Feb 6
UNSUSTAINABLE: Water Scarcity
Sharing our insights into the biggest sustainability challenges facing our built environment. Our previous issues of the UNSUSTAINABLE series have explored cooling, windows, concrete & cement, and steel. In this post, we explore our UNSUSTAINABLE water use and the solutions emerging to bring water systems back into balance.
Running out of water
In 2018, in the midst of a severe multi-year drought, Cape Town nearly became the first modern majority city to run out of water. Known as “Day Zero,” the city was scheduled to shut off municipal water supply, at which point its >4 million residents would have been limited to water collections just meeting minimum requirements for health and hygiene. There were even proposals to “harvest” Antarctic icebergs as an emergency freshwater resource. In the end, with water-wise behaviour along with rain, Cape Town’s Day Zero was averted. But researchers have warned that such extreme water crises could become the norm. And indeed, in the last year, droughts had global impact:
- The Horn of Africa is experiencing its worst drought in >40 years, with 22 million people across Ethiopia, Kenya, and Somalia facing acute food insecurity as a result.
- Lake Mead and Lake Powell — the US’s largest reservoirs — reached record low levels (down to 26–27% capacity), while Utah’s Great Salt Lake has shrunk by 2/3 since the late 1980s, exposing a lake bed containing high levels of arsenic.
- Europe saw its worst drought in >500 years, with knock-on effects on power production in the midst of an energy crisis. Even the Netherlands — a historically waterlogged country — is facing the consequences of drought, with buildings’ wooden pile foundations at risk of rot as groundwater retreat enables fungi to flourish.
- In China, sections of the Yangtze River reached the lowest levels since records began, and drones were used to seed rainclouds in an attempt to mitigate the effects of drought.
Billions of people are already impacted by water stress. According to the UN’s 2022 World Water Development Report, an estimated 4 billion people live in areas that suffer from severe physical water scarcity for at least one month per year (based on 1996–2005 data and representing ⅔ of the global population at the time of data collection). Yet our demand for water is only growing. Global freshwater withdrawal has grown by >6x since 1900 and is expected to grow ~1% p.a. over the next 30 years. And the mismatch between water demand and supply is only further compounded by climate change, bringing changing precipitation patterns, reduced snowpack, greater evaporation from surface water & soil, potential salination of aquifers due to rising sea levels, etc.
Water scarcity is a key challenge for our built environment. Urbanisation focuses growth in areas with often insufficient water resources, and many cities depend on long supply chains — up to 500 km — to satisfy their water needs. But as noted by World Bank, “for most large cities in the developing world, the financial means to source water from such a distance is untenable.” Water scarcity is thus a particularly challenging risk for the built environment, and as climate change and population growth add to the water supply-demand gap, cities will need to adapt to bring water systems back into balance.
Closing the gap
By 2030, there will be an estimated 40% gap between demand for water and supply if current practices continue. And unfortunately, existing measures cannot close the gap. The World Bank estimates that at the current pace of improvement in water productivity, current water-saving measures may only close a fifth of the gap. To address the rest, we need new technologies and approaches urgently. Water is the one resource that is not nice to have but a must have for us to survive.
Innovative solutions are emerging along the value chain to tackle the problem of water scarcity in a number of ways. We focus on (1) new water sources for increased water supply, (2) digital tools for more efficient water use, (3) wastewater treatment and water resource monitoring to cut down on pollution and protect our water supply.
1. New water sources for increased freshwater supplies. We explore innovations in desalination, atmospheric water generation, and water recycling.
- Desalination today supplies ~1% of global water use, but desalination is more energy and cost intensive than conventional water supplies, requiring >10x more energy and costing 4–5x more, thus limiting its deployment potential. Moreover, existing desalination methods typically run continuously, complicating the decarbonisation of energy supply. Startups are developing new technologies to improve the productivity of existing desalination plants, e.g., Eden Tech’s reverse-osmosis centrifuge, or to find novel ways to power decarbonised desalination, e.g., Oneka’s wave-powered desalination buoys.
