reduce production or change to another site. They see the impact, and it's a risk evaluation when they can no longer produce product at a particular location — the impact on business vs. moving some place else and increasing lines of distribution.

Stuchtey: We are starting to see that pattern — however, nowhere near as dramatically as in unconventional fossil fuels. These have the potential to shift and flatten the global energy supply curve. One of the reasons why this is not (yet?) happening at the expected scale is concerns around water requirements and water pollution. The U.S. shale gas debate is very closely linked to water issues. Similar patterns we see in power, where dry cooling changes the economics significantly.

China, especially after the 2010 drought, curtailed electricity supply and took steps on energy rationing. Various aluminum smelters had to reduce their production. China will cap its net water usage at 620 billion cubic meters by 2015. Even with significant efficiency improvements expected in the long term, that does not leave space for some thirsty industry projects.

SS: Conversely, do you see other territories beginning to pick up the pace of project attraction or expansion precisely BECAUSE of their strong water profile?

Stuchtey: You could argue that Brazil, referred to by some as the Saudi Arabia of biofuel, is consciously using its strong water profile (allowing sheer unlimited rain-fed agriculture) and is such an example. Perhaps Ethiopia, the water tower of Africa, might follow that example (in agriculture and hydropower). Norway and Tyrolia offer investors cheap and "green" hydropower.

Milwaukee is a good example of an active promoter of regional freshwater assets. Indeed, the Economist has highlighted Milwaukee's hope that water may not only support growth, but catalyze it. Milwaukee has a well-organized "Water Council" that promotes innovation in the company of such well-known clusters as Singapore.

Bellamy: I see it on the other side, people trying to change their water profile. In the Middle East, Qatar is looking at their food security and ability to supply water and balance their water needs. In Saudi Arabia, they know their current system is not sustainable — 50 percent of their domestic energy is used for water. A barrel saved is a barrel sold. You're also then not gaining a major export. Industry recognizes that too. Industry is for the most part getting their water from the government, and the government now has a large program put in, and is starting to make sure they use all of that as far as possible. They're one of the leaders in application of solar technologies to desalination.

The UAE is doing similar things in looking at their systems. In Australia, Brisbane put together large water reuse systems. Sydney has put in their large desalination system, with power use offset by wind power they build at the same time. It moves forward where they have the economic wherewithal to make sure it goes forward. All of these are government sponsored, as in Singapore.

With desalination, we're pretty close to the lower cost in reverse osmosis. We say it costs a lot, but at the same time, if you compare total costs, as a study did in Florida looking at treating groundwater and distributing it, if they converted to seawater desalination, what's the difference? Treatment costs would now equal distribution costs. It would go up in price, but the actual treatment cost is now equal. It's doable.

The thing that makes it difficult now is the shift away from the energy sources we're using now, and our ability to have sustainable energy linked to desalination. The California Coastal Commission passed a rule that any seawater desalination had to be done with renewable electrons — similar to Australia. There is a bit more to be gained in desal technologies, but we're finally getting up to the basic chemistry/physics of how much energy it takes to separate water from salt. We're going to see more use of alternative energies and sustainable energies, and we'll see direct use of solar, which we haven't seen in the past because of large land use. And there's forward osmosis. We may see more evaporation and collection in low energy systems, using geothermal for instance. We'll be looking at smaller and smaller systems.

Look at where the world's population is, and the distribution of the need for water. Seventy percent are living within 100 miles of the ocean. But we need freshwater for agriculture, which takes 70 to 80 percent of the water now. I think we'll see the shift: Use freshwater for agriculture as much as possible, and then in the urban areas along the coasts, if there isn't water coming down the river, we'll see desalination. Desalination will keep moving forward. We'll absorb the costs, but it will be hard to absorb the energy use.

SS: Tell me about one or two innovative water and wastewater practices by companies, and those practices' potential influence on corporate real estate and facilities management and project decision-making.

Stuchtey: One big theme is water efficiency in industrial processes. A global car manufacturer built a state-of-the-art treatment plant with two separate wastewater treatment systems and a water recovery system for one of its water-stricken plants in Mexico. By working with a turnkey water treatment company, the company saved time and money, getting the facility's system up and running all the faster. The 250,000-gallons-per-day system recovers more than 95 percent of its processing water now, thus saving dollars in chemicals and biological treatment.

The second big theme is wastewater reuse. Wastewater reuse can be done in-house. One IT company made wastewater reuse a pillar of its corporate water stewardship. With separate streams for recapturing water use of varying qualities, it can reuse ultrapure water for other less-stringent processes within its facilities. And in its India operations, currently 100 percent of water is recaptured for reuse in the plants. Wastewater reuse can also be promoted between industry and the local municipalities.For example, a chemical company developed a PPP [public-private partnership] with the local municipality to use a good portion of the municipality's treated wastewater discharge.

The third big theme is dry or seawater cooling. This is a theme for large power plants which are slowly converting (all thermal power plants in South Africa will be dry-cooled). However, it is also a theme for industrial facilities, which can retrofit on a more accelerated timeline. A chemicals company at its largest manufacturing site globally designed and implemented a power plant using seawater for cooling instead of freshwater. From a resource perspective, this means a 1,200-gallons-per-minute reduction in freshwater demand for the life of this facility.

The fourth trend is biosolids recovery. Whilst clearly driven by municipal operators, the recovery of ammonia and phosphate from nutrient-rich fluids is an increasingly interesting option for industry as well. Latest technology can remove approximately 85 percent of the influent phosphorus.

SS: Share with me some concrete figures concerning cost savings and/or materials reclamation realized by a company's more efficient management of water and wastewater.

