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Less Than 10%
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More Than 40%
From 20% to 40%
Water Withdrawals as a Percentage of Total Available Water
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Given the challenging supply/demand
situation, the global water industry is
expected to undergo a substantial transformation in the near future. Businesses
will need to make further investments
in water technology, and utilities will
need to devote more money to water
infrastructure. Capital expenditures
on water infrastructure are expected to
grow to $131 billion in 2016 from $90 billion in 2010, according to Global Water
Intelligence (GWI). Sales of water- and
wastewater-treatment equipment to
industrial users are expected to rise to
$22 billion by 2016, up from $14 billion
in 2010, a 7.8% compound annual growth
rate (see Figure 3, page 3). Much of this
K99%&=$#*'(%'L66M-'yEGK@(QH(zEB@A(`KA?@L:'
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-$*#$P9)#('>)("&Q$#=.-(&+'&"8%&1'$-'#""="=:'
&"*)&=/"--'%8'&"*$%#:'&"-$="#9":')*":'<%/$($9)/'
)8P/$)($%#'%&'2%.-"2%/='$#9%1"?
No
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Percent in Agreement
According to ITT’s Value of Water
Survey, 95% of Americans rate water as
“extremely important,” which is more
than give that priority to any other service
they receive, including heat and electricity; nearly two-thirds say they’re willing
to pay more now to ensure long-term
access to clean water. A substantial majority of Americans believe significant
reform is needed, regardless of region,
residence, age, political affiliation or
household income (see Figure 2).
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investment growth will be driven by
changing financial models in the municipal water sector. Traditionally, less than
half of the money invested by utilities is
derived from their own operations, with
the rest of the costs being paid by local
governments. Given the increasing financial
pressure on the public sector, this model
is no longer sustainable. Governments
$.0,%)(+!%)-#5(+$&!"(/%0)#5((}(().*#$/#0(1233
will expect utilities to finance themselves
to a greater degree in the future, and the
proportion of capital expenditure from
operating cash flow is expected to rise
to 62% in 2016 from 44% in 2010.1
Despite challenges in transforming to
a new financial model, greater financial
independence for water utilities may
be liberating for the water sector, as
vG@EF@(A@H@A(BQ(PNDQABEJB(PJHQANEBPQJ:(OPFIGQFKA@F(EJO(|KEGPrIEBPQJF(EB(BC@(@JO(QH(BCPF(NEB@APEG8
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#")&'8.(.&"?'3.-$#"--"-'>$//'#""='(%'1)R"'
8.&(2"&'$#O"-(1"#(-'$#'>)("&'("92#%/%*+:'
)#='.($/$($"-'>$//'#""='(%'="O%("'1%&"'1%#"+'
(%'>)("&'$#8&)-(&.9(.&"?'
Forecast Compound Annual Growth Rate, 2010 to 2016
10%
8
6
9.4%
8.6%
7.8%
6.5%
4
2
0
Capital Expenditures Water- and Wastewateron Water Infrastructure Treatment Equipment
Sales to Industrial
Water Users
Total Capital
Expenditures
on Desalination
Total Capital
Expenditures
for Water Reuse
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>.,8%0/#/'-
;.&$#*'(2"'<)-('9"#(.&+:'*/%C)/'>)("&'
>$(2=&)>)/-'2)O"'$#9&")-"='-$AQ8%/=?'L#'
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>$(2=&)>)/-')&"'"A<"9("='(%'*&%>''
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5,000 Cubic Kilometers per Year
4,000
Water Withdrawals
3,000
2,000
1,000
0
1905
1925
evidenced by an emerging group of highperformance, self-financing utilities.
Private water financing was less popular
in the 2000s, but this trend is expected
to be reversed as municipalities attempt
to rein in spending and balance their
budgets. Private-sector participation in
the water industry should benefit from
increased demand for advanced water
and wastewater technologies, particularly
those involving desalination and water
reuse. While more than a decade ago
fewer than 10% of large-scale desalination plants were privately financed,
57% of currently proposed large-scale
desalination plants are expected to be
financed through private investors.2
Total capital expenditure on desalination is projected to increase to $18
billion in 2016 from $11 billion in 2010.
Capital expenditures for water reuse
are also expected to reach $8.4 billion
in 2016, up from $4.9 billion in 2010—
a 9.4% compound annual growth rate
(see Figure 3). China is projected to surpass the US as the largest market in the
world in terms of capital expenditures
in the water sector, and technology and
finance should continue to be the primary drivers of change in the global
water industry.3
I8"$J0(K'"*$
1955
1975
1995
2015E
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:.240"$T<$Q0(#,8$.+$$
)"0$9/).,/$N(*"-,.3$
>/,"0$N"*/+%
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7%<./)($%#'*&%>(2'$-'(2"'1)N%&'9%#(&$C.(%&'
(%'"/"O)("='*/%C)/'>)("&Q>$(2=&)>)/'/"O"/-?'
SO"#'-%:'(2"'&$-"'$#'="1)#='8%&'>)("&'2)-'
%.(<)9"='<%<./)($%#'*&%>(2'C+')'8)9(%&''
%8'(>%?'
The amount of water withdrawal as a
percentage of the total water available
is forecast to rise substantially by 2025.
As population growth continues, the
number of people affected by water stress
and scarcity will increase significantly.
During the past century, global water
withdrawals have increased six-fold
(see Figure 4).
Even with population growth being the major contributor to elevated
global water-withdrawal levels, the
rise in demand for water has outpaced
population growth by a factor of two
(see Figure 5).
19
50
19
55
19
60
19
65
19
70
19
75
19
80
19
85
19
90
19
95
20
00
20
05
20
10
20
15
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20
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20
25
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250 Liters per Capita per Day
200
150
100
50
0
>LIDF$>=IMNFL>LO
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,-./%-(&)*#+!$#)!('.$$&!!##(s(!"#$%!&'(&)*#+!&),
NFUVQMI
Steadily increasing temperatures associated with climate change and widespread
exploitation of water resources across
the globe have made droughts a recurring
and growing threat. A National Center
for Atmospheric Research (NCAR) study
concluded that the US and many other
populous countries face an increased
threat of severe drought in the coming
decades.4 The majority of the western
two-thirds of the US is expected to be
significantly drier by the 2030s, putting
large parts of the nation at risk for extreme drought. Other regions that could
encounter considerable drought include
most of Latin America, the Mediterranean border regions, Southeast Asia,
Southwest Asia, Africa and Australia
(see Figure 6). The NCAR study also
suggests that drought risk should decline in this century in the majority of
Northern Europe, Russia, Canada, Alaska
and parts of the Southern Hemisphere.
