As the New Year Unfolds, Unveiling Trends, Challenges, and Opportunities – Bluefield’s In-Depth Analysis Forecasts the Path Ahead for the Evolving Water Sector
Approaching the dawn of a new year, the water industry stands once again at the intersection of tradition and transformation. This pivotal moment in time signifies a crucial juncture for stakeholders throughout the water value chain. In recent times, water has commanded an unprecedented level of attention, with the industry grappling with long-standing challenges.
Reflecting on the events of 2023, several noteworthy developments came to the fore:
- Water quality assumed center stage, marked by regulatory advancements regarding PFAS. At Bluefield, our team of analysts adjusted our PFAS forecast to nearly US$13 billion in anticipation of new Maximum Contaminant Levels (MCLs) and legal settlements with chemical companies. Simultaneously, initiatives for lead service line replacements gained significant traction, especially with the proposed Lead and Copper Rule Improvements (LCRI), which aimed at compelling water systems to replace 100% of lead service lines within a decade.
- Government funding surged into the water sector through the Infrastructure Investment and Jobs Act (IIJA) and Europe Recovery Funds in 2023. Although the rollout was gradual, the repercussions of IIJA funds continue to be top-of-mind for leading water companies.
- Deal flow in 2023 witnessed a slight dip from the previous year. Nevertheless, noteworthy transactions involved publicly traded water companies like H20 Innovation and Logistec transitioning into private hands. Additionally, decentralized water treatment firms like Cambrian and Natural System Utilities, along with the emergence of the “water unicorn” Gradiant, garnered attention.
- Water prominently featured in key climate conferences such as the UN Water Conference in New York and COP28 in Dubai. Inflationary pressures and supply chain constraints, stemming from geopolitical issues like those involving China and Russia-Ukraine, initially raised market concerns but appear to be subsiding.
As a market research company, our responsibility is to analyze the past and current data to navigate the future. Already in 2024, notable developments include Badger Meter’s acquisition of Trimble’s water monitoring and telemetry business, prompting speculation about potential similar moves by other metering companies and the possibility of increased consolidation in the utility sector. The impact of recessionary concerns on company strategies remains a key question.
Looking ahead into the new year, we present several predictions:
- Water will play a central role in climate discussions focusing on resiliency, stormwater management, and alternative water supplies. The increased frequency of extreme weather events documented by the National Centers for Environmental Information (NCEI) in 2023 is driving businesses to prioritize infrastructure capable of withstanding such events. Innovative solutions, from advanced drainage systems to water storage facilities, will be deployed to ensure resilience and safeguard corporate bottom lines.
- Significant investment will flow into digital water technologies, particularly those impacting consumers, such as real-time monitoring and leakage management. The global digital water spend is projected to scale at an 8.8% Compound Annual Growth Rate (CAGR), reaching US$55.2 billion by 2030. Smart meters, sensors, and IoT technologies will usher in a new era of water management, enhancing efficiency and promoting sustainable approaches.
- Europe will lead the way in circular economy practices, PFAS discussions, and water reuse. Droughts in Europe will drive investments in water reuse, sustainability, and circular economy initiatives. Technologies guaranteeing both water supplies and energy efficiencies will see increased investment, alongside the emergence of smaller-scale, decentralized water treatment and recycling systems.
- Industrial water usage, spanning sectors from semiconductors to food and beverage, will experience significant growth. The rise of clean fuels and energy, driven by electric vehicles and hydrogen, will create opportunities for water providers. Corporates will integrate water into their Environmental, Social, and Governance (ESG) strategies, driving further investment.
- The issue of “forever chemicals” in drinking water, particularly PFAS, will remain a top priority. With pending guidance in 2024, the U.S. Environmental Protection Agency is expected to finalize proposed Maximum Contaminant Levels (MCLs), addressing concerns raised by public comments. Managing the complexities of wastewater and biosolid management in relation to these contaminants will continue to be a challenge.
- As we step into 2024, it is evident that water is not just a topical issue; it is a critical solution and change agent. The industry must discard the “out of sight, out of mind” approach regarding water infrastructure needs and priorities, especially in the context of global climate and carbon mitigation strategies. At Bluefield, we are committed to supporting our clients’ water strategies in the coming year and beyond.