Stuchtey: A global IT company has reduced by 30 percent the amount of source water required to generate the ultra-pure water (UPW) required for chip production. The chemical company's design of its U.S. facility above results in $600,000 per year in avoided treatment, energy and water costs. In the PPP example above, there has been a 95-percent savings in energy required for water treatment via a new facility and the partnership agreement with the city.

Bellamy: In most of these areas, the greatest innovation is often the LEED systems. Another thing I've seen in smaller areas where they've linked industry and municipal areas is the sharing of reuse waters for things such as wastewater, because water quality for cooling is not as high a need. We're also seeing a reduction in the cost associated with large sewer projects, going to decentralized treatment — especially in areas where youe can't have gravity flow, that can be savings.

Gray water [use] can reduce total water usage in dollars by 20 to 30 percent, because all the gray water is that much offset for water coming into the system.

One of my clients we're working with in the Eastern bloc was able to reduce total water by almost 50 percent at the same cost as if they had bought the water. That was the key — not so much "Can we save significant money?" (LEED is close to a break-even), but "How do you not use a lot of water?" It's becoming more of an issue.

Where water lags is if it were economically viable to reuse, industry would do it. Now if it's even break-even, and you have a CEO or board interested in that, you're going to see it implemented. We're seeing more along the lines of corporate responsibility.

SS: Certain territories are known for their water awareness, and have looked to water technology as a target sector in an economic development sense: Singapore, Israel, California, Ontario, Cincinnati (with the GE/EPA effort), etc. Are there other emerging locations you see on this growing list?

Stuchtey: Expect places like Finland (home base of the number one supplier of coagulants and number three supplier of flocculants for water treatment in the world), Netherlands and Germany to discover water as an export and development theme.

Germany's Ministry for Education and Research recently (2009) conducted a study "Water 2050: sustainable solutions – a chance for the German water industry," identifying opportunities for Germany's traditionally strong and export-oriented SMEs especially around water use efficiency technology and in water distribution.

The Netherlands takes a lead in water for development: Prince Willem-Alexander of the Netherlands is a specialist in water management, serving as chairman of the U.N. Secretary-General's independent advisory board on water and sanitation. The Netherlands has a strong profile in water management and has attracted NGOs that focus on the sustainable development of water resources.

SS: If you were advising a territory on cultivating water awareness as an economic development asset (and not a liability), what would be your chief advice?

Stuchtey: Jurong Island in Singapore has established very strict water operating rules. In return, investors get high-reliability water (which is of high value) and a homogeneous application environment which is exactly what many equipment manufacturers look for.

They would benefit from pushing their municipal water works to adopt new tech and practices fast — many water companies are frustrated with the adoption rates.

Bellamy: My advice to the policy makers is usually on a watershed-by-watershed basis. They need better information than they have, and they need to understand their own backyard — what's the reality of their water, where's it being used, and how do they want it to be used? When you start to get to a water short basis, can you afford to have 70 to 80 percent of water used for agriculture and all the industry and power production has almost stopped? Can you really go that far? No, you can't. So now comes the issue of flexibility, and who bears the cost of that flexibility.

If you're in a severe water shortage, can you ask your agriculture to cut back, and who's going to compensate them, and how is that going to occur? In Colorado, Aurora has purchased the rights to some large farming operations, so that if they have a big shortage, they'll shut down for X amount of money so that Aurora can claim their water.

Industry has a vested interest to work in that as well. Corporations anymore really do … those not long at sustainability will not be alive in a few years. If you don't have good corporate responsibility, one way or another you'll end up not being a good corporation.

The ultimate is Singapore. Industry there should feel very comfortable, with policy making sure industry has water.

In China, with the south-to-north project, they've already had water shortages in the south, so how is the south-to-north project going to sustain industry up there? After the government gives you a guarantee, there's the reality check.

SS: GE Power & Water's Jeff Fulgham was very positive about the energy and water measures he has seen being taken in China, by companies and by community authorities. What is your perspective on water awareness by companies and by governments in China and other emerging markets, and how it is influencing industrial development?

Stuchtey: Like in green energy, China is driving the revolution. China is investing US$600 billion in water conservation in the next 10 years. That will create a local market and push down the costs for many technologies globally. In membranes we saw a cost decrease of 33 percent between 2000 and 2006. Expect the same for metering, pumping etc.My personal opinion on this: Once China has grasped that water needs to be a priority, they will move quickly.

The award-winning Gippsland Water Factory, an innovative wastewater treatment and recycling system in the Gippsland region of Victoria, Australia, uses technology and methods such as biological treatment, membrane filtration, and reverse osmosis to treat nearly 9.3 mgd (35 ML/d) of domestic and industrial wastewater. The facility produces 2 to 3 mgd (8 to 12 ML/d) of high-quality recycled water for use by local industry. The project was delivered using an alliance model, which included Gippsland Water as the principal sponsor and a consortium of CH2M HILL, Transfield Services and Parsons Brinckerhoff providing project management, design, construction and operations services.
Photo courtesy of CH2M Hill

Adam Bruns
Managing Editor of Site Selection magazine

Adam Bruns

Adam Bruns has served as managing editor of Site Selection magazine since February 2002. In the course of reporting hundreds of stories for Site Selection, Adam has visited companies and communities around the globe. A St. Louis native who grew up in the Kansas City suburbs, Adam is a 1986 alumnus of Knox College, and resided in Chicago; Midcoast Maine; Savannah, Georgia; and Lexington, Kentucky, before settling in the Greater Atlanta community of Peachtree Corners, where he lives with his wife and daughter.


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