The globe’s total land areas, however,
should be drier overall.
Even recent heavy rains and flooding
may not mitigate drought-induced water
shortages. According to Brian Fuchs,
a leading climatologist at the National
Drought Mitigation Center, temporary
spikes in rainfall and flash floods do not
sufficiently abate the issue of long-term
drought. “Whenever there is a lot of
moisture in a short period of time, the
potential exists for rapid improvement,”
says Fuchs. “While that possibility exists, it won’t necessarily mean the end
of drought in those areas.” According
to Fuchs, it is very difficult for water
to effectively infiltrate the surface of
drought-stricken regions because of the
subsequent hardening and compacting
that occurs in the top layers of soil.
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R$
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,-./%-(&)*#+!$#)!('.$$&!!##(s(!"#$%!&'(&)*#+!&),
Million Square Kilometers, 12-Month Average
:.240"$\<$N"3'.+"$.+$,8"$!(0,8"0+$
M"*.-)8"0"G-$7+(#$9(&"0$
12.5
;.&$#*'(2"'/)-('-"O"&)/'="9)="-:'(2"')1%.#('%8'$9"')#='-#%>:'
"-<"9$)//+'$#'(2"'U%&(2"&#'V"1$-<2"&":'2)-'="9/$#"='=&)1)($9)//+''
)-')'&"-./('%8'*/%C)/'>)&1$#*')#='-2$8($#*'<&"9$<$()($%#'<)(("&#-?'
Decline in North America Snow Cover
16
11.5
15
10.5
14
9.5
13
’75
’79
’83
’87
’91
’95
’99
’03
’07
Decline in Eurasia Snow Cover
’75
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’79
’83
’87
’91
’95
’99
’03
’07
’11
`QKAI@t(uEBPQJEG(>I@EJPI(EJO(~BNQFDC@API(~ONPJPFBAEBPQJ(EF(QH(~KVKFB(wx{{
7!U>$9U[DF
The increased climate variability throughout the world has severely affected the
earth’s snow cover and glaciers (see Figure
7). During the last several decades, the
amount of ice and snow, particularly in
the Northern Hemisphere, has declined
drastically as a result of global warming
and shifting precipitation patterns. The
reduction in ice and snow volumes has
both global and local implications on
climate, ecosystems and world water
availability. The average monthly snowcover extent in the Northern Hemisphere
has declined 1.3% per decade in the last
40 years, with the largest decreases in the
spring and summer months.5 In the next
several decades, the ice albedo feedback—
whereby melting snow exposes more dark
ground, which in turn absorbs heat and
causes more snow to melt—will accelerate
the rate of Arctic sea-ice melt. Projected
increases in global air temperatures will
diminish the extent of the snow cover
and induce premature snow melt; this
reduction in overall snow cover will itself
exacerbate global warming.
The United Nations Environment
Programme (UNEP) forecasts that the
majority of middle latitudes will experience snow losses of as much as 60% to
80% in monthly maximum snow-water
T$
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8%&"9)-(-'(2)('(2"'1)N%&$(+'%8'1$==/"'
/)($(.="-'>$//'"A<"&$"#9"'-#%>'/%--"-'%8''
)-'1.92')-'WEF'(%'XEF'$#'1%#(2/+'
1)A$1.1'-#%>Q>)("&'"Y.$O)/"#('C+'(2"''
"#='%8'(2"'9"#(.&+?
J0(^"3,"%$J"03"+,/2"$98/+2"$.+$7+(#$9(&"01$$
?@_?S,(SBCCC$J"0.(%$["0-4-$$
BC_?S,(SB?CC$J"0.(%
-98% to -75%
-75% to -50%
-50% to -10%
-10% to 10%
10% to 50%
`QKAI@t(_JPB@O(uEBPQJF(mJ?PAQJN@JB(vAQVAENN@(EF(QH(jKJ@(wxx†
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,-./%-(&)*#+!$#)!('.$$&!!##(s(!"#$%!&'(&)*#+!&),
QFUV!N>LIDF$L`7IFL9I=U!
Approximately 2.5% of the earth’s water
is freshwater, of which 69% is in glaciers and the polar caps, 30% is fresh
groundwater and 0.3% is in lakes and
rivers. Total withdrawals of water account for 10% of renewable water, although in some countries this number
is more than 100%.7 Overextraction of
water becomes an issue when more than
20% of renewable water is withdrawn,
and by that standard the world is not
facing a water crisis.
At the heart of the issue, however,
is the uneven distribution of water resources. Many countries may have sufficient water on a national basis, but not
regionally or locally, such as in China, the
US, India and Spain. Countries may also
have sufficient water but at the wrong
time, such as in Trinidad, the Bahamas
and the Cayman Islands. Long-distance
water transport and storage are a priority
in these instances, although there are
frequently logistical, financial and/or
political obstacles to such investments.
The majority of nations that are deficient
in renewable water rely on nonrenewable resources, which has led to problems in the form of overexploitation of
surface water and groundwater. Such
overexploitation can lead to a variety
of problems, such as saline intrusion.
In some cases, wells have been drilled
so deep that the water becomes contaminated with radon from the earth’s
crust, which can cause severe health
side effects that include lung cancer and
birth defects. Such problems are typically
localized, however, and can be resolved
in the medium term via reverse-osmosis
desalination of brackish water. Larger
W$
populations may be affected by a salinity crisis caused by overexploitation of
the groundwater, but this is an issue
that takes place over a 30-year period.
The agriculture sector stands as the largest consumer of freshwater resources
across the globe, accounting for more
than 70% of global water withdrawals.
GWI anticipates that the total land under
irrigation (the main measurement of
water use in agriculture) in the US will
reach 290 million hectares by 2025—
a 115% increase over 1996 levels.
