This year, 800 companies from 20 countries applied for the Artemis Review, and 125 were selected for full examination.

Through this analysis, we get an early view of the tech companies that will emerge in the next few years.  The Artemis Review has not missed any of the companies that have emerged in water tech.  Several of the most promising companies have won major projects with influential municipal and industrial customers and have been generating results for months or even years.  Over the next few months, we expect that the 2012 companies will be publicizing successes that will position them as the early leaders in water tech.

Here is a view of the market that is just emerging from under the radar.

What we are seeing
Let’s start with what we are not seeing.  During the 2012 Artemis Top 50, we didn’t see membranes or nanotechnology, with the exception of one of the shining stars of water tech, NanoH2O.  Innovation in these areas seems to require so much research and development that only the large corporations can support them.

Emerging Trends
Waste water mining:  In this first wave of IP-intensive solutions from independent companies, start-ups offering resource recovery solutions take the forefront.

It’s becoming more expensive to dispose of the “garbage” of water treatment.  Many places, like China or Switzerland, are down to a small amount of precious space to dispose of waste. Harvesting useful products from waste cuts the cost of disposal, generates valuable materials, and makes water treatment cheaper. The early leaders are extracting phosphorus, energy, lithium and hydrochloric acid (HCl).  (See a future post for more detail.)

These technologies are valuable for a diverse group of industries.  The Artemis Review shows the value of deep understanding of different industries. If the leading water executives on the Artemis jury look at one of these solutions in depth, they often identify situations where they can provide dramatic benefits.

Alternatives to filtering and chemicals
Today, filtering and chemical treatment are the dominant approaches to water treatment around the world.  Rather than making small improvements to these processes, some of the most promising start-ups have developed approaches that replace or complement filtering and chemicals.

For example,

• New Sky Energy’s selective ion recovery system isolates and solidifies the salts in water treatment waste streams to harvest useful chemicals and simplify water treatment.
• Atlantis’ capacitive deionization removes salts and minerals by applying an electric field between two electrodes.
• Saltworks—concentrates the salts in waste water and uses their chemistry to drive an electrochemical device to treat the water

Energy Efficiency
Saving energy is another sweet spot for innovation.  Water treatment accounts for a large chunk of industrial operations.  As saving energy has gained focus, big water users are looking to new, but proven approaches to change the picture.

Some sweet spots are

• Desalination: Desalitech– a continuous, closed-circuit desalination process that operates on the basis of relatively low average feed pressures
• Water treatment facilities: Derceto in optimizing the overall management of water treatment plants

Smart Grid
As our centralized water system breaks down, making the system smarter with sensors and network management tools provides dramatic benefits:

• Takadu—predicting pipe break down to drive pipe and pump repair
• Hydropoint—water use management in the built environment
• Aquacue–wirelessly linked cloud-based information management of water throughout the delivery system

The Artemis Top 50 Review goes beyond looking at technologies to gauge the potential for the start-up companies behind them.  The structure of each market segment is also critical for the success of a young water company.

The tech trends above reflect the future of the water business.  Watch for these companies, and the rest on the 2012 Artemis Top 50, to emerge as the leaders in a new wave of tech success stories.

But early-stage investments in water technology start-ups to date have not reflected that promise.  Recent analysis by Bessemer Venture Partners showed that of 183 firms that had invested in water, all but 31 did not make an additional investment, and only seven made more than two investments.  Historically, water has accounted for only 2-5% of overall cleantech investments. The few water tech investments that have been made have yet to yield venture quality returns.

The best venture investments were made when technology markets have looked as water does today.  Water services are highly regulated.  The business of water is dominated by a few behemoths.  Major customers choose the most well proven solutions and work with the same service firms that they have worked with for decades.

Similarly, twenty years ago telephony meant a landline, not a diverse industry of wide-ranging options, from cellular and Voice Over IP to satellite.  Before the communications revolution, “messaging” was done by fax or the US Postal Service.

