With 2006 quickly approaching, the staff of Water & Wastes Digest wanted to provide you with a brief report on the current state of the water/wastewater industry. WWD asked some of the industry’s top professionals—manufacturers, consultants and utility personnel—to gauge the health of the industry in 2005, as well as give their outlooks for next year. By encompassing various viewpoints on important issues affecting the industry, this article will help you better plan for 2006.
According to the professionals WWD interviewed, 2005 was a relatively successful year for the water/wastewater industry.
“The current state of the water/wastewater market is fair to good,” said Kevin Marsh, vice president of sales and marketing for Marsh-McBirney. “We just finished WEFTEC 2005, and it was one of the biggest ever. I think that speaks well for the overall health of the industry.”
Despite projections for continued growth at annual rates of 5 to 10%, most professionals are concerned about regulatory issues, aging infrastructure, high energy costs and an overall lack of funding.
“The state of the water/wastewater industry is good, and we believe it will continue to be good in 2006,” said Tom Seymour, director of sales and marketing for the Gorman-Rupp Co. “Although, there are two caveats to that answer: First, is the aging infrastructure of the water and wastewater industry. Many of the plants, pumps, pipes and controls are old, and capacity is a problem. Second, it is questionable whether the government will provide the funding to re-build these infrastructures. How both of those issues are addressed will go a long way toward determining the state of our industry in the coming years.”
In addition to these concerns, as the industry saw in 2005, natural disasters can impact both short- and long-term performance. Recovery and rebuilding efforts after hurricanes Katrina and Rita spurred unexpected activity in the market, but they have also caused some drawbacks, such as material and equipment price hikes.
Len C. Rodman, chairman, president and CEO of Black & Veatch, said he believes the market will remain steady, but added, “We do expect that some clients will delay projects as material and equipment prices increase to handle hurricane reconstruction efforts in the south.”
For most of the professionals WWD interviewed, the 2005 market performed as expected or slightly better.
“The domestic marketplace is a little better than I expected for 2005, but it is not surprising given the uptick in the economy,” said Douglas M. Owen, vice president and managing director for Malcolm Pirnie’s Municipal/Water Environment, Business Unit.
Market growth
Much of the water/wastewater industry’s current growth can be attributed to population increases and infrastructure upgrades, both of which will continue in the future.
“With population centers continuing to expand and aging infrastructure, water and wastewater should maintain the growth patterns being forecasted over the next 10 to 20 years,” said Michele LaNoue, CEO of Headworks, Inc. “Market growth is clearly being driven by population growth, particularly in areas of scarce water supplies,” added Malcolm Pirnie’s Owen. “Even areas that historically had adequate precipitation are experiencing broad swings in annual rainfall as a result of climate change.”
Both of these situations are creating increased demand for water/wastewater treatment equipment.
As the U.S. population increases, low interest loans have helped the water/wastewater industry grow as well, according to Gorman-Rupp’s Seymour. “If interest rates stay low, people will build new homes. If they build new homes, then they will need water/wastewater plants,” Seymour said. It is important that interest rates remain low because as they rise, companies and municipalities must shift their focus from new project development to debt management.
Obstacles to growth
Although the industry has experienced recent growth, sufficient funding is also needed to implement new projects and upgrade existing infrastructure. Of the industry professionals WWD interviewed, nearly all said they view funding as a major impediment to future growth.
“Water and wastewater needs over the next 20 years may total $500 billion to $1 trillion,” said Gene Schiller, deputy executive director of management services for Southwest Florida Water Management District. “The biggest obstacle to sustainable growth is limited availability of funding.” Other experts agree that with the ongoing war in Iraq, health care issues and the recent natural disasters, water infrastructure is not on the radar for major federal funding.
“The lack of sufficient public infrastructure funding remains a huge challenge,” Marsh said. “Frankly, I don’t think we can expect the federal government to do its part any time soon. That leaves it up to the local municipalities who have historically been reticent to increase water and sewer rates.”
Without adequate government assistance, municipalities will have to explore alternative funding options. Two of these options are increased rates and the use of federal private activity bonds (PABs).
“These bonds promote public-private partnerships that can develop more cost-effective projects while minimizing project risk to the ratepayer,” Schiller said. “Removing the financing cap for PABs would increase issuance of bonds to finance water infrastructure, help meet the growing public demand for water and wastewater services, and ensure compliance with federal environmental and public health laws.”
A positive note on the funding front, Gorman-Rupp’s Seymour said the Water Quality Financing Act (H.B. 1560) will allow for $20 billion over five years for the construction and repair of water and wastewater infrastructure.
Regulations
In addition to funding, regulatory issues were also a concern for many industry professionals in 2005.
“Under the current administration and Congress, the maintenance and improvement of the environment has not been a priority issue, and needed legislation as well as funding to oversight agencies has been lacking,” Headworks’ LaNoue said. “Until the public becomes more involved on these matters or the administration and congressional makeup changes, this problem is likely to continue.”