One of the most significant catalysts
to agriculture’s sustained growth and
reliance on water is the steadily increasing global consumption of foods that
are heavily dependent on water (see
Figure 9). As a nation becomes more
affluent, consumers increasingly prefer
more water-intensive foods. The water
needed to produce one kilo of meat is 10
times greater than the amount necessary
to grow an equal serving of rice.
The utilization of modern agricultural
methods has been a key contributor to
the reduction of rural poverty throughout the world and, in many nations,
governments continue to bolster the
agricultural industry by subsidizing
irrigation projects and promoting
irrigation-friendly policies. The Indian government, for example, provides
free electricity toward the extraction
of groundwater. The proliferation of
agriculture will continue to strain global
water resources—a seemingly inevitable
outcome in a world that continues to
grow in both size and wealth.
The Millennium Development Goals,
a framework of eight international development goals that all 193 United Nations
(UN) member states and at least 23 international organizations have agreed to,
aim to free people from extreme poverty
and multiple deprivations by 2015. The
volume of water for agriculture will need
to increase in order to achieve the target
of halving, between 1990 and 2015, the
proportion of people who suffer from
hunger (see Figure 10, page 7). To effectively decrease global famine, agricultural output—and therefore water use—
must increase.
:.240"$a<$I8"$98/+2.+2$
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$#9&")-$#*/+'<&"8"&'1%&"'>)("&Q$#("#-$O"'
8%%=-:'-.92')-'1")(:'>2$92:'$#'(.&#:'&)$-"-'
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8%&'>)("&?'
LQF=9VOIVFD
Other
Pulses*
Roots and Tubers
Meat
Sugar
Vegetable Oils
Other Cereals
Wheat
Rice
2,500
Kilocalories per Capita per Day
equivalent by the end of the century.6
The sharpest declines are expected to
take place in Europe, while the UNEP
model anticipates increases in the Canadian Arctic and Siberia (see Figure 8,
page 5). Snow is a vital water resource
for ecosystems and human activities, and
changes in snow cover and snow extent
in the decades to come are likely to have
significant consequences.
2,000
1,500
1,000
500
0
1964 to 1966
1997 to 1999
2030E
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,-./%-(&)*#+!$#)!('.$$&!!##(s(!"#$%!&'(&)*#+!&),
Water Required for Food Production,
Cubic Kilometers per Year
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Q'(K/'$>/,"0$9(+-4*),.(+$
5(0$:((%$J0(%43,.(+
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9,000
8,000
7,000
6,000
5,000
4,000
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#""='(%'$#9&")-"'$#'%&="&'(%')92$"O"'(2"''
B#$("='U)($%#-'[BU\'()&*"('%8'2)/O$#*:'
C"(>""#'IJJE')#='DEIH:'(2"'<&%<%&($%#''
%8'<"%</"'>2%'-.88"&'8&%1'2.#*"&?
Increase Over 2002 Needed to
Meet the 2015 UN Hunger Target
Increase Over 2002 Needed to
Eradicate Poverty by 2030
Increase Over 2002 Needed to
Eradicate Poverty by 2050
3,000
2,000
1,000
0
1960
1970
1980
1990
2002
2015E
2030E
2050E
`QKAI@t(_JPB@O(uEBPQJF(mJ?PAQJN@JB(vAQVAENN@(EF(QH(l@MAKEAL(wxx‡
VF`L!=cLI=U!
In 1990, the world had 10 cities with
populations of 10 million or more; six
were in developing countries and four
were in developed countries. By 2010,
there were 21 cities of 10 million or
more; 17 were in developing countries
and four were in developed nations.
The UN forecasts that by 2020 the
world will have 27 cities of 10 million or more; 22 in developing countries and five in developed countries
(see Figure 11).
Urbanization leads to increased
water demand, for both household
needs and services. Household needs,
which include activities such as flushing
a toilet, watering flowers or washing
a car, increase daily per capita water
needs by 80 to 250 liters. Service institutions, such as hospitals, restaurants
and hotels, are also major consumers
of water. Urbanization can cause the
demand for water to increase five-fold
beyond the “basic water requirement.”8
This increase does not include water
used in power generation or other
industrial activities that typically
accompany urbanization.
More than half of the current global
population resides in cities. As urban
populations continue to grow, and as
the standard of living of those dwelling in cities improves, there will be a
need for more stringent environmental regulation, as well as increased
capital expenditures for water and
wastewater infrastructure.
Environmental-protection investment generates diminishing returns.
While primary and secondary wastewater treatments are comparatively
cheap processes and contribute to
the quality of the environment, extracting nutrients, pharmaceutical
by-products and endocrine disruptors from wastewater can be rather
expensive and provide relatively
minimal benefit. The outcome is that
the world is encountering a spike
in the amount of money needed for
water and wastewater infrastructure,
which subsequently garners more
interest in technology. Although
the water industry has traditionally comprised a series of individual
domestic markets, it is becoming
increasingly global in various segments. Advanced water and wastewater treatment, and several areas
within the equipment supply chain,
have become internationalized.
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\$
$.0,%)(+!%)-#5(+$&!"(/%0)#5((}(().*#$/#0(1233
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,-./%-(&)*#+!$#)!('.$$&!!##(s(!"#$%!&'(&)*#+!&),
:.240"$;E<$>/,"0$F"4-"$
98/+2"-$,8"$Q/*"$5(0$$
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]<&%=.9"='>)("&:^'%&'>)("&'9%#()1$#)("='C+'
(2"'2+=&)./$9Q8&)9(.&$#*'<&%9"--?'K-')'&"-./(:'
(2"'"#"&*+'$#=.-(&+'$-'"A<"9("='(%'C%%-('
-<"#=$#*'$#'>)("&Q(&")(1"#('"Y.$<1"#(?