The trick for early-stage investors is to identify the moment in which technology can bring about a new era of water management.

In five years, venture capital history will tell of a few visionary investors who identified the right technology at the right time in the market.  The best investors are asking two questions to define whether now is the time for the future water tech leaders to emerge, and where the critical opportunities lie to drive start-up success.

1)    What recent scientific or engineering breakthroughs have redefined how well a technology solution can tackle critical problems?

Some examples are new polymers for selective absorption of pathogens, hydro fracturing, which has made significant domestic shale gas reserves economical for drilling, new chemical/pathogen detection capabilities that are driving to new regulation.

2) What market forces are changing to raise the value of a tech solution?

In the past few months, water scarcity, pollution and infrastructure breakdown have been forcing the most conservative water users to seek out innovative approaches.

Even Texas is limiting the amount of water for drilling for oil, or “Texas Tea” so that it provide water for its citizens.

In spite of its importance, water tech has been neglected in the growth of green technologies like renewable energy, waste management, and energy storage. Several other greentech ventures increased in revenue and interest, gaining the confidence of their early investors. Water tech has not received the same well-deserved attention.

Today, it has been harder to cultivate renewed financial interest in promising watertech company after the hype of 2005 and 2005. However, even in the face of this lack of confidence from investors, the market pull is building for dramatic solutions to water management issues as the importance of water tech is finally acknowledged.

In May of 2011,  Artemis Water Strategy co-sponsored the Water Leadership Summit in Toronto, in partnership with the government of Ontario, XPV Capital, and the Cleantech Group in response to this exciting new interest in water tech. Three hundred of the world’s leading water tech investors gathered to meet the 2011 Artemis Top 50 and speak with executives from trail-blazers in the water industry. The conference brought together leaders in the field, encouraged projects and investments, and helped forge promising partnerships. The opportunities fostered and developed at the Artemis Top 50 will make water tech the exciting investment opportunity it deserves to be.

Going forward,  Artemis Water Strategy is developing seminars that combine case studies with hands-on discussion. Small groups will work together to devise strategies that take on the challenges of getting to market and driving revenue. Senior executives and water tech investors will have a chance to develop relationships in an intimate, challenging environment.

Participants will have the rare opportunity to step back from day-to-day responsibilities and acquire the knowledge and skills that define today’s most effective executives, such as:
A heightened awareness of the extraordinary financial conditions and external forces shaping the water industry right now
A portfolio of leadership skills and the most effective techniques with which to approach each unique set of opportunities
A process of self-assessment that improves performance as a senior leader
Fresh strategic frameworks and tools to stay ahead of the competition
New levels of confidence that translate into effective decision making throughout an organization
An invaluable network of global peers for exploring challenges and opportunities throughout a career
Watch our website to learn more as we develop our program!

Bringing forth the “gee-whiz” water innovations of today and making them the iPhones of the future has a lot to do with rigorous testing with authoritative frameworks for evaluating new approaches.

The US National Science Foundation has funded a new Engineering Research Center (ERC) focused around water with a ten-year, $40M grant.  It is the first NSF ERC focused around water, and represents a significant amount of the overall federal funding for research in water.  Based on the structure of the ERC program, ReNUWIt might prove pivotal in bringing the innovative solutions to wide scale use.

Historically, the NSF has served a pivotal role in developing the innovations that have defined American life—from the Internet to robotics.  The NSF is charged with supporting “high-risk, high pay-off” ideas, novel collaborations and numerous projects that may seem like science fiction today, but which the public will take for granted tomorrow.

The Engineering Research Centers (ERCs) promote partnerships among researchers in different disciplines and between industry and universities.  Reinventing Urban Water Infrastructure brings together 27 of the leading water engineering services and water equipment companies, including Bechtel Corporation, Carollo Engineers, CH2M Hill, IBM, Kennedy/Jenks Consultants, Malcolm Pirnie and Veolia.