- Atmospheric water generation harvests water directly from the air, via condensation or absorption. But AWG today is ~100x more energy intensive than desalination and ~1000x more energy intensive than conventional water supplies (best-in-class AWG: 150 kWh/m3; best-in-class desalination: 2 kWh/m3, conventional supplies: 0.2 kWh/m3). To put AWG’s energy intensity into perspective, to produce water for an average San Franciscan (168L/person/day) at ~180 kWh/m3 would require ~30 kWh/day, roughly the average electricity usage of an entire US household to produce a single person’s worth of water. Startups are working to lower both AWG’s costs and its demand on the grid, e.g., SOURCE, Majik Water, Uravu Labs, and more.
- Water recycling moves away from our current linear, single-use water consumption, recognising that water can be used multiple times before being returned to the natural water cycle. For example, Hydraloop’s device takes in greywater (i.e., lightly contaminated domestic wastewater, for example from showers), treats it, and distributes it back into the building for non-potable uses (e.g., toilet flushing, laundry machines, irrigation). Within a typical house, this can reduce water usage by up to 45% and reduce wastewater discharge by up to 45%.
2. Use water more efficiently to reduce freshwater demand. Over 70% of global water use is self-supplied water used for agriculture (mostly irrigation), but “farmers in most countries do not pay for the full cost of the water they use” (OECD). So our search for scalable solutions focused on industrial and municipal water users, making up 16% and 12% of global water use respectively.
- Corporate water analytics software aims to help companies quantify and reduce their operational water risk (the CDP estimates that the cost of water risks to businesses could be >5x the cost of taking action now to address those risks, a figure which rises to 18x for food, beverage, and agriculture and >60x for manufacturing). Software solutions — e.g., that provided by Waterplan — use internal and external data sources to quantify the risk of water stress, estimate the financial implication of this risk, and generate recommended actions.
- Non-revenue water is water that utilities pump or produce but that is lost in the water distribution systems, through physical leakage, theft, poor metering, etc. The estimated non-revenue water rate is ~30% globally, ranging from as low as 6–8% in Denmark to >50% in some developing countries. The total cost of these losses to water utilities is estimated at $39B per year. New solutions are being developed by startups and incumbents alike to help utilities detect, predict, and ultimately reduce water leakage. For example, Xylem measures flow rate and pressure throughout a network, using data analytics to then detect leaks.
- Water leakage within buildings is estimated as high as 25–30%. And leaks are expensive for building owners, both because of the direct cost of water but also due to resulting property damage. At an asset level, a malfunctioning cooling tower might cost half a million dollars a year, while an unnoticed leak can cause millions in property damage to a single building (see here). Startups are working to make buildings smarter, with novel sensors and/or data analytics to detect and reduce leakage.
3. Cut water pollution to protect our water supply. A staggering 50%-80% of all industrial and municipal wastewater is released into the environment without prior treatment. We scoped out PFAS removal, organic contaminant removal, and monitoring of water resources.
- PFAS are long-lasting chemicals that have been used in industry and consumer products for decades. e.g. in non-stick pans, water repellent materials, stain resistant materials, fire retardants, etc. Made up of strong carbon-fluorine bonds, PFAS are very slow to degrade, known as “forever chemicals,” and can bioaccumulate in humans & animals. A US CDC study found PFOA (one of the more common PFAS) in the blood of 98% of Americans. And problematically, PFAS exposure has been linked with cancer, liver damage, system disruption, resistance to vaccines, and more. Today, we use granular activated carbon and ion exchange resins to separate out PFAS, and once spent, the PFAS-laden capture materials are incinerated. But today’s capture methods are inefficient, and there is worrying evidence to suggest that incineration may actually spread PFAS rather than destroying it. New solutions are urgently needed to capture and destroy PFAS more effectively, and the potential commercial opportunity is significant. In the US alone, estimates for the addressable market for PFAS removal are on the scale of tens of billions of dollars annually.