3,000 Million US Dollars
2,500
2,000
Capital Expenditures on Water-Treatment
Equipment for Oil and Gas
1,500
1,000
500
0
2007
2008
2009
2010 2011E 2012E 2013E 2014E 2015E 2016E
`QKAI@t(oGQMEG(zEB@A(gJB@GGPV@JI@(EF(QH(WEAIC(wx{x
:.240"$;P<$9(*)(+"+,-$$
(5$,8"$eT$`.''.(+$$
!(0,8$L*"0.3/+$
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K#'$#9&")-$#*/+'<%<./)&'%<($%#'8%&'=$-<%-$#*'
%8'<&%=.9"='>)("&'$-'%#Q-$("'(&")(1"#(:'
>2$92'2)-'/%>'PA"='9%-(-'&"/)($O"'(%'%(2"&'
=$-<%-)/'%<($%#-?'62"')/("&#)($O"'(%'(2$-'
<&%9"--'$-'(%'(&)#-<%&('<&%=.9"='>)("&'(%''
)'(&")(1"#('8)9$/$(+'%&'=$-<%-)/'9"#("&?
6%
JFUNV9DN$>LIDF
The increased prevalence of land-based
natural-gas drilling and hydraulic fracturing throughout the US has generated much debate over environmentally friendly methods of disposing of
“produced water.” Produced water is
water contaminated by the hydraulicfracturing process that becomes infused
with highly toxic chemicals. The disposal process for produced water has
become one of the fastest-growing water
subsectors, as natural-gas producers
must take extra precaution and dedicate considerable resources to make
certain that the contaminated water
doesn’t in any way mix with drinkingwater sources (see Figure 12 and Figure
13). An increasingly popular option for
disposing of produced water is “pointof-use treatment,” whereby produced
water is treated on-site. Point-of-use
treatment has low fixed costs relative to
other disposal options. The alternative
to this process is to transport produced
water to a treatment facility or disposal
center via pipeline or truck.
Treatment
Lifting, Pumping
and Reinjection
16%
Minimization
49%
Off-Site Disposal
30%
uQB@t(ŒKEJBPBP@F(NEL(JQB(@|KEG({xx(OK@(BQ(AQKJOPJV8(
`QKAI@t(pPBP(gJ?@FBN@JB(d@F@EAIC(Ž(~JEGLFPF(EF(QH(WEL(wx{{
]$
$.0,%)(+!%)-#5(+$&!"(/%0)#5((}(().*#$/#0(1233
vG@EF@(A@H@A(BQ(PNDQABEJB(PJHQANEBPQJ:(OPFIGQFKA@F(EJO(|KEGPrIEBPQJF(EB(BC@(@JO(QH(BCPF(NEB@APEG8
,-./%-(&)*#+!$#)!('.$$&!!##(s(!"#$%!&'(&)*#+!&),
:.240"$;R<$>/,"0$78(0,/2"$
.+$98.+/$=-$DX)"3,"%$$
,($>(0-"+
,2$#)M-'8)-(Q<)9"='"9%#%1$9'*&%>(2'2)-'
&"-./("='$#')'>)("&'-2%&()*"'(2)('$-'8%&"9)-('
(%'>%&-"#'=.&$#*'(2"'&"-('%8'(2$-'="9)="?'
70 Billion Tons
60
50
Water Shortage
40
30
20
10
0
2003
2004
2005
2006
2007 2008
2009 2010 2011E 2012E 2015E 2020E
`QKAI@t(WQAVEJ(`BEJG@L(d@F@EAIC(EF(QH(uQ?@NM@A(wx{x
:.240"$;T<$F/).%$
Q0(#,8$5(0$F"-.%"+,./'$
>/-,"#/,"0$U)"0/,.(+-$
.+$98.+/
!.C-()#($)/'$#O"-(1"#('>$//'C"'#"9"--)&+'
(%'"/"O)("',2$#)M-'>)-(">)("&Q(&")(1"#('
$#=.-(&+'(%')'/"O"/'(2)('$-'<&%<%&($%#)("'
(%'$(-'"9%#%1$9'-()(.-?',2$#)M-'1)&R"('
8%&'&"-$="#($)/'>)-(">)("&'%<"&)($%#-'$-'
8%&"9)-('(%'&$-"'(%'GE'C$//$%#'&"#1$#C$'$#'
DEID'8&%1'DX'C$//$%#'&"#1$#C$'$#'DEIE?
45 Billion Renminbi
40
China’s Residential Wastewater-Operations Market
35
30
25
20
15
10
5
0
2001
2002
2003
2004
2005
2006 2007
2008 2009
9M=!L
Morgan Stanley Research forecasts that
the water shortage in China is expected
to worsen (see Figure 14). Substantial
investment will be necessary to elevate
China’s wastewater-treatment industry to a level that is proportionate to
its economic status.
In 2010, the Chinese government announced its intent to devote 3.1 trillion
renminbi to the environmental-protection
industry during the 12th Five-Year Plan
versus the 1.3 trillion renminbi allocated
in the 11th Five-Year Plan, generating an
annual growth rate of approximately 15%
to 20%. A study conducted at Tsinghua
University concluded that investment
in sewage-treatment facilities is projected to reach 153.97 billion renminbi
throughout the 12th Five-Year Plan, up
35% from the 11th Five-Year Plan. As per
the Chinese government’s 12th Five-Year
Plan, all cities and counties are expected
to have 100% sewage-treatment capacity, versus the 75% of cities and 30%
of counties that had sewage plants in
2009.9 China’s market for residential
wastewater operations is forecast to rise
to 40 billion renminbi in 2012 from 28
billion renminbi in 2010 (see Figure 15).
2010 2011E 2012E
`QKAI@t(WQAVEJ(`BEJG@L(d@F@EAIC(EF(QH(uQ?@NM@A(wx{x
a$
$.0,%)(+!%)-#5(+$&!"(/%0)#5((}(().*#$/#0(1233
vG@EF@(A@H@A(BQ(PNDQABEJB(PJHQANEBPQJ:(OPFIGQFKA@F(EJO(|KEGPrIEBPQJF(EB(BC@(@JO(QH(BCPF(NEB@APEG8
,-./%-(&)*#+!$#)!('.$$&!!##(s(!"#$%!&'(&)*#+!&),
I8"$7('4,.(+$
D::=9=D!I$=FF=QLI=U!
Approximately 70% of all water is used
for agriculture, and our ability to expand
agricultural output to sustain the growing global population is restricted in
part by the limited supply of freshwater.