Artemis Water Strategy serves as the Innovation Partner for the project. Bringing forth the “gee-whiz” water innovations of today and making them the iPhones of the future has a lot to do with rigorous testing with authoritative frameworks for evaluating new approaches.

Bringing forth the “gee-whiz” water innovations of today and making them the iPhones of the future has a lot to do with rigorous testing with authoritative frameworks for evaluating new appraoches.

What is holding back the most promising water tech companies?  Validation.  Water needs rigorous, well-charted validation testing in order to get to the wide-scale market faster. While you might be cranky if the firewall software that you put on your computer doesn’t work, you might die if a water management solution doesn’t perform.  Truly innovative solutions require an entirely new framework for evaluating their performance.  This NSF ERC brings together leading industrial corporations, utilities and academics who can propose the frameworks for validation of new water management approaches.

Truly innovative solutions require an entirely new framework for evaluating their performance.  This NSF ERC brings together leading industrial corporations, utilities and academics who can propose the frameworks for validation of new water management approaches.

Here at  Artemis Water Strategy, we are tracking almost 1000 venture investment worthy companies that have developed IP-intensive water management solutions.  There is plenty of innovation.

As the Innovation Partner for ReNUWIt,  Artemis Water Strategy is responsible for developing the ERC’s strategic plan and research to bring its innovation into the market.  These innovations will provide a public good and will also drive economic development and create jobs.

Artemis is advising on how innovation emerging from the center might best be tested to address the concerns of the leading water managers who will pioneer use of the systems. Artemis provides the connection for the ERC to the venture capital community and to young start-up water tech companies.

Where do you see models for validating water tech?

By YULIYA CHERNOVA

Joe Duty
BY THE TRUCKLOAD With fracking’s growth, tankers unloading wastewater keep a Texas recycling site busy

The growing volume of dirty water produced in shale-gas drilling has triggered a gold rush among water-treatment companies.

Energy companies increasingly are drilling for natural gas using hydraulic fracturing, or fracking. In this process, water mixed with sand and chemicals is pumped into a well under high pressure; the mixture fractures the rock, allowing the gas to escape. Huge amounts of water are used, and about 10% to 40% of it emerges after a frack job, laced with a variety of contaminants.

Even as the volume of dirty water grows, the traditional methods of disposal are narrowing. Several states are considering or have recently imposed limits on wastewater disposal underground or in streams. Meanwhile, record drought in some drilling areas is making access to fresh water for drilling more difficult, costly and unpopular.

The net result: “For the first time there’s a strong driver for technology” to clean up the wastewater from mines so it can be reused, says Laura Shenkar, founder of  Artemis Water Strategy, a water-technology consulting firm. Dozens of water-treatment companies have started up in the past year or so, and many of the more established companies are adapting their techniques for use in the shale-gas industry. How many of those companies the market can support remains to be seen.

Plenty of Options

Companies are using several different approaches to shale-gas wastewater treatment.

Ecosphere Technologies Inc., based in Stuart, Fla., is one of the dominant providers of water treatment for the shale-gas industry, according to Lux Research, a technology research and consulting firm. The company’s technology avoids the use of chemicals typically employed to treat wastewater.

Ecosphere’s process forces dirty water through pipes where ozone breaks down contaminants with the help of sound waves, electrically charged particles and changes in pressure. No waste is created in the process, because while the technology renders contaminants harmless it doesn’t filter anything out.

Another strong competitor for new business, according to Lux analyst Brent Giles, is WaterTectonics Inc., based in Everett, Wash. The company uses a process called electric coagulation, in which an electric charge forces contaminant particles into clumps that can be removed after they either rise to the surface of the water or sink to the bottom. The process avoids the use of chemicals, but it does produce waste that has to be disposed of.