- Organic contaminants — carbon-containing compounds — are a key pollutant group in our wastewater streams. Bioelectrochemical treatments — e.g., Cambrian Innovation’s waste-to-methane reactor — use bacteria to destroy organic matter in wastewater while producing energy, similarly to anaerobic digestion but with more efficient processes (consuming less energy input and/or producing more energy output) while also offering better economics (e.g., through wastewater-as-a-service business models). Novel electrochemical and thermochemical treatments — e.g., 374Water’s supercritical water oxidation (SCWO) — are destroying the harmful and hard-to-degrade pollutants, such as PFAS, found in industrial wastewaters but also increasingly in treated municipal wastewater and nature itself.
- Resource monitoring today is highly manual, creating resiliency concerns given potential worker shortages (85% of US water and wastewater utilities have three or fewer employees and ~1/3 of US drinking water and wastewater operators will be eligible for retirement by 2028). Startups are developing new technologies and approaches to measure water quality and / or quality more effectively and efficiently. For example, Nature Metrics — a 2150 portfolio company — can use its environmental DNA sampling and bioinformatics approach to deliver mapping of bacterial pollution across whole river catchments, including identification of potential human pathogens. Gybe uses satellite imagery and sensors to monitor water quality parameters and can predict algal blooms using machine learning to ensure drinking water quality. To cut down on sewage pollution at source, Pallon (fka Hades) uses artificial intelligence to identify defects in sewers, cutting the costs of sewer condition assessment and repair while protecting the environment.
Our 2150 take: Why now for water tech?
Historically, water tech has struggled to attract VC funding. In 2021, water startups raised an estimated $470M, just 1% of the $57B of climatetech VC & PE funding that year. The critical challenge in water is that its price doesn’t reflect its value or even its cost. Even for municipal water systems, “Full-cost charging for water services is the exception rather than the rule” (UN, 2022). According to the World Bank (2019), globally excluding China and India, water and sanitation subsidies amount to $320 billion a year, covering infrastructure costs but also operating expenditures.
But there are large and growing markets within water (overall market size estimated at ~$900B), as communities and countries become more and more water stressed, increasing water prices and driving regulation. For example:
- Prices: The water & wastewater bill for a typical US household has increased 43% over the last decade. In the UK, the typical water bill is set to increase 7.5% this year alone.
- Usage restrictions: For example, in 2021, semiconductor manufacturers in Taiwan saw their water supply cut by 15% due to drought, forcing them to rely on water trucks to limit impact on operations.
- PFAS regulation: The US EPA has proposed new rules that would designate two broadly used PFAS chemicals — PFOA and PFOS — as “hazardous substances,” introducing new disclosure requirements and potential clean-up liability for releases of PFOA, PFOS, and potentially other PFAS chemicals.
- Water reuse regulation: In San Francisco, new development projects of 100,000+ gross square feet are required to install and operate onsite water reuse systems, while in Austin, commercial developments that use reclaimed water can get as much as $500,000 in city funding.
- Water leakage regulation: For example, in the UK, leakage is estimated at ~15–20%, and regulators are targeting a 50% reduction in leakage from 2017 / 2018 levels by 2050.
So why now for water tech? Ultimately, necessity is the mother of innovation. When water scarcity is so severe that communities are being shut off from water supplies entirely (see here), lawmakers are considering piping water 600 miles (~1,000 km) from the Pacific Ocean to Utah (see here), the largest reservoirs in the US are nearing dead pool levels where water levels are too low to flow downstream (see here), and so much more, there is opportunity for new technology to have both great impact and great commercial potential.
Here at 2150, we see water scarcity as one of the biggest challenges of our time, and we are passionate about supporting the innovators that are reimagining our relationship with water for a more sustainable future. If you want to learn with us or if you’re creating new solutions for water security, please reach out!
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2150 is a venture capital firm investing in technology companies that seek to sustainably reimagine and reshape the urban environment. 2150’s investment thesis focuses on major unsolved problems across what it calls the ‘Urban Stack’, which comprises every element of the built environment, from the way our cities are designed, constructed and powered, to the way people live, work and are cared for. Find out more at www.2150.vc