According to the Food and Agriculture
Organization (FAO), approximately 20%
of the increase in crops produced by
2050 will be attributed to newly irrigated
lands, while 80% will have to come from
increases in crop yields. Land that is fit
for growing crops is finite and the areas
that have yet to be cultivated require
costly infrastructure build-outs. The
most effective long-term solution will
be creating and enhancing agricultural
technologies to produce more “crop per
drop” (see Figure 16 and Figure 17). As
the world’s water supplies continue
to be strained by growing populations
and as arable land per capita continues
to decline, agricultural efficiency will
become a major focus of policymakers
and investors alike.
There are several irrigation techniques
that are capable of effectively producing
crops with relatively minimal amounts
of water. In most developing economies,
the overwhelming source of irrigation
is flooding fields. Flooding is only about
35% efficient; 65% of the water evaporates
before it reaches the crops. By contrast,
sprinklers are 75% efficient. Drip irrigation is 85% efficient and widely accepted
as one of the most effective water-saving
irrigation systems. This process gradually applies water to the crop’s roots
through a system of valves, pipes, tubing
and emitters. Alternative methods that
are capable of increasing crop yields
with less water include center-pivot
sprinkler irrigation, advanced fertilizers and watering-schedule controls
that account for weather conditions.
:.240"$;W<$78/0"$(5$90()$
J0(%43,.(+$=+30"/-"-1$
;aW;$,($;aaa$
3"(>""#'IJWI')#='IJJJ:'#")&/+'XEF'%8'(2"'
$#9&")-"'$#'>%&/='9&%<'<&%=.9($%#'9)1"'
(2&%.*2'$#9&")-$#*'+$"/='%#'"A$-($#*'/)#=?'
Yield Increases Arable-Land Expansion
Increased Cropping Intensity
All Developing Countries
South Asia
East Asia
Near East/North Africa
Latin America and the Caribbean
Sub-Saharan Africa
World
0
25
50
75
100%
`QKAI@t(_JPB@O(uEBPQJF(mJ?PAQJN@JB(vAQVAENN@:(odg~A@JOEG(EF(QH(l@MAKEAL(wxx‡
:.240"$;\<$J0(^"3,"%$
7(403"-$(5$=+30"/-"-1$
;aa\g;aaa$,($EbPb$
T%%R$#*')2")=:'$#9&")-"-'$#'9&%<'<&%=.9($%#'
>$//'#""='(%'9%1"'8&%1'9&")($#*')#='
"#2)#9$#*')*&$9./(.&)/'("92#%/%*$"-'(%'
<&%=.9"'1%&"']9&%<'<"&'=&%<?^
Yield Increases Arable-Land Expansion
Increased Cropping Intensity
All Developing Countries
South Asia
East Asia
Near East/North Africa
Latin America and the Caribbean
Sub-Saharan Africa
Rain-Fed Crop Production
Irrigated Crop Production
0
25
50
75
100%
`QKAI@t(_JPB@O(uEBPQJF(mJ?PAQJN@JB(vAQVAENN@:(odg~A@JOEG(EF(QH(l@MAKEAL(wxx‡
The FAO expects global irrigation
water withdrawal to increase by approximately 11% to 2,906 cubic kilometers
per year in 2050, up from the current
2,620 cubic kilometers per year. Output
from irrigated lands globally is set to
increase to 3,424 trillion kilocalories
;b$ $.0,%)(+!%)-#5(+$&!"(/%0)#5((}(().*#$/#0(1233
in 2025 and 5,420 trillion kilocalories
in 2050 from 2,544 trillion kilocalories
in 2010 (see Figure 18, page 11). Global
irrigation water withdrawals are forecast
to rise by 14% in the developing countries, offset by a decline of more than
2% in the developed countries.
vG@EF@(A@H@A(BQ(PNDQABEJB(PJHQANEBPQJ:(OPFIGQFKA@F(EJO(|KEGPrIEBPQJF(EB(BC@(@JO(QH(BCPF(NEB@APEG8
,-./%-(&)*#+!$#)!('.$$&!!##(s(!"#$%!&'(&)*#+!&),
China and India stand out as having
ample opportunity to boost crop yields,
as both governments have recently demonstrated a commitment to increasing
agricultural productivity and efficiency.
At the Fifth World Water Forum in 2009,
China’s minister of water resources underscored China’s goal to increase the
nation’s irrigated area by 10% by 2020, as
well as restore 260 large-scale irrigation
and drainage pumping centers within three
to five years. In 2008, India’s minister of
agriculture declared his goal to bring 17
million hectares under efficient irrigation
(12 million hectares under microirrigation
and 5 million hectares under sprinkler
irrigation) by 2012; the Indian Planning
Commission predicts that water supply
and irrigation capital expenditures will
experience a subsequent compound annual
growth rate of 19% to reach this goal.10
:.240"$;]<$:(0"3/-,$
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U4,)4,
62)#R-'(%'$1<&%O"1"#(-'$#'$&&$*)($%#'
("92#%/%*+:'*/%C)/'%.(<.('8&%1'$&&$*)("='
/)#=-'$-'8%&"9)-('(%'1%&"'(2)#'=%.C/"'C+'
DEHE'%#'N.-('IIF'1%&"'>)("&:')99%&=$#*''
(%'(2"'B#$("='U)($%#-'@%%=')#=''
K*&$9./(.&)/'K=1$#$-(&)($%#?
LQF=i`=UID9M
Biotechnology companies recognize that
demand for drought-tolerant crops will
continue to rise as global climate change
forms a world that is both warmer and
drier. These companies are utilizing both
conventional breeding and genetic engineering to develop crop varieties that can
effectively maintain their output in regions
stricken with drought (see Figure 19).
For example, researchers are engaged in
various phases of testing for corn strands
that have been genetically manipulated
to retain yield stability in the driest of
environments. Already one particular
gene that is undergoing testing has demonstrated encouraging yield advantage
when water is limited, and further testing
has found the gene to be compositionally
equivalent to conventional corn.
