The Race for Water Access and Investment: Navigating Scarce Resources
In recent years, water scarcity has emerged as one of the most pressing concerns of the global community. As climate change continues to affect weather patterns and population growth drives up demand for fresh water, the need for sustainable water management has become more urgent than ever before. This article explores the challenges and opportunities presented by the growing water crisis, highlighting key strategies for investors, entrepreneurs, and policymakers looking to navigate this complex and evolving landscape.
The Problem of Water Scarcity: A Tipping Point for Spanish Strawberries
Spanish strawberries have long been a springtime treat for Northern Europeans, but as the demand for this crop has grown, so too has the strain on local water resources. Illegal abstraction of water for agriculture has dried up Andalusian wetlands, leading German activists to call for a boycott of “drought strawberries.” Meanwhile, climate change and unprecedented heat waves have brought lingering drought to Spain, exacerbating water stress across the country.
The Coming Decades: Water Scarcity as a Defining Feature
As demand for fresh water continues to increase, driven by population growth and economic development, water scarcity is set to become a defining feature of the coming decades. According to a study by McKinsey, the demand for water will be 40% higher than the supply by 2030. This sobering statistic underlines the importance of new investments and innovations in water technology, which will play a critical role in meeting the growing demand for fresh water.
Investing in Water Technologies: Opportunities and Risks
One of the most pressing challenges facing investors is how to allocate capital to water technologies that are effective, sustainable, and cost-efficient. According to analysts, water-savings technologies, such as drip irrigation, represent the lowest-hanging fruit on the investment curve. Agriculture, which accounts for 70% of water consumed globally, is a particularly promising area for investment, as new drought-resistant crops and innovative irrigation systems can help to conserve water and improve yields.
Desalination: A Growing Industry
Desalination is another area of water technology that is rapidly gaining traction among investors and entrepreneurs. Over the past 15 years, the cost of producing fresh water from seawater has decreased from $1.50 to $0.50 per cubic foot, with costs expected to fall further as renewables become cheaper. As such, desalination is becoming an increasingly viable option for water-stressed coastal areas, with Saudi Arabia’s ACWA Power having built the world’s largest plant in Abu Dhabi.
Opportunities for Water-Tech Entrepreneurs
Beyond desalination and water-savings technologies, there are also ample opportunities for water-tech entrepreneurs to develop new and innovative solutions for managing scarce resources. From water treatment and recycling to advanced data analytics and machine learning, there is a vast landscape of potential innovation waiting to be explored. Investors who are able to identify promising startups and incubate new technologies stand to reap significant rewards, but success will depend on a multifaceted approach that is tailored to local conditions and takes a long-term view of sustainability.
The Role of Government Grants and Public Policy
Finally, it is worth noting that government grants and public policy also have a critical role to play in addressing the challenge of water scarcity. In many cases, the poorest farmers and regions will require additional support and funding in order to adopt new water technologies and adapt to changing conditions. Moreover, policy decisions around water access, usage, and pricing will have a profound impact on the ability of investors and entrepreneurs to develop and deploy innovative solutions. As such, it is essential that policymakers take a proactive and forward-looking approach to water management, balancing economic growth with environmental sustainability.
The Bottom Line: A Critical Challenge for the Global Community
Addressing the challenge of water scarcity will require a multifaceted and coordinated approach from all stakeholders, including governments, investors, entrepreneurs, and civil society. While the road ahead will undoubtedly be challenging, the opportunities presented by this growing crisis are vast and varied. By investing in sustainable water technologies, innovating new solutions, and prioritizing long-term sustainability over short-term profits, it is possible to build a world in which everyone has access to the fresh water they need to thrive.
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Sources:
– Financial Times (https://www.ft.com/content/2081f8af-3776-43d5-bad8-be8d0f406886)
– McKinsey (https://www.mckinsey.com/business-functions/sustainability/our-insights/2030-water-resources-group-challenges-and-opportunities-for-water-scarcity#)
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Spanish strawberries are a spring treat for Northern Europeans. They are also a tipping point in a larger race for access to dwindling water resources. German activists call for a boycott of ‘drought strawberries’. Illegal abstraction of water for this crop has dried up a once thriving Andalusian wetland.
Water scarcity will be a defining feature of the coming decades, Lex believes. This will create new opportunities and new risks for investors.
The demand for fresh water is increasing in tandem with population and prosperity. Climate change is reducing rainfall. As water stress across Europe has eased, Spain has been particularly hard hit: this April was the hottest and driest on record, prolonging a lingering drought.
By 2030, according to a study by the McKinsey consultancy firm, the demand for water will be 40% higher than the supply. Closing this gap will require investment in three major water technologies.
Water savings are lowest on the cost curve. It is especially important in agriculture, which accounts for 70% of water consumed globally. Some companies, such as Netafim in Israel, focus on drip irrigation. Others are developing drought tolerant crops. Government grants may be needed to finance adaptation by the poorest farmers.
The next step is technologies for water treatment and reuse. Water scarcity poses an existential threat to companies such as mines that make intensive use of it. Unless they can create closed-loop water systems, they risk losing their licenses to operate. This creates opportunities for water-tech entrepreneurs. The first water tech unicornGradiant, has devised new ways to purify industrial wastewater.
Further up the water technology cost curve is desalination. This uses technologies similar to purification plants but separates smaller molecules. Over the past 15 years, the cost of producing fresh water from seawater has decreased from $1.50 to $0.50 per cubic foot. It will fall further as renewables become even cheaper. This will make desalination a real option for water-stressed coastal areas.
Saudi Arabia’s ACWA Power has built the world’s largest plant in Abu Dhabi. Jefferies, a broker, says a number of companies offer exposure to the sector, including Sweden’s Azelio AB and Japan’s Hitachi Zosen Corporation.
Big data projects and machine learning can help optimize all three types of technology. US-based Xylem, for example, sells sensor technologies, smart meters and data analytics for underground infrastructure.
In the past, the adoption of water technology has proceeded at a glacial pace. The recent cycle of droughts may finally encourage the flow of investment.
https://www.ft.com/content/52ae4368-73d9-494a-9c23-a86076459117
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