Jan 31, 2003

Point-of-Use Reverse Osmosis

Looking for Answers in 2003 and Beyond

As the residential point-of-use (POU) reverse osmosis (RO)
industry approaches its 35th anniversary, it is time for a reality check on the
industry's progress to date as well as a look ahead to new technologies or
improvements that the industry may introduce for POU RO systems in 2003.

A Snapshot of 2002

Despite the red-hot market for new homes in the United
States, POU RO sales in 2002 appear, at best flat and, at worst, down by 11 percent
or a total of 181,000 in 2002 versus 204,000 in 2001, according to the November
2002 Water Quality Association's (WQA's) Reverse Osmosis Drinking Water
Shipments in the United States report. These numbers are reported by 15 of the
largest U.S. makers of POU systems for sale only in the U.S. market. Keep in
mind these numbers do not include those systems made by POU assemblers or those
who engage in the assembly/direct sell to consumers and do not include all of
the suppliers in the retail, or "big box," marketplaces. Taking these
twists into consideration, we could safely add 100,000 to the 2002 number to
date and have a total U.S. unit sales volume of 280,000, which means that this
year's sales equal just about 1 percent of the total population of the United
States. Another way to look at this is that homebuilders are reporting that
990K new homes were built this year versus the 280,000 POU RO units sold--a
total of approximately 28.8 percent market share--if every POU RO sold was sold
through the new home market exclusively. That number--29 percent--sounds much
better than the 11 percent loss WQA reported. Too bad this number is not
useable since a significant share of the RO units sold in 2002 have continued
to be sold into existing homes or as replacements.

Take a look at another familiar kitchen appliance:
refrigerators. According to Appliance Magazine, total 2002 sales year to date
(YTD) on Sept. 20, 2002, stood at 9.3 million versus 8.7 million in 2001 for an
increase of 6.80 percent. Have you ever wondered why the refrigerator makers
appeared to rapidly add filters to their product lines once one manufacturer
did just that? Using just half of the YTD September 2002 numbers (4.65 million
refrigerator units sold) those replacement filter sales, based on an average
retail selling price per unit of $30, would yield $139.5 million dollars in
replacement filter sales in just six months and a total of $279 million if the
filters are exchanged at the semiannual rate as recommended by the refrigerator
makers. These sales numbers represent only a small part of the potential
revenue that these filters can generate. The offering of filtered water has
become a standard feature for most refrigerator manufacturers for approximately
three years, and now they are on at least 85 percent of the brands offered in
the United States. Further, no refrigerator maker charges substantially more
for these systems, but rather has invested in increasing the sophistication
level of the filter monitoring operations, which of course leads to consumers
becoming more mindful of when filter changes are required as well as insuring
the recurring revenue for the refrigerator and filter maker. Is there something
wrong here? Absolutely not. It is the perfect example of a "win-win"
approach to water quality improvement--the consumer gets better tasting water
at little or no additional up front cost, the refrigerator maker generates a
revenue stream and, even more importantly, maintainS close ties to its customer
base for the potentially beneficial marketing programs that target other home
appliance improvements and/or programs.

How does POU compare to point-of-entry (POE)? Again,
referring to the WQA, RO unit shipments are down 11.4 percent in 2002, while,
according to Appliance Magazine's September 2002 shipment numbers, residential
water softener sales were up for the year with a total of 738,000 units shipped
versus 690,000 in 2001, for an overall improvement of 6.90 percent increase for
2002. It prompts the question, why are POU RO sales decreasing while water
softener sales increase, especially since the notion that drinking water is
accepted universally as a requirement for good health? While the answer may
vary region to region, the bottom line is that while consumers may understand all
of the various POU technologies such as filtration, adsorption, distillation or
reverse osmosis they simply are not buying RO devices. Perhaps the answer is
simpler than we can believe: Consumers remain baffled by the myriad of choices
and price points the industry offers and choose to bypass POU RO because they
cannot see or understand the value of POU RO ownership.

Looking Ahead

So what can we expect in 2003? The answer appears to be
technology. Right now the POU RO industry appears to be embracing new
approaches to how the next generation of home RO systems will look, operate and
be maintained as a method to stimulate stale sales numbers. Here is a roundup
of the products vying for "Most Interesting in 2003." Their
technologies are considered the most likely to be presented by POU RO
manufacturers at the March 2003 WQA Convention and Trade Show in Las Vegas.
(See "WQA PreShow," page 18.)

Lower- and zero-discharge systems. The basic design of a POU RO has been prefilter,
membrane product water to storage tank, and then from tank through postfilter
and out of the faucet. This system also uses hydraulic feed water shut-off
valve, which will stop the system from processing any water when the storage
tank is full. This design remains as the most commonly used configuration even
today--unchanged for three decades. Recognized as simple, efficient and
time-proven, this design has some limitations. The latest twist on this design
premise is low- or no-waste POU RO systems.