6,000 Trillion Kilocalories
5,000
Irrigation Output
4,000
3,000
2,000
1,000
0
2000
2010E
2025E
2050E
`QKAI@t(_JPB@O(uEBPQJF(lQQO(EJO(~VAPIKGBKA@(~ONPJPFBAEBPQJ(EF(QH(wxx
:.240"$;a<$9(*)(-.,.(+$(5$
,8"$9(0+$h."'%
K*&$9./(.&)/'9%1<)#$"-')&"'.($/$_$#*'C%(2'
9%#O"#($%#)/'C&""=$#*')#='*"#"($9'"#*$#""&$#*'
(%'="O"/%<'9&%<-'(2)('9)#'1)$#()$#'(2"$&'%.(<.('
$#'=&%.*2(Q-(&$9R"#'&"*$%#-?
25 Tons per Hectare Agronomics Conventional Breeding
Marker-Assisted Breeding
20
Biotechnology Traits
15
10
5
0
`QKAI@t(WQJFEJBQ(pQNDEJL(EF(QH(jEJKEAL(wxx‡
;;$
$.0,%)(+!%)-#5(+$&!"(/%0)#5((}(().*#$/#0(1233
vG@EF@(A@H@A(BQ(PNDQABEJB(PJHQANEBPQJ:(OPFIGQFKA@F(EJO(|KEGPrIEBPQJF(EB(BC@(@JO(QH(BCPF(NEB@APEG8
,-./%-(&)*#+!$#)!('.$$&!!##(s(!"#$%!&'(&)*#+!&),
that heavy solids settle to the bottom
while oil, grease and lighter solids float
to the surface. Secondary treatment
then removes dissolved and suspended
biological matter. Tertiary treatment
then allows discharge into a highly sensitive or fragile ecosystem. This being
the case, the capacity of water-reuse
>L7ID>LIDF$IFDLIdD!I
Treated wastewater costs about a third
less than desalination. In addition to
tertiary and advanced reuse, a significant portion of water reuse involves
treatment that does not go beyond the
secondary level. Primary treatment involves temporarily holding sewage so
:.240"$Eb<$=+&"-,*"+,-$.+$
>/,"0SF"4-"$J'/+,-
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C"9).-"'(&")("='>)-(">)("&'9%-(-')C%.(')'
(2$&='/"--'(2)#'="-)/$#)("='>)("&?'62"'%.(<.('
8&%1'>)("&Q&".-"'8)9$/$($"-'$-'8%&"9)-('(%'
&")92'J?X'C$//$%#'9.C$9'1"("&-'$#'DEIW:'.<'
8&%1'H?I'C$//$%#'9.C$9'1"("&-'$#'DEIE?
12 Billion Cubic Meters per Year
Water Reuse
10
8
6
4
2
0
1992
1996
2000
2004
2008
2012E
2016E
`QKAI@t(oGQMEG(zEB@A(gJB@GGPV@JI@(EF(QH(WEAIC(wx{x
:.240"$E;<$!(0,8$L*"0.3/+$
>/-,"#/,"0SI0"/,*"+,$
J'/+,-$V-.+2$V[$
I"38+('(2H$
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
62"'>)("&Q(&")(1"#('<&%9"--'R#%>#')-'
./(&)O$%/"('[B`\'=$-$#8"9($%#'$-'*)$#$#*'
<%<./)&$(+')-')'9%-(Q"88"9($O"')#='-.<"&$%&'
)/("&#)($O"'(%'92/%&$#"'=$-$#8"9($%#?
UV-Treatment Plants
’85 ’86 ’87 ’88 ’89 ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05
facilities that offer no more than secondary treatment is expected to increase
to 36 million cubic meters per day in
2016 from 22 million cubic meters per
day in 2008, and total investment in
water reuse is forecast to rise to 9.8
billion cubic meters per year in 2016
from 5.1 billion cubic meters per year
in 2010 (see Figure 20).11
Advanced wastewater treatment
means that sewage can be viewed as
a resource with a number of possible
uses: (1) agricultural irrigation, because
wastewater flows are typically more
reliable than those from freshwater
sources and are rich in nutrients for
the cultivation of high-value crops;
(2) urban landscaping; (3) industrial
cooling and processing; and (4) indirect potable water production, such
as groundwater recharge.
The water-treatment process known
as ultraviolet (UV) disinfection is gaining popularity throughout the water
industry as a cost-effective and superior
alternative to chlorine disinfection.
Recent technological developments
within the UV sector have made treatment both affordable and simple. In this
purification process, exposure to UV
light effectively changes the DNA of any
harmful microbes, thus sterilizing the
cell. The $500 million UV-treatment
industry is expanding rapidly (see Figure
21). BCC Research estimates that the
market will grow at an annual rate of
approximately 40% during the next
five years. The Environmental Protection Agency now requires certain
drinking-water sources to undergo UV
disinfection because of its ability to
neutralize various parasitic diseases that
are impervious to chlorine treatment.
In 2012, New York City is expected to
break ground on the world’s largest UV
disinfection treatment facility.
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;E$
$.0,%)(+!%)-#5(+$&!"(/%0)#5((}(().*#$/#0(1233
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,-./%-(&)*#+!$#)!('.$$&!!##(s(!"#$%!&'(&)*#+!&),
ND7LO=!LI=U!$
There are currently two methods for
desalination: Either water can be boiled
and gradually evaporated in a process
known as thermal desalination, or it
can undergo a membrane-filtration
method known as reverse osmosis, in
which the water is pushed through a
fine membrane that separates the water
molecules from the salt ions. GWI says
that thermal desalination will continue
to be used in regions where energy is
inexpensive and plentiful, such as the
Middle East. The consulting firm also
estimates that investments in desalination plants with membrane technology
will grow to $4.7 billion in 2016 from
$3.3 billion in 2010—a 6% compound
annual growth rate versus just 1% for
thermal desalination (see Figure 22).
During the past several decades, the
desalination industry has had remarkable
success in lowering its costs through
technological innovation. In thermal
desalination, a large portion of recent
progress can be attributed to economies of scale. The membrane segment
of the desalination industry has utilized
technological advancements to create
energy-recovery devices and cheaper,
yet more efficient, membranes, which
have resulted in impressive cost reduction for desalinated water.
Figure 23 shows water prices for reverseosmosis projects, which are arranged
by contract date. The first eight bars on
the chart would be familiar to anyone
who goes to desalination conferences—
they are the most common illustration
of the falling cost of desalination. The
remaining bars appear to tell a different,
more complicated story. Innovation in
desalination technology is continuing.
