42 SEPTEMBER 2003 | JOURNAL AWWA

e should remember, in the same

vein, that our colleagues at the
other end of the water manage-
ment processthe wastewater
treatment industryface almost identical
problems and challenges. Indeed,
although it is estimated that more than 1
billion people on this planet currently
lack adequate access to clean drinking
water, more than 2.5 billion people lack
access to any kind of sanitation services.
Many people in the water utility busi-
ness have tended to think about the
water and wastewater industries as being
two rather different businesses. Sure, in
our houses as well as in our factories
clean water usually comes in through
one pipe, and dirty water goes out
through another. However, the differences and the
boundaries between water and wastewater are
slowly and surely fading. Today, we hear more and
more frequently that water is waterregardless
of its type or the amount of treatment it may need
to undergo before we drink it or use it to manufac-
ture computer chips. Water utilities are increasingly
viewing wastewater as another potential source of
drinking water. Certainly, the water and waste-
water industries are more notable for their simi-
larities than for their differences. Lets examine
some of those similarities.
First, the overall size of the two different busi-
nesses are almost identical. Environmental Business
International has estimated the total market, or
revenue generated, for municipal wastewater treat-
ment at about $29 billion per year and has put
water utility revenues just slightly higher at $32
billion per year. Thus, in terms of their overall
impact on the economy and their percentage of the
total Gross National Product, the water business
and the wastewater business are very similar.
Second, the two industries use many of the same
technological approaches and systems. Treatment
technologies and management systems are under-
going a similar proliferation and advance in waste-
water treatment as in primary water treatment. As
regulatory requirements become tougher and more
comprehensive, newer technologies are coming
into broader usemembrane filtration, advanced
READERS OF JOURNAL AWWA HEAR A LOT ABOUT RISING CUSTOMER DEMANDS, VAST INFRASTRUCTURAL NEEDS, AND THE
CONSEQUENTLY HUGE CAPITAL INVESTMENT REQUIREMENTS THAT CHALLENGE AND CLOUD THE FUTURE OF THE US DRINKING
WATER INDUSTRY.
W
Wastewater Is Water Too
market
outlook
market
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B Y S T E V E M A X W E L L
Like the water industry, the wastewater industry is facing an overwhelming
need for infrastructure replacement and capital expenditure during
the next 20 years. It is estimated that each industry will need to spend
about $300 billion.
ALTHOUGH IT IS ESTIMATED THAT MORE THAN 1 BILLION PEOPLE ON THIS PLANET CURRENTLY LACK
ADEQUATE ACCESS TO CLEAN DRINKING WATER, MORE THAN 2.5 BILLION PEOPLE LACK ACCESS TO ANY KIND OF SANITATION SERVICES.
2003 American Water Works Association
JOURNAL AWWA | SEPTEMBER 2003 43
oxidation treatment techniques such as ultravio-
let radiation and ozonation, and constructed
wetlands and other approaches that mimic nat-
ural treatment systems. More thoughtful strate-
gic and operational planning and better asset
management have likewise made possible great
efficiency gains in both industries.
Third, the overwhelming need for infrastruc-
ture replacement and capital expenditure is prob-
ably the most critical challenge facing the
wastewater industry, just as it is in the drinking
water business. Although studies abound and
dollar estimates vary, most
observers put the total
investment required in the
wastewater treatment busi-
ness over the next 20 years
at around the same $300
billion level that AWWA has estimated for drink-
ing water infrastructure.
Upgrading and maintaining the wastewater
and sanitation infrastructure are clearly just as
critical as upgrading and replacing the primary
water infrastructureto human health, to the
environment, and to the functioning and growth
of our economy. Users of the service will not be
able to pay for all of these costs. The Water
Infrastructure Network has estimated that if all
of the required investments for upgrading water
and wastewater infrastructure were to be funded
by local users, the fees that we all pay each
month would have to approximately double.
That is not likely to happen, so federal and other
funding mechanisms must be developedin
water and in wastewater infrastructure.