While low- and no-waste systems have been available for
quite a while in some form or another for commercial applications, bringing
this concept into the home market has never reached the level as the
"traditional" POU RO. In the '70s, Layton Manufacturing had such a
system that installed "split-stream" style in the feed water, and the
effluent from the membrane was "flushed away" into the home's general
use water. The newer version incorporates a pump so that the membrane rinse
water from the device is discharged into the hot water distribution piping at
one pound per square inch greater than the hot water piping pressure. The
manufacturer also makes retrofit kits available, according to the information
on the IAPMO website. While the advantages of such a closed-loop system in more
arid regions are self-explanatory, a consideration for use of such a system
would be that the concentration of organic compounds contained in the membrane
effluent water must not exceed the U.S. Environmental Protection Agency (EPA)
drinking water requirements. This would translate to a problem if you have POU
RO on an application where a contaminant such as nitrate when discharged from
the membrane effluent flow exceeds the maximum contaminant level (MCL) as set
by EPA.

Also available this year are the "non-pressurized"
storage tank systems. These units will have an atmospheric tank or, in some
cases, a bag that operates in conjunction with a delivery pump. Such systems
offer high quality water, faster storage tank refill times and lower overall
recovery rates by reducing the back pressure on the membrane caused by using a
pressurized storage tank. Several companies have systems in production or soon
will have systems available. Expect to see some creative packaging with these
units as they can be arranged around or in box, taking up less space and
allowing for some non-traditional installation locations as well as fewer
external connections. In addition, these units can offer a solution to the
problem of feed water pressure to the multiple locations and/or those applications
where the POU RO must supply a product water at a minimum inlet pressure to
another water-using appliance such an icemaker.

On-demand. No, not a
way to enjoy first-run movies at home, but RO systems that "process
water" only when the consumer pushes down on the faucet or when there is
demand for the product such as to refill an ice machine. Among the first
commercially viable versions of these types of units came from the Swedish
company Electrolux. These on-demand systems feature a small commercial-sized
element, which is pressurized by a positive displacement pump. These systems
have proven that this type of technology rapidly can produce high quantities
and maintain high-quality water while operating at a reduced time sequence,
thus saving time and water.

Other OEMs offered units utilizing versions of this
technology at the 2002 WQA Show in New Orleans, but at least one manufacturer
has plans to unveil an on-demand system without a pump. Such a system would
provide sufficient product water flow to meet the needs of the average consumer
while "operating," or processing tap water into RO permeate, only as
long as the source demands. The primary advantages of such an on-demand system
operating at line pressure would be the dual reduction of both cost because a
pump is not required as well as energy consumption from not having to run a
high-pressure booster pump and motor while still offering drinking water to
several locations within a home. Still to be determined is the flow and
pressure such systems would deliver at the faucet.

Proprietary product models will continue to grow. This unit
features special connection on the replacement filters and membrane elements
that only the original equipment manufacturer's (OEM's) replacements will fit.
These types of units are not new, having been available since the mid-1980s. It
has become clear that such units offer the user and seller distinct advantages.
The consumer will have access to easy-to-change and reliable filters that he
may choose to service on his own. This concept of controllable replacement is
important. Right now, systems with standard component filters can be fitted
with any number of replacement cartridges including those not recommended by
the OEM. OEMs have concerns that systems that use these standard components
place the OEM at risk if the end user uses inferior or unreliable cartridges.
Another emerging trend is labor. Having easy-to-use, "no-brainer"
filter exchanges increases the available labor pool by opening the door for
less technical personnel. Finally, there is no denying that the revenue stream
from a dedicated filter base is very desirable for the dealer and the OEMs. It
is said that rarely, if ever, has a propriety system maker gone out of business
or turned its back on those loyal system users.

Membrane element selection options will grow. While we see
the flux, or gallon per day process capacities, of standard residential
membrane elements grow to completely unbelievable ranges (up to 150 gallons per
day), expect to see the availability of "designer total dissolved solids
(TDS) rejection" elements. These elements can be designed with selective
TDS rejection and provide a customer's desired overall TDS rejection quality to
match the feed water quality needs of a specialty application.

Challenges in 2003

With RO membrane element pricing at an all time low, why has
the industry seemingly run out of steam? There are no easy answers. The
industry must look at the facts and then determine for itself--What is the
future here? But one thing is clear: while the industry can and does rise to
the technological challenges of POU RO improvement, it has failed to reach the
consumer with a succinct and clear message about the value of RO POU drinking
water systems.

About the author

Tony Pagliaro is marketing manager at Nimbus Water Systems.