Business of Water

Water, Water Everywhere, Not a Drop for Free

Growing up in Colorado I was always aware of drought.  Through news stories of falling water tables, half-empty reservoirs, forest fires, and brown lawns I became aware very early of the risks of water overuse and mismanagement.  As we look towards a global future of climate change, urbanization and increasing consumption water will continue to be a bottleneck to development and economic growth.  The scale of the challenge is enormous.  Appropriate technologies for water desalination, treatment, recycling and transport exist; But it is expensive to get clean water to the tap and most governments remain reluctant to pass the cost of water to end-users. 

It has long been a goal of mine to build a global appreciation for the scale of the challenge, as well as a deeper understanding of possible solutions. Singapore and China were great case studies as their water systems face contrasting challenges  [Singapore small, tightly managed + China huge, distributed]; yet similarly compelling stories of governments that have made the choice to take action now to mitigate risks of future water conflicts. Together they provide a window into what we can expect to see in the future of the water sector:

• Water requires long-term planning and vision (appears to be a part of the growth mindset of China/Singapore); Contracts are 20-30 years and require foresight in rapidly changing economic environments
• All-inclusive water pricing is critical to successful water system management (water treatment -> distribution -> waste water disposal)
• China/Singapore both have sufficient funds to pay for water projects, and as a result PPPs are not required; where PPPs are seen in Singapore they are designed to increase the capabilities of “local” companies with the goal of helping them win business abroad 
• Private companies are most successful where they work closely with local governments (e.g., Black & Veatch in Singapore and Veolia in Changdu)
• On-site water treatment and recycling is increasingly a part of the corporate mindset (e.g., Coca-Cola, TI); Companies share best practices across geographies. 

In reflecting on the experience, I am grateful for the chance to travel to Asia and see for myself how they are pushing the innovation and development curve in the water sector.  The time is right for water to emerge as a major global strategic and competitive focus, and Asia will clearly be at the forefront. 

Lastly, before I sign-off I would like to give a shout out to the group of Sloan students that put this tour together.  As a 2^nd year and two time study tour veteran I can honestly say that these trips were a highlight of my Sloan experience! There is no substitute for spending two weeks exploring an issue with fellow students that share my passions for the world, water and development.  Back in Boston I am glad to see their familiar faces all around campus, and feel the type of personal connection which is rare in the busy network of business school life.  You guys are awesome!  I hope you don't forget me next year.

 

I drank pee-UB water, and I liked it!

Sorry for channeling some Katy Perry into the title of the blog, but the title is fully accurate.  

Early on in our trip, the group visited PUB in Singapore, which is the quasi-government organization that manages the country's water supply.  

What does that mean--"manages the country's water supply"? 

In broad strokes, PUB manages two processes: 

• The water supply that comes from Malaysia, which is roughly 50% of Singapore's water (though the exact figure is akin to a stateheld secret)
• Filling the other 50% gap--some through desalination plants, but much through "reclaimed" water.  That is, water that was once waste water--from residential and industrial use--and is treated to be put back in the water supply.  And there you have it--a lot of the water in the supply was once in someone's toilet bowl, or run-off from a Coke plant.  

Your first reaction may be...ew.  Drinking water that someone once did their business into--doesn't that sound, gross?  Like an option of last resort?  

In fact, our PUB hosts did a fantastic job of breaking down for us what are essentially the two components to the process: the science, and the psychology.  If you want to succesfully "reclaim" water and see it as a meaningful source of supply, you need to get both right.

The science: the process to cleanse dirty water has been in place for years, and is not terribly complicated.  Essentially, the dirty water goes through a reverse osmosis treatment, and a series of filters, with each step further ensuring that particles and unwanted bacteria are removed from the water.  The filters that we saw consist of what looks like paper with a glue coating, wrapped around itself thousands of times into a tube.  The paper has microscopic holes that filter out the (microscopic) solid stuff, and pass through the H2O.  In fact, the water is so purified at the end of this process, that PUB gives nearly all of it to industrial users who require super-clean water as inputs to things like manufacturing wafers that are used to create semiconductors.  It's actually more refined than drinking water, and tastes different too.  To make this water ta'ste decent for human consumption, PUB actually puts minerals back INTO the water to give it that familiar "dug up from the well" taste that we've all grown so accustomed to.