As the cost of the desalination process
falls, other costs such as civil engineering
and site costs have a greater influence
on the overall cost of water. This is particularly true of desalination projects
on the California coast, where costs for
labor, permits, real estate and professional services are very high.
The desalination industry’s ability
to significantly drive down costs while
simultaneously bolstering its technology will translate into substantial future
growth. GWI predicts that contracted
desalination capacity will rise to 130
million cubic meters per day in 2016
from 68 million cubic meters per day
in 2009. The mounting effort to drive
down the cost of desalination has resulted
in the emergence of several promising
new technologies.
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Thermal Desalination Plants
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Forward Osmosis
Since water molecules naturally flow
from fresher solutions to saltier ones,
reverse osmosis uses pressure to force
water molecules to go against that tendency through membranes that filter the
water. In contrast, forward osmosis (FO)
uses a “draw solution” that is saltier than
seawater. Without need for any energy,
the water molecules in seawater flow
across a porous membrane and into the
draw solution, leaving the sea salt behind.
Because the process doesn’t require any
pumping, it generally consumes very
little energy. These compounds then
vaporize at lower temperatures than
those required for thermal desalination
(212ºF). Unlike reverse-osmosis treatment, FO does not need to be forced
through a membrane at high levels of
pressure, which translates into substantial cost savings; FO requires only 10%
as much electricity as reverse osmosis
and does not have to rely on the costly
pipes that are specially constructed to
tolerate high pressures.12
In 2007, researchers at Yale University built a pilot plant to demonstrate
an FO desalination process that uses
osmotic pressure, rather than hydraulic pressure or thermal evaporation,
to separate freshwater from seawater
or brackish water. In February 2009, a
company built around the research from
;R$
Yale announced that it had received $10
million in venture-capital funding to
commercialize its novel desalination
technique. The company’s solution
needs only 122ºF to burn off salts and
leave behind pure water rather than the
much higher temperatures required for
thermal desalination. Bloomberg Businessweek (March 10, 2011) reported that
the company plans to start taking orders
in late 2011.
Carbon Nanotubes
Leading chemical- and environmentalscience researchers are in the midst
of refining a desalination technology
that employs carbon nanotubes in the
membrane-distillation process. Carbon
nanotubes, which are essentially atomthin carbon sheets that have been shaped
into cylinders, can be immobilized in
membrane pores to construct a filtration system that is superior to typical
reverse-osmosis membranes in that
they are approximately 20 times more
water permeable and can treat water
at a relatively low temperature, higher
flow rate and higher salt concentration.
The September 2010 Journal of Physical
Chemistry reported that Professor Somenath Mitra of the New Jersey Institute of
Technology had developed a membrane
incorporating carbon nanotubes that
could lead to a faster and more energyefficient method of water desalination.
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Mitra’s new material reportedly results
in much greater vapor permeation while
keeping liquid water from clogging the
pores, and it allows for higher flow rates
while requiring lower temperatures. As
compared with a regular membrane,
it demonstrated the same level of salt
reduction at a temperature that was
cooler by 20ºC and at a flow rate that
was six times greater.
Biomimetic Membranes
Scientists at the University of New
Mexico and Sandia National Laboratories are working on revolutionizing
the desalination industry through the
creation of biomimetic membranes for
water-filtration treatment. Biomimetic
membranes seek to mimic the structure
and water-transport processes of living
cell membranes, which could provide an
incredibly efficient and natural filtration
system. According to the University of
New Mexico, “The technology uses an
atomic layer deposition (ALD) process,
a thin-film deposition technique on
an atomic scale that sequentially applies layers of chemicals to the surface
of a substrate to produce a thin film.
The nanoporous material has twice
the efficiency of an RO [reverse osmosis] membrane because it has high
salt rejection and improved water flux
(the rate at which water permeates
a membrane).”13
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A 2011 United Nations Educational,
Scientific and Cultural Organization study found that one-fifth of the
global water footprint (from 1996 to
1995) was related to production for
exports, largely agricultural, rather
than domestic consumption.14 Large
international virtual-water flows and
their associated national water savings
and external water dependencies highlight the point that the issue of local
water scarcity needs to be considered
from a global context.
Many nations save water resources
by importing products that are water
intensive and exporting those that are
less so (see Figure 24). This process can
imply global water savings if the flow
is from nations with high to low water
productivity. Between 1997 and 2001,
1,605 billion cubic meters per year would
have been required by the importing
countries if all imported agricultural
products were produced domestically;
however, these products were produced
with only 1,253 billion cubic meters
per year in the exporting countries.15
Nations are divided in their ability
to use science to support agricultural
productivity and food security. Developed
countries spend $2.16 on agricultural
research and development (R&D) for every
$100 of agricultural output, compared
with $0.55 in the developing countries.
Agricultural R&D spending in developing
countries grew to $4.4 billion in 2000
from $3.7 billion in 1991. Such spending was largely driven by Asia, which
represents 42% of total agricultural
R&D spending in developing nations
(China and India account for 18% and
10%, respectively). Despite Africa’s large
size, its share in R&D spending is 13%;
Latin America’s is 33%.16
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Figure 25 depicts the virtual-water
balance per country. The key for Figure 25
indicates which countries—and to what
degree—have a negative balance, or a net
virtual-water export, and which have a
positive balance, or net-water import. The
biggest virtual-water net exporters are in
North America and South America (US,
Canada, Brazil, Argentina), Southern Asia
(India, Pakistan, Indonesia, Thailand)
and Australia. The biggest virtual-water
net importers are North Africa and the
Middle East, Mexico, Europe, Japan and
South Korea.