According to Joe Zuback, chief technology officer for USFilter, important potable water regulations in 2005 included the new arsenic rule of 10 ppb that takes effect in January 2006, and the Long Term 2 Enhanced Surface Water Treatment Rule, which will require additional treatment to reduce Cryptosporidium at higher risk water suppliers.
With regard to wastewater regulations, John F. Masters, director of sales for Danfoss Water & Wastewater, said, “The increased regulations for nutrient removal have forced many communities to look at ways to more efficiently treat wastewater. This, in many cases, requires more monitoring and automation to achieve these better efficiencies.”
Emerging technologies To address increasing populations and decreased funding, new technologies are emerging that offer smaller footprint and more cost-effective operation.
According to Black & Veatch’s Rodman, technological advances in the potable water treatment industry are reducing treatment costs and improving the quality of treated water. Some of the more important trends include: membrane filtration processes; desalination of brackish and sea water; high efficiency, small footprint solids capture processes; and alternative disinfectants, such as UV, ozone and chlorine dioxide.
Of these trends, the increased use of membranes is the most significant development.
“Membranes clearly are emerging as a technology that deserves evaluation in a lot of applications,” said Malcolm Pirnie’s Owen. “Improvements in membrane materials (higher rejection at lower transmembrane pressures) are driving a significant number of drinking water installations in the low-pressure membrane filtration market.”
Membrane use is also increasing in the wastewater treatment industry. “A major area of growth is in membrane wastewater plants,” said Fritz Egger, director of sales and marketing for JWC Environmental. “This is affecting other equipment requirements, such as fine screens (in some cases multi-stage screening) at the headworks of plants.”
In addition to membranes, there has been a general trend toward more cost-effective technology.
“Minimal to maintenance-free technology is taking hold,” Seymour said. “So are more efficient products, given the increasing cost of energy. There also will be more technology imposed on traditionally simple pieces of equipment. Municipalities and other organizations will require pumps with more electronic controls to maximize energy efficiency and minimize man-hours—two costs that are steadily rising.”
The need for energy-efficient technology has also increased use of variable frequency drives, said Danfoss’ Masters. The demand for this type of equipment will grow as more people discover the benefits of the technology in terms of energy savings and tighter control of plant processes.
Declining technologies
With the increased use of new technologies, some established technologies may see a decline in use. According to Malcolm Pirnie’s Owen, these include concrete and space-intensive processes, such as conventional sedimentation, as well as energy-dependent technologies. Owen added that this trend probably would drive improvements in the energy efficiency of UV disinfection.
Other technologies that may see decreased use are conventional clarification and filtration technologies, lime softening and ozonation, according to USFilter’s Zuback.
2006 Outlook
In 2006, many industry professionals expect to see continued growth in the water/wastewater industry. Some trends to watch include population growth in hard-to-service areas, acquisitions by multi-national companies and increased consideration of infrastructure security.
“The industry should look much the same in 2006 as 2005,” Zuback said. “Although, there is a risk that funding required to repair infrastructure damage caused by hurricanes Katrina and Rita will reduce funding available for new treatment facilities.”
According to Gorman-Rupp’s Seymour, population growth is likely to increase in difficult-to-service areas. “A trend that is sure to continue is the building and growth in areas that are less accessible,” Seymour said. Today, developers are building in scenic areas that are not conducive to wastewater treatment. This will create increased demand for higher head pumps.
Acquisitions will be another important trend in 2006. “A handful of large multi-national companies will continue to invest in this marketplace through acquisitions,” Marsh said. “There remains an attractive aura surrounding the water market, and these companies will continue to build a strong foundation of smaller water/wastewater companies and technologies.” Additionally, since 9/11, security has been a major issue, and that will continue in 2006.
“Security is an issue that is on the radar and gets a lot of attention, but there have not been many large infrastructure projects focused solely on security,” Owen said. “Security will continue to be considered as an important criterion in planning and construction of infrastructure.”
Future growth
Although it is hard to put an estimate on the long-term future of the water/wastewater industry, some experts offered WWD their final thoughts on the subject.
“If we look back on the growth spurt of new treatment plants in the 1980s, many of these plants are reaching their design life and are in need of upgrades or expansion,” Danfoss’ Masters said. “Also, if we look at the continued trend of new construction in outlying areas, I would anticipate an increased need for more pumping systems, water systems, and/or new treatment facilities.”
According to Malcolm Pirnie’s Owen, “Interagency agreements, preservation of watersheds, water rights issues, effluent trading, total water management, and water stakeholder equity, all will continue to drive a focus on how water is protected, shared, treated and distributed.” Gorman-Rupp’s Seymour added, “We believe the industry will see growth across the board from potable water to wastewater treatment. Clean drinking water is a concern most everyone sees every day. But municipalities must act as environmental stewards for wastewater treatment as well. It is as much of a community issue as any facing our industry.”
