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April 25, 2009 By Sarah Stroud Sustainable Industries Everyone learns in elementary school that energy and water are essential to sustaining and fueling life. In today's fossil fuel-dependent economy, what's becoming more apparent is how, when it comes to industrialized systems, water is an essential component to our energy system–you can't have one without the other. Electricity is second only to agriculture as the country's biggest guzzler of water, with power production sucking up almost 40 percent of U.S. freshwater withdrawals. Meanwhile, moving, cleaning and storing water burns of a surprising amount of power: In California, almost 20 percent of the state's electricity is used to heat, deliver and treat water, according to the California Energy Commission. While California, which draws much of its water from the state's northern mountains for use in its lower reaches, is an extreme case in many water-related matters, experts in both the public and private sectors are increasingly urging for a closer look at the connection between energy and water. Linking the two together is essential to the security of both, they say. "Energy sucked focus away from water," says Chris Spain, chief strategy officer of HydroPoint, a Petaluma, Calif.–based company that makes automated monitoring and control systems for irrigation. "But people are starting to understand the role water has. Virtually everything has water embedded somewhere in the supply chain and manufacturing process." But it goes the other way as well: Ninety-five percent of California's energy-efficiency goals can be met through water efficiency, according to Mary Ann Dickenson, the former executive director of the California Urban Water Council. In other parts of the United States, strains on energy and water are already auguring disruptions. In 2008, a drought in the Southeast threatened to shut down area nuclear power plants because of limited water for cooling. Meanwhile, power outages could hobble water treatment and distribution, according to University of Texas professor Michael Webber, in testimony he gave in front of the U.S. Senate in March 2009. Population growth, increased energy demand and an intensification of the hydrological cycle caused by climate change are likely to exacerbate the problem, researchers say. By 2025, half of the world's countries may face shortages of freshwater, while up to three-quarters the world's population may experience freshwater scarcity by 2050, according to the United Nations. "When there's a scarcity, energy production is constrained," says Heather Cooley, senior research associate for the Pacific Institute, an Oakland, Calif.–based think tank. Despite the warning of a world hamstrung by water and energy limitations, researchers, analysts and entrepreneurs say they also see a lot of opportunity in the energy-water nexus–by conserving one, you conserve the other–and, as many investors believe, you conserve money as a result. The dilemma facing many cleantech startups, which garnered $8.4 billion worldwide in venture capital in 2008, is when one energy- or water-saving technology tackles one problem yet creates another along the way. Case in point: renewable energy technologies. Increased implementation of renewable power sources is key to securing future water supplies, but when it comes to water use, not all renewables are created equal. "We have to think through energy alternatives because they're not all renewable," says Kyle Rabin of New York–based environmental policy group Network for New Energy Choices. Wind and solar photovoltaics are among the least thirsty renewable sources, consuming about a gallon of water for each megawatt-hour of electricity produced, according to Sandia National Laboratories. Concentrating solar technologies range from between 10 and 750 gallons, depending on the type of cooling system used. Those figures, however, don't calculate water and energy used in the manufacturing process. A 2009 study from MIT comparing energy use of 20 manufacturing processes pointed to "the seemingly extravagant use of materials and energy resources by many newer manufacturing processes," including solar panel fabrication. Vestas, the world's largest wind power company, has even tied its projected growth rate to the low-water consumption of its installed turbines. In its 2008 annual report, the Danish company says it plans to grow about 20 percent annually over the next decade "due mainly to the fact that wind power neither uses water nor emits CO2." "Water is increasingly becoming part of the calculation... another of the benefits people are considering," says Roby Roberts, senior vice president of external relations for Vestas Americas. "Five years ago we never discussed it, but it seems to us that this is increasingly going to be a factor." The same water concerns that could give wind and solar PV a boost may also help sink some corn-based ethanol producers, adding to other pressures including high corn prices and mounting environmental concerns. A University of Minnesota study published in 2009 found that corn-derived ethanol potentially uses more than 2,000 liters of water for every liter of fuel produced, depending on where the corn is grown. Arid states such as California and Colorado guzzle about 2,000 liters of water for every liter of ethanol while states such as Ohio and Iowa use about 5 liters of water for every liter of fuel produced. Ethanol processing plants located near other water-intensive users are in competition for resources, and some ethanol processors have been denied permits because of a lack of available water, says Dulce Fernandes, of Network for New Energy Choices. Fernandes says ethanol, increased production of which was federally mandated, illustrates why government energy policies should be carefully thought through for unintended consequences, such as their potential effects on water. "Federal incentives happened so quickly without evaluating consequences," Fernandes says. "If we are investing in alternatives, we have to get it right." Federal lawmakers have already made a move to link water and energy policies, via an in-the-works Senate bill called the Energy and Water Integration Act. If enacted, the bill would require government agencies