The psychology: this, as you can imagine, is a big challenge--bigger, in fact, than the science.  Our PUB hosts highlighted how they overcame this challenge, and it really is a playbook in exceptional messaging and PR management.  

First, they don't call it "recycled water", "waste water", "toilet to tap", or any other phrase that might make you think it's been in someone else's toilet.  They have branded the water NEWater, and the only other phrase you may hear a PUB employee utter is "used water".  But even that is eschewed in favor of their glimmering NEWater brand.

Second, they have educated the population like crazy.  Our group was given a tour of what is essentially a NEWater playhouse, which is made for kids: glimmering lights and exhibits, a child-friendly animated host leading you through the museum, and fun videos to watch throughout.  The point?  Educate kids early about the safety of the NEWater, and they won't have reason to question the stuff when they are grown up.  Another point of their education campaign is that PUB has brought the public to the water supply, literally.  The water storage lakes that were once walled off from the public are now encircled in beautiful walking paths, and people can swim and do water sports in these lakes.  The cost to taking out a kayak, for example?  Listening to a short informational blurb about Singapore's water supply and the water treatment process.  PUB believes that having people make the water a part of their recreational activities will make them more aware and accepting of NEWater, and they seem to have hit the nail on the head.

Finally, PUB mounted a maor PR campaign when NEWater "hit the streets".  A commercial was run that showed the Prime Minister playing an intense game of tennis, then taking a break to chug down some...NEWater!  Before a soccer game, bottles of NEWater were handed out to the 60k attendees, and a full-stadium "toast" was done where everyone drank the stuff together...again, on national TV.  Madison Avenue executives couldn't have written it any better.

At the end of our visit, we were given bags of brochures, CDs, and of course a bottle of NEWater.  I eagerly twisted the cap off, peered into the full bottle (looks like water), surreptitiously took a sniff (smells like water), and finally took a good swig (tastes like...great water!).  

Our PUB hosts were fantastic, and incredibly candid in the reasons they have had to adopt the water reclamation process (can't capture and store enough rain water in Singapore), and the ways they have executed and gained public adoption.  The process has been adopoted in other places, notably in parts of London, but does not work everywhere--as it was voted down in Australia, where the public could not get past the psychological barrier of drinking what was once toilet water.  The process in Singapore is an interesting meld of science, psychology, and state messaging.  Perhaps the process will be further adopted in water-scarce regions of the US.  

My scattered reflections

I have many disparate thoughts as I think back to my experiences in Singapore and China, so I’ve listed them:

Water as a business opportunity:  water and government are inextricably linked. If you hope to start a venture in the water industry, be prepared to work with governments.

Governance in Singapore: the country is exceptionally well governed. This is a clear source of economic advantage. For instance, many start-ups in the water technologies sector choose to launch a pilot in Singapore as the government is open to trying new ideas and extremely efficient.

Chinese Economic Development in contrast to India’s: China (at least the parts we visited) seems to be richer and a much broader social net appears to exist. This is to be expected as the per capita GDP is around 4 times India’s on a nominal basis. However, in my anecdotal estimation, a consumer culture China doesn’t appear to have caught on in the same way it has in India.

Desalination: Having done our team project on this, I’ve arrived at the conclusion that desal technologies have a part to play in many countries’ water portfolio. However, the technology is not a silver bullet. If we take a holistic view, the most meaningful impact will come from better resource allocation and demand management.

Study tours:  Going on the study tour was possibly the best decision I’ve made at Sloan so far. The costs are certainly a consideration, but are far outweighed by the benefits. In my opinion, our study tour was the perfect combination of interesting company visits and R&R (well, maybe just the second R.)

The tour's organizers: Matt, Jamie, Pat, Ed and Chi-chu did nothing short of a phenomenal job putting the tour together. Thanks Guy!! It was amazing traveling with you and the rest of team aqua. 

 

Water in International Relations

Following our return to the US, we’ve been reflecting on many of the meetings we had. As we spent more time with our different hosts, discussions became more and more candid. In one meeting, two engineering directors suggested that while local government bodies had come to agreements over water use and price, that implementing water plans would eventually require ways for government bodies in disagreement to resolve their disputes. Their teams spent significant time studying how large infrastructure projects in the Western US and Europe had faced water disputes.