Another company, Altela Inc., based in Albuquerque, N.M., earned a spot on Artemis Project’s 2011 list of the 50 most innovative water-technology companies in the U.S. Its technology mimics rainmaking. Wastewater is heated to the point of evaporation, which produces clean water in the form of vapor, leaving contaminant particles behind. The vapor is then condensed back into liquid form.

The basic process, called thermal distillation, isn’t new, but Altela has found a way to make it more efficient, by capturing the heat generated by condensation and using it for evaporation. Ned Godshall, the company’s chief executive, says Altela’s method uses a third of the energy typically required for conventional thermal distillation.

Do It Yourself

One potential drag on the use of all these technologies: Some drillers have started to simply reuse their wastewater without fully treating it. But it isn’t clear how much of a factor that will be. Many technology companies and some researchers argue that there is a limit to such recycling because it doesn’t clean the water enough for it to be used repeatedly and still be effective. The particles in dirty water can damage equipment and block the release of gas from the shale.

“When I learned in early 2010 that they were going to recycle, I thought they were going to do a real heavy-duty treatment” before reusing the water, says John Veil, who analyzed water treatment for the oil and gas industry for many years at the Argonne National Laboratory, and now does so at his own consulting firm. “They are not. All they are doing is getting out the big sand grains in a [filtering] process as simple as pouring the water through pantyhose.”

Ms. Chernova is a special writer for Dow Jones VentureWire in New York. She can be reached at yuliya.chernova@dowjones.com.

But the big surprises that we have been expecting—burst water mains that close huge areas of metropolitan offices, water rationing as a result of depleted reservoirs – have not occurred as we might have expected.  The average age of pipes in the US is over 80 years (for equipment with a 50-year life span) and the EPA has identified a $335 Billion gap in our investment in water infrastructure.  Still few symptoms of these crises have been heard above the noise of our daily lives.

Not surprisingly, we haven’t seen the movement that we would have expected from corporations to address the concerns of their biggest investors.  When water is cheap and abundant, why spend precious time and budget to increasingly implement active water management in their operations?

In  Artemis Water Strategy’s work with corporations, we are seeing a small elite group of leaders emerge from a variety of industries.  Water management matters today, and now is the time to develop water management best practices before the water crises to come.

The quiet leaders in the blue revolution in business understand that agility to adapt to thirstier times in the future will be a competitive advantage.

The most promising water tech companies are making themselves part of this quiet “blue business revolution.”   While innovative water tech products often must first prove themselves in pilot projects at utilities, the speed with which they build their presence in business operations determines how well they realize their potential.

Business has served as the gateway to the full-scale market for any new wave of technology.  When business adopts a technology as standard in its operations—from the personal computer to the cell phone, it creates the scale of orders that drive down price per unit and force tech companies to compete to perfect a rugged, user-friendly device.

Artemis Water Strategy believes water technology has the potential to gain the scale that cellular phones or personal computers have reached today.

Efficient desalination can utilize alternative energy, like these Danish windmills, thus relying on the ocean twice. / Photo: andjohan on Flickr

The most common question I field when I mention desalination is, “Doesn’t that take a lot of energy?”

The truth is, yes, it does. That’s why you’ll not hear me advocate for desalination without strongly insisting on complementary conservation.

We must redouble our conservation efforts by upgrading infrastructure intelligently and in no way excuse wasteful water practices by pointing to the plentiful, historical ingredients of desalination: oceans of water and oceans of coal.

Each barrel of freshwater extracted from the ocean has costs, so we should use the water as efficiently as possible, recycling it and then remediating it into the water cycle.

Yet, conservation alone isn’t going to meet our water needs. The world’s population is expected to increase by 2.5 billion over the next 30 – 40 years, while the current, natural water cycle is not expected to increase its output.

Just as we must increase conservation, we must prepare for the impending water plateau by increasing our capacity to produce fresh water.

Hence my excitement in June when I heard about Desalitech’s successful pilot.The test purified Mediterranean saltwater, using Desalitech’s proprietary Closed-Circuit Desalination saltwater reverse osmosis method (SWRO-CCD).