Fourth, because both industries have the eco-
nomic characteristics of natural monopolies,
they exhibit similar tendencies or imperatives
toward consolidation. Bigger regional systems, if
operated properly, can often provide service to
customers at improved efficiency or reduced
costs. Bigger operations can allow greater
economies of scale, so there is a trend toward
consolidation of systemssimilar to the rapid
consolidation we have seen among the vendors
to the water and wastewater businesses over the
past several years.
Because of the confluence of these similar chal-
lenges, the wastewater business is also increas-
ingly turning to private operators and private
sources of capital in an effort to help meet all of
these increased demands. This trend toward
greater private participation in the overall water
business has attracted many companies in the
past several years. Many observers attribute the
great foreign invasion of the US water indus-
try in the late 1990s to an effort by European
players to gain strategic position for the impend-
ing privatization of the US municipal business.
However, it is now clear that there are limits to
privatizationon both the water and the waste-
water sides of the business.
The issue of the solid by-products of waste-
water treatmentso-called biosolidsand
what to do with them is perhaps the one aspect
of the wastewater treatment business which in
fact does make it a bit different from the primary
drinking water business. As advanced treatment
standards have been regulated into place over
recent years, the wastewater treatment business
has become more and more efficient and has off-
set the higher costs of regulatory compliance by
developing and marketing an economically valu-
able by-product: biosolid material.
So, over time, we are coming to realize that
water really is just water. Wastewater, just like
groundwater, surface water, or even pristine
mountain lake water, should really be viewed as
just another potential source of raw water for
water utilities to utilize in the provision of clean
water to their customers. In the future, water
utilities may well compete fiercely over their
rights and access to wastewater streams as vari-
ous raw water sources become more restricted
and hard to find.
So, the boundaries between two businesses
that have historically been thought to be quite
different continue to blur. The water and waste-
water industries should both be fighting for the
same ideals. One day we will probably recognize
them as essentially the same industry.
The challenges and needs of this coalescing
water resource industry are likely to be one of
the most pressing problems facing humankind
over the next century. The Johannesburg Earth
Summit of 2002 set as one of its goals the halv-
ing of the number of people without decent
water and sanitation services by the year 2015.
market
outlook
THE WATER AND WASTEWATER INDUSTRIES SHOULD BOTH BE FIGHTING FOR THE SAME
IDEALS. ONE DAY WE WILL PROBABLY RECOGNIZE THEM AS ESSENTIALLY THE SAME INDUSTRY.
2003 American Water Works Association
44 SEPTEMBER 2003 | JOURNAL AWWA
market
outlook
Making these kinds of objectives a reality rather
than simply happy talk will require a vast
effort by all the countries of the world. Given
that only about 6% of the worlds water and
wastewater needs are met by private organiza-
tions, publicly owned water and wastewater
organizations will clearly have the major role to
play in achieving these sorts of goals.
It is important to note that this is not just a
problem for the rest of the worldit is a prob-
lem right here at home too. The vast and press-
ing nature of the worlds water problems about
the broader water industry were just highlighted
in a special section on water in the July 19 issue
of the widely respected international news-
magazine The Economist. Concluding that
throughout history water resources have been
ill-governed and colossally underpriced, this
review highlighted many contentious arguments
and issues plaguing the international water
industry. However, the report also stated that
there is one aspect of water use about which
nearly everyone agreesand which we would
all do well to consideralthough we are making
gains, the United States is the most wasteful
nation on earth in terms of water use.
Steve Maxwell is managing director of
TechKNOWLEDGEy Strategic Group, a
Boulder, Colo.based management consultancy
specializing in merger and acquisition support
services, strategic planning, and market research
for water and broader environmental industries.
Maxwell is also the editor and founder of The
Environmental Benchmarker and Strategist, the
environmental industrys most comprehensive
source of competitive and financial data. He has
advised dozens of environmental services and
water firms on strategy and transactional issues,
and he can be reached in Boulder at
(303) 442-4800 or via e-mail
at maxwell@tech-strategy.com.
2003 American Water Works Association