The conversation comes into sharp relief when we look at the water disputes happening throughout Asia. We heard a lot during our trip about how disputes between Malaysia and Singapore prompted Singapore to classify their water supply as a national security issue, which prompted the Four Taps strategy. China’s water strategies touch on river basins that cross international borders. Neighbors like India, Bangladesh, Nepal, Pakistan, Thailand, Myanmar, Laos, Cambodia and Vietnam are dependent on the water supply emanating via rivers originating on the Tibetan Plateau, an arid region that is nonetheless a major watershed with significant supply stored in glaciers (which are melting due to climate warming).

Many of these countries do not have water-sharing agreements with each other or with China – there is significant uncertainty around how millions of people inside and outside of China will be affected by the major infrastructure projects we saw while there. Much has been written about the potential for these countries engaging in water wars. The diplomatic discussion around water use don’t seem to be particularly robust, but the major factors are well known: water is essential for development, and sovereign control over water tend to follow domestic market and national security imperatives.

Two sets of questions occur to us for the affected countries to ask themselves:

• First, what can countries do by themselves? Do countries affected by water disputes define water conservation and alternative sources as a national security issue (as Singapore has) and have the capacity to execute a national change strategy?

• Second, what must countries do together? What policy mechanisms can countries develop to solve water disputes politically? Will the arguments resemble a transnational incarnation of the water disputes in the Western US? What assumptions will countries make about the relationship between a country’s economic development activities and its position on water rights? Is there a viable international model available for shared water resources? We have the Law of the Sea… do we need a Law of the Rivers?

The End: Final Reflections from a Water God

Life at MIT Sloan has certainly changed for us "Water Gods" (aka water study tour organizers) since we returned home from our trip to Asia two weeks ago. 

The five organizers - Pat Flynn, Ed Fish, Jamie Fordyce, Chi-Chu Tschang, and I - had not previously experienced MIT Sloan without the water study tour. We dreamed up the idea of the tour during the second week of school, and spent hundreds of hours over the past seven months turning our dream into reality. Most weekends were filled with at least one 2-4 hour organizer meeting, and weeks consisted of many phone calls, meetings, and piles of emails with our professors, participants, and company hosts in Asia. For me personally, the time commitment meant sacrificing many nights out with my classmates, quality time with my girlfriend, and study time during the intense core semester. 

Looking back, I can confidently say that what we accomplished made it all worthwhile. 

In many ways, this study tour is what MIT is all about. It was an experience in action learning, something MIT cherishes. It required a helping of MIT's entrepreneurial spirit to create a class and trip on a subject never before explored at Sloan. It embodied the "Mens et Manus" ethos of our institute, as our participants created final reports that outlined opportunities to both make money and solve real problems in the water sector. And finally, we focused on a timely, complex, critical issue that allowed us to look for ways to live up to Sloan's mission of "developing principled, innovative leaders that improve the world."

Also, more than any other experience at Sloan, the study tour has made me feel so proud to be part of such a smart, diverse, and intellectually curious group of people. The hours we spent in planes, trains, and buses gave us a chance to sit next to classmates we don't typically interact with at school, and learn about their backgrounds in law, real estate, civil engineering, public health, investment banking, and public policy (to name a few). During every company visit in Asia, our group could always be counted on to listen respectfully to company executives, ask poignant questions, and represent the MIT Sloan brand extremely well.  And following these visits, I found it fascinating to be able to digest findings from the meeting through the different lenses our classmates, with their breadth of experience, embody. 

I was also humbled by how powerful the MIT brand really is, even in a place as far away as China. To set up many of our company visits in China and Singapore, we were forced to cold call or email many company executives. I strongly believe that one of the major reasons we received so many responses to these calls and emails is because of the fact that we were from MIT. And during our trip, it was flattering to be constantly reminded by our tour guides and company hosts that MIT was one of the best schools in the world. More than ever, I feel extremely priviledged to be part of such a respected institution.  

For all of these reasons, I'm so happy that we embarked on this journey over the last seven months, and I know I'm going to miss working on this project. Most of all, I'm going to miss seeing the other organizers and trip participants on a regular basis and deepening my knowledge of the incredibly-interesting water sector. 