Using common components, without energy recovery, running a high-pressure pump at 81% mean efficiency and circulation pump at 37.5% mean efficiency, the pilot achieved 48% recovery at 2.05 – 2.40 kWh per cubic meter of fresh water. For comparison, Perth’s desalination plant using Energy Recovery from ERI achieves 43% recovery at 2.32 kWh/m3.

Desalitech aims to increase the mean efficiency of the off-the-shelf, high-pressure pump to 88%, to provide recovery at 1.75 – 1.95 kWh/m3 on Mediterranean saltwater. The same pumps used on ocean water could produce equal recovery at 1.5 – 1.7 kWh/m3.

Desalitech’s implementation reduces the cost of powering desalination processes. It also decreases capital expenditures. Nadav Efraty, CEO of Desalitech, told me, “This technology is reducing energy consumption by up to 50% when we utilize about twice the membranes, reduces energy by about 10-15% when we use only 40% of the membranes compared to a conventional plant, or reduces energy about 30% when we utilizes the same amount of membranes, but in this mode, since we don’t utilize any form of energy recovery, we still see a reduction in capital expenditures.”

Even with less than half the membranes, the technology still sees 10-15% energy reduction. That’s a 60% savings on capital expenditures for membranes.

As an added element of efficiency, plants utilizing Desalitech’s technology can turn plants up and down depending on demand: Nadav explained, “The very same unit can operate at very high production rates part of the day (when power rates are low for example) and in extremely low energy consumption the rest of the day.”

Desalitech does this by independently controlling component flow rates, recovery, pressures and cross flow irrespective of the other variables.

Following their successful pilot, Desalitech is addressing brackish water. Desalitech’s three BWRO installations are fully operational facilities, capable of producing 10,000 m3 fresh water per day.

Efficient desalination can utilize alternative energy, like these Danish windmills, thus relying on the ocean twice. / Photo: andjohan on Flickr

The most common question I field when I mention desalination is, “Doesn’t that take a lot of energy?”

The truth is, yes, it does. That’s why you’ll not hear me advocate for desalination without strongly insisting on complementary conservation.

We must redouble our conservation efforts by upgrading infrastructure intelligently and in no way excuse wasteful water practices by pointing to the plentiful, historical ingredients of desalination: oceans of water and oceans of coal.

Each barrel of freshwater extracted from the ocean has costs, so we should use the water as efficiently as possible, recycling it and then remediating it into the water cycle.

Yet, conservation alone isn’t going to meet our water needs. The world’s population is expected to increase by 2.5 billion over the next 30 – 40 years, while the current, natural water cycle is not expected to increase its output.

Just as we must increase conservation, we must prepare for the impending water plateau by increasing our capacity to produce fresh water.

Hence my excitement in June when I heard about Desalitech’s successful pilot.The test purified Mediterranean saltwater, using Desalitech’s proprietary Closed-Circuit Desalination saltwater reverse osmosis method (SWRO-CCD).

Using common components, without energy recovery, running a high-pressure pump at 81% mean efficiency and circulation pump at 37.5% mean efficiency, the pilot achieved 48% recovery at 2.05 – 2.40 kWh per cubic meter of fresh water. For comparison, Perth’s desalination plant using Energy Recovery from ERI achieves 43% recovery at 2.32 kWh/m3.

Desalitech aims to increase the mean efficiency of the off-the-shelf, high-pressure pump to 88%, to provide recovery at 1.75 – 1.95 kWh/m3 on Mediterranean saltwater. The same pumps used on ocean water could produce equal recovery at 1.5 – 1.7 kWh/m3.