The 2008 food crisis accelerated
farmland transactions (see Figure 26);
governments have moved into large-scale
agriculture in their expectation of gains
from food crops, biofuels and environmental
services. China, the Gulf States, Japan,
India, South Korea, Libya and Egypt are
purchasing farmland in Ethiopia, Mali,
Sudan, Madagascar and Mozambique
in Africa; the Philippines, Indonesia,
Laos, Thailand, Vietnam, Cambodia
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Germany
Switzerland
Russian Federation
Belgium
Norway
UK
Lithuania
Luxemburg
Ukraine
Austria
Italy
Portugal
China
Rep. Korea
Japan
Jordan
Iran
Israel Kuwait
Pakistan
Libya Egypt
Saudi UAE
India
Mali
Lao
Arabia
Vietnam
Sudan
Cambodia
Nigeria
Sierra Leone Ghana
Philippines
Ethiopia
Cameroon
Liberia
Malaysia
Kenya
Benin
Indonesia
D. R. Rwanda
New Guinea
Papua
Congo TanzaniaMalawi
Angola
Zambia
Madagascar
Canada
USA
Brazil
South
Africa
Argentina
Countries
Investing
Mozambique
Countries
Offering Land
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,-./%-(&)*#+!$#)!('.$$&!!##(s(!"#$%!&'(&)*#+!&),
and Pakistan in South Asia; Brazil and
Argentina in South America; and the
Ukraine in Eastern Europe.
Indian companies are buying overseas
land, primarily in Africa, to grow agricultural
products that can be exported to large
markets. Africa has 807 million hectares
of cultivable land, and 197 million hectares
are currently under cultivation. More
than 80 Indian companies have invested
$2.4 billion in purchasing plantations in
eastern Africa to grow food for India’s
domestic markets.17
China is also investing in agriculture
overseas. Northeast China’s Beidahuang
Group intends to enter into an agricultural joint venture with Argentina’s Rio
Negro Province. According to the Argentine government, China’s state-owned
farmland investment and development
;\$
company, which is China’s top grain
producer, is planting crops in the Patagonian province and paying low rent in
exchange for developing unused land.
The Beidahuang Group’s Argentina agricultural investment project will include
advanced irrigation, power-generation
facilities and port-infrastructure investments. Although Argentina has highquality land with an ideal climate, the
technology level is lacking. This synergy
of technical expertise from China and
land resources from Argentina makes for
a partnership that should significantly
benefit both parties involved.
L$N"&"'().+2$7,(0H
Water may turn out to be the critical
commodity story of the 21st century as
declining supply and increasing demand
$.0,%)(+!%)-#5(+$&!"(/%0)#5((}(().*#$/#0(1233
combine to create a “perfect storm.”
To address the challenges, the global
water industry is expected to undergo a
fundamental transformation. Businesses
will need to invest in new technologies, while utilities will need to devote
greater resources to water infrastructure.
Investment growth in the sector will
be affected by the changing financial
models in the municipal water sector, where budgetary constraints will
limit the role traditionally played by
municipalities. The key to profiting
from the growth in the sector will be
to understand the technological, climactic, governmental and population
trends affecting the water industry.
The winners will be those who can
grasp those trends and discover the
underlying opportunities.
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,-./%-(&)*#+!$#)!('.$$&!!##(s(!"#$%!&'(&)*#+!&),
D+%+(,"1. Lang, Heather, Jablanka
Uzelac, and Ankit Patel.
Global Water Market 2011.
Oxford, United Kingdom:
Media Analytics, Ltd., 2010.
2. Lang, Heather, Jablanka
Uzelac, and Ankit Patel.
Global Water Market 2011.
Oxford, United Kingdom:
Media Analytics, Ltd., 2010.
3. Lang, Heather, Jablanka
Uzelac, and Ankit Patel.
Global Water Market 2011.
Oxford, United Kingdom:
Media Analytics, Ltd., 2010.
4. Dai, Aiguo. "Drought
Under Global Warming: A
Review" Wiley Interdisciplinary Reviews: Climate
Change 2 (October 19, 2010):
45-65.
5. Overland, James E., John
E. Walsh, and Muyin Wang.
"Why Are Ice and Snow
Changing?" Global Outlook
for Ice and Snow (2007):
29-38.
6. "Projected Reduction in
Snow 2080-2100." UNEP/
GRID-Arendal Maps and
Graphics Library. June
2007. UNEP/GRID-Arendal. 10 Oct 2011 <http://
maps.grida.no/go/graphic/
projected-reduction-insnow-2080-2100>.
7. Lang, Heather, Jablanka
Uzelac, and Ankit Patel.
Global Water Market 2011.
Oxford, United Kingdom:
Media Analytics, Ltd., 2010.
8. Source: Alexander
Zehnder et al., “Water Issues : the Need for Action at
Different Levels,” Aquatic
Sciences, 2003.
;]$
9. Wen, Helen, and Ivy
Lu. China Water Utilities:
Brightening Outlook Thanks
to 12th Five-Year Plan.
Morgan Stanley Research,
November 5, 2010.
10. India Planning Commission (Government of
India). Eleventh Five Year
Plan. New Delhi: Oxford
University Press, 2008.
11. Lang, Heather, Jablanka
Uzelac, and Ankit Patel.
Global Water Market 2011.
Oxford, United Kingdom:
Media Analytics, Ltd., 2010.
16. Nellemann, C., MacDevette, M., Manders, T., Eickhout, B., Svihus, B., Prins, A.
G., Kaltenborn, B. P. (Eds).
The Environmental Food
Crisis– the Environment’s
Role in Averting Future Food
Crises. United Nations Environment Programme, GRIDArendal, February 2009.
17. Ramsurya, M.V. Indian Companies Buy Land
Abroad for Agricultural
Products. Economic Times.
Oct. 11, 2011 < http://farmlandgrab.org/10070>.
12. Bullis, Kevin. "A Cheaper
Way to Clean Water" MIT
Technology Review. Oct.
10, 2011 <http://www.
technologyreview.com/
energy/26916/page1/>.
13. Wentworth, Karen.
“New Membranes for
Water Purification Technology Receives R&D 100
Award” UNM Today. Oct.
10, 2011 < http://news.unm.
edu/2011/07/new-membranes-for-water-purification-technology-receivesrd-100-award/>.
14. Mekonnen, M.M., and
A.Y. Hoekstra. National Water Footprint Accounts: The
Green, Blue and Grey Water
Footprint of Production and
Consumption. UNESCOIHE (2011).
15. Chapagain, A.K., A.Y.
Hoekstra, and H.H.G.
Savenije. “Water Saving
Through International
Trade of Agricultural Products”. Hydrology and Earth
System Sciences (2006).
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