But enough of that soft stuff. What did I actually learn about the water sector that I will take with me in the future? Well, I've become very hopeful about the many tools we can employ to make sure water scarcity doesn't compromise the health and economic growth of places like the US, Singapore, and China. Here are a few examples of the tools at our disposal to prevent supply-demand imbalances:

-Full cost-recovery pricing: pricing water based on its true worth and cost to clean and transport will result in the following:

• Per-capital demand for water by manufacturers, farmers, and households will be reduced
• Alternative, less water-intensive sources of energy, such as solar and wind, will become more economically appealing 
• Water utilies will be able to cover their operating and capital costs, which will allow them to properly maintain their water infrastructure assets. This will also allow utilities to reduce leakage throughout the water system and therefore increase water supply to final consumers. 
• Higher water prices are also necessary if utilities want to fund infrastructure extensions to, and subsidies for, poor neighborhoods in cities in developing nations.

-Water rights trading: a form of pricing, water rights trading requires that users of water in certain industries (e.g. agriculture, real estate) purchase and trade permits with others in the industry. The total number of permits is fixed based on the available quantity of water in a given region. This scheme allows water to be allocated to its most productive uses, and has worked extremely well to prevent water shortages in places such as the Murray-Darling basin in Australia (agricultural sector) and in the US Southwest (real estate sector).

-Desalination: desal seems to a very promising solution to mitigate water scarcity in coastal cities. Desal technologies are already being used in water-scarce regions, such as Singapore and the Middle East, as part of a suite of water supply solutions. Continued technological innovations should make desalination less energy-intensive, and therefore more cost-effective, in perhaps 5-10 years' time. 

-Wastewater reuse: cheaper than desal, wastewater re-use is the way of the future in water supply in my opinion. The technology to make wastewater safe for drinking is already available, and re-use allows regions to effectively increase their supply of water and reduce withdrawals from other sources. We already have several success stories: Singapore and Orange County, CA are two of the most notable examples. Moreover, wastewater re-use holds tremendous promise for the industrial sector as well, and firms like GE and Nalco are well-placed to help clients re-use water at mines, oil fields, factories, hotels, and residential buildings.

________________

I can't wait to create more opportunities next year for MIT Sloan to deepen its commitment to the water sector. In the meantime, I offer thanks to all of the MIT faculty, staff, and students that made this first foray into the water space so successful and exciting!!!

Study Tour in Review

When I reflect on the Study Tour experience, I realize that it has been a collage of learning and cultural experiences that will stay with me long after I graduate from MIT this spring.  In the classroom, I gained an appreciation for the many facets of the water crisis and disciplines involved in finding solutions.  In the international experience, I realized that every stakeholder has an opinion on water and the best way to manage it, yet enacting a change is hardly an easy task – it requires the coordination of multiple parties and an intricate understanding of the “powers that be.”

Singapore was interesting to me because its government has incredible agility to enact policy, be it the advancement of water independence or creation of an ecosystem of entrepreneurship.  However, even in Singapore there is a balance of power – the Public Utilities Board does not have the ability to set the price of water and balance the income and expenditures of its operations.  Rather, the Ministry of Environment sets the water price.  No system is perfect.

In China, water seems to have only recently become very high on the government agenda.  As with any relatively new government initiative, there is much to learn and perhaps the newness of the water policies explain why the water quality has a long way to go before one can drink from the tap.  But we also heard, on multiple occasions, that the way things get done in China (whether in business or politics) is through connections.   Although this was initially surprising to me, it is not entirely different from the U.S., in which merit is recognized, but connections certainly help.

Since this was also my first trip to Asia, the cultural experiences were just as impressive as what I learned during the company visits.  In Singapore, I was stunned with the gorgeous skyline, and enjoyed the delicious food available at the ubiquitous street vendors.  In contrast to the pristine, manufactured orderliness of Singapore, our first impression of China was the “fog” that was so thick that it was visible within the baggage claim area of the airport.  I started coughing almost immediately and wondered whether it was a biological or a psychological response.  We were quickly whisked away to the stunning beauty of the mountainous panda reserve near Chengdu (which I hope to visit again someday).  On the way, our tour guide insisted that the fog was a result of the geological formations that trapped the fog for more than 200 days per year, and that the air in Chengdu was thought to be very good for the skin; I wondered if the fog was correlated to the days when factories might be hurling pollutants into the atmosphere.  My cough only lasted for the first morning, so perhaps I was too judgmental initially.