Desalitech’s implementation reduces the cost of powering desalination processes. It also decreases capital expenditures. Nadav Efraty, CEO of Desalitech, told me, “This technology is reducing energy consumption by up to 50% when we utilize about twice the membranes, reduces energy by about 10-15% when we use only 40% of the membranes compared to a conventional plant, or reduces energy about 30% when we utilizes the same amount of membranes, but in this mode, since we don’t utilize any form of energy recovery, we still see a reduction in capital expenditures.”

Even with less than half the membranes, the technology still sees 10-15% energy reduction. That’s a 60% savings on capital expenditures for membranes.

As an added element of efficiency, plants utilizing Desalitech’s technology can turn plants up and down depending on demand: Nadav explained, “The very same unit can operate at very high production rates part of the day (when power rates are low for example) and in extremely low energy consumption the rest of the day.”

Desalitech does this by independently controlling component flow rates, recovery, pressures and cross flow irrespective of the other variables.

Following their successful pilot, Desalitech is addressing brackish water. Desalitech’s three BWRO installations are fully operational facilities, capable of producing 10,000 m3 fresh water per day.

Newtown Creek Wastewater Treatment Plant / Photo: roboppy on flickr

Everywhere you look people are trying to do more with less. Reduce costs, increase efficiency, reduce energy use, recover resources. There are strong economic drivers to do all of these things, which also happen to be sustainable.

On July 22nd, 2010 I moderated the first in the BlueTech Tracker(TM) Webinar series: Mineral & Resource Recovery from Wastewater. We featured four companies with innovative technologies, and perhaps even more importantly, innovative business models. The companies were Ostara Nutrient Recovery Technologies, Calera, CASTion and Oberon.

Ostara produces a slow release fertilizer product, Crystal Green(TM) from wastewater. Calera, a Khosla Ventures backed company whose technology is part of a new infrastructure designed to view carbon, not as a pollutant, but as a resource. Calera might be accused of having a Superman complex in the cleantech sector, in that their technology simultaneously contributes to solving two of the most pressing environmental issues of our time: climate change and water scarcity. Calera sequesters carbon from power plants, produces a low carbon cement and helps to desalinate water.

The CASTion Corporation has an Ammonia Recovery Process (ARP) which can produce an ammonia fertilizer product from wastewater and recently won a $27.1M contract with the City of New York to provide a cost effective method for the City to achieve compliance at its 26th Ward Wastewater Treatment plant.Oberon FMR concluded the quartet. Oberon takes wastewater from the food processing industry, and through the application of some clever biotechnology (single cell protein synthesis), produces a value added, high protein, fish meal replacement for use in the aquaculture industry.

A few key take-aways:

1. This is about Costs

To get out of the starting gate with wastewater technologies in this area, you have to have a compelling value proposition. Resource recovery can enable a technology provider to off-set operational and capital costs and thereby provide a cost effective solution to their clients.

Ahren Britton, CTO with Ostara put it very succinctly with the observation, “as a standalone wastewater treatment technology, we won’t always be the cheapest way to remove phosphorus; as a fertilizer production company, we might not compete with current ore prices, but put the two together, and that’s what makes for the winning proposition.”

David Delasanta, President of CASTion noted that the decision by the City of New York to go with their ARP system on a new project was driven by economics. The City had a regulatory requirement to remove ammonia and the ARP system represented the lowest cost option occupying the smallest footprint. The City in fact sole-sourced this option from CASTion.

Fish Farm outside Shanghai / Photo: Ivan Walsh on flickr

The Sustainability and political angle can help to push these projects over the line, as the person who finally signs off on expenditure is likely to be a political animal. However, to get this far in the process, you first have to convince the people on the ground that this is a good idea, and their concerns tend to be less politically motivated and more related to, ‘Will this work and how much will it cost?‘.

Seth Terry, Oberon VP of Operations said they have found that the Corporate Sustainability angle of their approach to turn food processing wastewater into a feedstock for fish meal replacement production, has piqued the interest of a number of major Corporations and was one of the factors which helped them to secure a contract with Miller Coors to construct a full-scale demonstration facility at their site.