to provide in-depth evaluation of the connection between energy and water in the production of fuel and electricity. Researchers at U.S. Department of Energy-funded laboratories, who have been studying the energy-water nexus for several years, also recommend an integrated approach to planning, as well as reducing freshwater use for power generation, and boosting renewable power sources. Energy and water projects are both very capital intensive, says Michael Hightower of Sandia National Laboratory, and planning for them both together would cut costs while increasing efficiency. But, at both the state and federal levels water and power are overseen by a slew of regulating bodies, which makes it difficult to take the necessary system-level approach, he says. Carbon emission reduction mandates, such as California's AB32, may also provide a push for water savings, as water utilities are required to reduce their greenhouse gas emissions, Cooley, of the Pacific Institute, says. Government action, especially if it comes in the form of mandated water conservation, could spur private-sector innovation in water, as it has for other cleantech sectors, according to industry observers. Many point to water's artificially low price as the main culprit behind lagging water regulation. The current cost of water in the United States–valued at an average of $2.81 per 1,000 gallons, according to a 2008 survey–could also be why the venture capital community has largely ignored water conservation startups. "For years water has been so heavily subsidized that people have a hard time embracing the real issues around scarcity," says Steve Vassallo, a principal specializing in cleantech investments at Menlo Park, Calif.–based Foundation Capital. Money funneled to water companies has traditionally been a drop in the bucket of cleantech venture funds. In 2008, water technologies received about $150 million in venture investment–less than 2 percent of the total venture dollars poured into cleantech companies that year, according to the San Francisco-based Cleantech Group. "This isn't a sector that has typically rewarded investors," Vassallo says. Nor, he adds, has it offered big rewards for entrepreneurs, who, in addition to the cost hurdle, often face complex regulations that can be difficult for startups to navigate. Analysts also point to the slow pace of change in the water industry and a lack of "critical mass" of companies in the space–which is a misperception, says Laura Shenkar, principal of the Artemis Project, a San Francisco–based water consulting firm. In spring 2009, the Artemis Project set out to illustrate the vitality of the sector by holding a "Top 50 Water Companies" competition to highlight water innovators. Contest judges assessed companies' technology, intellectual property and market potential, and named 50 companies representing the gamut of the water sector, from treatment to use management. Globally, the water sector revenues are expected to total almost $1 trillion by 2020, according to technology research firm Lux Research. In the vast sea of water-related technologies, measurement and monitoring tools, on-site recycling, and disinfection and purification technologies are all likely to see an increase in demand. Water purification alone represents an $18 billion annual market, which is expected to grow between 15 percent and 20 percent per year, according to John Kaestle, CEO of clean water company HaloSource. Despite hurdles faced by water companies seeking funding, some experts indicate that the tides might be shifting, as water is receiving an increasing amount of attention from investors. "We've reached a tipping point in an enormous market. ... Now is the time to take early-stage companies and do very well," Shenkar says. And if companies manage to produce water benefits while using less energy–even better. "We absolutely consider the energy-water interplay. ... It pervades many of the investments we make," Vassallo says. Bothell, Wash.-based HaloSource, one of the companies selected by the Artemis Project, is banking on the power of gravity to produce drinkable water. The company's HaloPure cartridge filtration system is already being used by more than 2 million people in India, and received certification by the U.S. Environmental Protection Agency in early 2009, verifying its safety and efficacy. In July 2008 the company announced it received $11.5 million from investors, following a $15 million funding round in mid-2007. While HaloSource's solution offers clean water on a small scale, Cambridge, Mass.-based desalination and water treatment company Oasys–number two on the Artemis Project's list–is looking to tackle two problems at once. The company closed a $10-million Series A funding round in February 2009 to back technology the company says reduces the fuel and electricity demands of current desalination methods by 90 percent and costs by about half. Beyond purifying water, HydroPoint, says it's able to impart hefty water savings without even getting its hands wet. The company's landscape irrigation management systems use satellite weather data to automatically adjust landscape watering and offers online monitoring and control of irrigation systems, resulting in a water-use reduction of about 60 percent in commercial applications, it says. "We're able to deliver these results because we're addressing an area of huge waste," HydroPoint's Spain says. HydroPoint garnered $8 million in venture investments in 2009. The company saw its revenue expand by about 70 percent in 2008, and is on track with its 2009 growth goals, Spain says. He credits the company's success with offering money and water savings, while requiring very little behavioral change on the part of its customers. Apart from the stark threat of a water-constrained world, the business case for considering energy and water together in an effort to conserve both may be the most compelling. The potential financial savings of water efficiency, plus the realization that water security is essential to the health of a wide range of businesses–whether they're dealing in socks or stereos–could be the key to putting the clout of business behind the effort to use technology to knit energy and water solutions together. |
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