There is a monetary value to a company in terms of brand value to be able to show its shareholders that instead of generating a waste product which required disposal, they were able to ‘up-cycle’ the resources in their wastewater and in doing so, off-set the unsustainable harvesting of biomass from oceans to produce fish-meal for fish farms.

2. Resource Recovery is becoming a geo-political and security issue

Certain resources such as phosphorus are becoming a geo-political issue. China has recently put an export tax on phosphorus to discourage the export of this valuable commodity, to preserve it and keep it at home to enable food production. China is known for its ability to take a long-term view on things and this is an early indicator of how important this resource may become. It is worth noting that like oil, phosphorus resources are found in a number of unstable regions of the world.

3. Companies which succeed in this area need to know two markets

The flip side of producing a product while treating a waste, is that you need to simultaneously build an outlet and channels to market for your product, at the same time as you are developing the infrastructure to produce it. This is challenging when working with a variable feedstock (wastewater) and when the quantities you produce, initially, do not make a dent in the larger market for that commodity.

To succeed, companies need to understand the wastewater treatment market and also understand the market for the commodity they are producing.

In the case of Calera, this means they have to know the concrete and aggregate business. In the case of Oberon, they have to know the fish-meal business. Ostara and CASTion both have to understand the dynamics of the fertilizer industry. When you hear Calera CEO Brent Constanz speak about the nuances of the concrete and aggregate market, and then switch back to the importance of piloting on different wastewater streams, you get a feel for the level and depth of understanding required to succeed in straddling these divergent worlds.

At least a part of the sustainable business advantage these companies have, is their ability to understand and create a business model which meets customers needs on both sides of the fence. Companies that can do this are pulling away from the herd. When you combine this with technical know-how, continued innovation and a strong IP position, you have a sustainable first mover advantage which will be difficult for a ‘me-too’ to catch up with in the short term.

The next Webinar in our BlueTech Tracker(TM) Series is on Thursday July 29th at 12 noon PST and will put the spotlight on Microbial Fuel Cells and Bioelectrochemical systems. This group of technologies has the potential to generate electricity from wastewater and produce fuels and chemicals which can be sold.Again the approach is the same, how to squeeze some value out of that wastewater.Paul O’Callaghan is Principal of O2 Environmental, a consultancy group providing water technology market expertise, founder of the BlueTech Innovation Forum and co-author of ‘Water Technology Markets 2010′.

Newtown Creek Wastewater Treatment Plant / Photo: roboppy on flickr

Everywhere you look people are trying to do more with less. Reduce costs, increase efficiency, reduce energy use, recover resources. There are strong economic drivers to do all of these things, which also happen to be sustainable.

On July 22nd, 2010 I moderated the first in the BlueTech Tracker(TM) Webinar series: Mineral & Resource Recovery from Wastewater. We featured four companies with innovative technologies, and perhaps even more importantly, innovative business models. The companies were Ostara Nutrient Recovery Technologies, Calera, CASTion and Oberon.

Ostara produces a slow release fertilizer product, Crystal Green(TM) from wastewater. Calera, a Khosla Ventures backed company whose technology is part of a new infrastructure designed to view carbon, not as a pollutant, but as a resource. Calera might be accused of having a Superman complex in the cleantech sector, in that their technology simultaneously contributes to solving two of the most pressing environmental issues of our time: climate change and water scarcity. Calera sequesters carbon from power plants, produces a low carbon cement and helps to desalinate water.

The CASTion Corporation has an Ammonia Recovery Process (ARP) which can produce an ammonia fertilizer product from wastewater and recently won a $27.1M contract with the City of New York to provide a cost effective method for the City to achieve compliance at its 26th Ward Wastewater Treatment plant.Oberon FMR concluded the quartet. Oberon takes wastewater from the food processing industry, and through the application of some clever biotechnology (single cell protein synthesis), produces a value added, high protein, fish meal replacement for use in the aquaculture industry.

A few key take-aways:

1. This is about Costs

To get out of the starting gate with wastewater technologies in this area, you have to have a compelling value proposition. Resource recovery can enable a technology provider to off-set operational and capital costs and thereby provide a cost effective solution to their clients.

Ahren Britton, CTO with Ostara put it very succinctly with the observation, “as a standalone wastewater treatment technology, we won’t always be the cheapest way to remove phosphorus; as a fertilizer production company, we might not compete with current ore prices, but put the two together, and that’s what makes for the winning proposition.”

David Delasanta, President of CASTion noted that the decision by the City of New York to go with their ARP system on a new project was driven by economics. The City had a regulatory requirement to remove ammonia and the ARP system represented the lowest cost option occupying the smallest footprint. The City in fact sole-sourced this option from CASTion.

Fish Farm outside Shanghai / Photo: Ivan Walsh on flickr

The Sustainability and political angle can help to push these projects over the line, as the person who finally signs off on expenditure is likely to be a political animal. However, to get this far in the process, you first have to convince the people on the ground that this is a good idea, and their concerns tend to be less politically motivated and more related to, ‘Will this work and how much will it cost?‘.

Seth Terry, Oberon VP of Operations said they have found that the Corporate Sustainability angle of their approach to turn food processing wastewater into a feedstock for fish meal replacement production, has piqued the interest of a number of major Corporations and was one of the factors which helped them to secure a contract with Miller Coors to construct a full-scale demonstration facility at their site.

There is a monetary value to a company in terms of brand value to be able to show its shareholders that instead of generating a waste product which required disposal, they were able to ‘up-cycle’ the resources in their wastewater and in doing so, off-set the unsustainable harvesting of biomass from oceans to produce fish-meal for fish farms.

2. Resource Recovery is becoming a geo-political and security issue

Certain resources such as phosphorus are becoming a geo-political issue. China has recently put an export tax on phosphorus to discourage the export of this valuable commodity, to preserve it and keep it at home to enable food production. China is known for its ability to take a long-term view on things and this is an early indicator of how important this resource may become. It is worth noting that like oil, phosphorus resources are found in a number of unstable regions of the world.

3. Companies which succeed in this area need to know two markets

The flip side of producing a product while treating a waste, is that you need to simultaneously build an outlet and channels to market for your product, at the same time as you are developing the infrastructure to produce it. This is challenging when working with a variable feedstock (wastewater) and when the quantities you produce, initially, do not make a dent in the larger market for that commodity.

To succeed, companies need to understand the wastewater treatment market and also understand the market for the commodity they are producing.

In the case of Calera, this means they have to know the concrete and aggregate business. In the case of Oberon, they have to know the fish-meal business. Ostara and CASTion both have to understand the dynamics of the fertilizer industry. When you hear Calera CEO Brent Constanz speak about the nuances of the concrete and aggregate market, and then switch back to the importance of piloting on different wastewater streams, you get a feel for the level and depth of understanding required to succeed in straddling these divergent worlds.

At least a part of the sustainable business advantage these companies have, is their ability to understand and create a business model which meets customers needs on both sides of the fence. Companies that can do this are pulling away from the herd. When you combine this with technical know-how, continued innovation and a strong IP position, you have a sustainable first mover advantage which will be difficult for a ‘me-too’ to catch up with in the short term.

The next Webinar in our BlueTech Tracker(TM) Series is on Thursday July 29th at 12 noon PST and will put the spotlight on Microbial Fuel Cells and Bioelectrochemical systems. This group of technologies has the potential to generate electricity from wastewater and produce fuels and chemicals which can be sold.Again the approach is the same, how to squeeze some value out of that wastewater.Paul O’Callaghan is Principal of O2 Environmental, a consultancy group providing water technology market expertise, founder of the BlueTech Innovation Forum and co-author of ‘Water Technology Markets 2010′.