I was surprised by a number of things on the trip: for example, the hundreds of motor scooters silently zooming along the streets in China were powered by electric (in turn, probably produced by coal…).  But electric transportation is definitely a step in the right direction by reducing exhaust and noise pollution.  Also, I saw more luxury goods stores in Chengdu and Beijing than I think I’ve ever seen in New York, DC, or Boston.  Perhaps the best surprise of all was realizing that I very much enjoy Chinese food, even the tongue-numbing Sichuan spices.  My parents used to think I would never survive if they decided to move to China. Now, I hope to have the privilege to do so in my career after Sloan - not only to enjoy the food, but hopefully to play a role in helping create a more sustainable world.

Sustainability at Sloan

This term, along with many of the other water nerds, I’ve been taking a class on sustainable practices in the business landscape.  We’ve read case studies on companies from Seventh Generation to Wal-Mart, ran a simulation of the fishing industry, and talked with representatives from Nike and Unilever.  I think my classmates would agree that this has been one of the best classes we’ve taken so far – the professors (three professors teach on rotation) are experts in their fields, the students are engaging and experienced, and it’s clear that everyone in the room feels passionately about the subject.

So, what does this have to do with water and Asia?  Quite a bit, actually.  This past week, our class sessions revolved around a simulated negotiation of the 2009 UN Climate Change Conference in Copenhagen.  In the resulting Copenhagen Accord, the countries recognized that climate change is a major global challenge, and that there is scientific evidence that supports the need to limit the rise in temperature to less than 2 degrees.  However, the negotiations were widely seen as a failure - though many countries eventually signed the agreement, it is not legally binding.  Both the U.S. and China, two countries with extreme CO₂ emissions, have refused to sign.

For our negotiation simulation, the class was randomly divided into 8 groups representing different countries like the EU, India, and “Other Developing Countries,” as well as Lobbyists and Environmentalists.  To make it a little more realistic, the rich countries got coffee and pastries, while the Other Developing team had to sit on the floor. 

By chance, I was on the China team.  Though Sloan’s sustainability students are a somewhat typecast group, we decided to play the simulation as true to reality as possible – rather than actually trying to reach an immediate agreement.  China’s top priority is development and living standards for its citizens.  They make the very reasonable argument that the US and other developed countries caused the problem (indeed, developing nations only represent ~15% of accumulated CO₂ emissions), and therefore should be the ones to deal with it.  We saw that China’s per capita GDP would be on par with Europe around 2030 and the US around 2050, so we set our target date for limiting emissions to 2060 – and refused to start reducing emissions until at least 2100.

As you might imagine, our classmates, many of whom had proposed reducing CO₂ emissions starting in 2015, were livid (the Environmentalist team drew up signs and staged protests).  We later found out that our initial offer was actually pretty closely in line with the actual Chinese proposal of cutting "emissions intensity" by 45% by 2020. 

What really made the class interesting, however, was not the antics or the heated debate.  It was the simulation software that showed the impacts of our back-and-forth negotiations.  C-ROADS, the Climate Rapid Overview and Decision-support Simulator, calculated the effects of our CO₂ reduction pledges in near real time.  We could immediately see that a 3% overall reduction from China was worth more than the same pledge from all the developed nations, and that it will take a lot to actually stick to our 2 degree goal.  Developed by one of our professors (and a team from Dartmouth!), this software is actually in use at the climate change summits – and may help to make repercussions more real to the negotiators.

So what did we learn?  Each day we sit on our hands, the 2 degree target gets less and less feasible – indeed, we may have blown by it already.  Particularly relevant to our study tour, it turns out that there is little we can do at this point, either as individual countries or the United Nations, to stop sea levels from rising at least a meter in this century.  Modeled estimates show entire cities disappearing, freshwater deltas and groundwater contaminated with saltwater, and millions of environmental refugees displaced from their homes.  This may be the reality check China needs to internalize – what good is achieving development goals midway through the century if Shanghai is gone by 2100?  Again, we see water as a central issue – both as a major challenge, and possibly the debate point that can win Chinese buy-in. 

Sustainability is not just green building design, alternative fuels, or water conservation.  It is a combination of these things that will determine whether our planet remains habitable for our children.  I hope that through open-minded negotiations (and help from C-ROADS!), we can act as a global community and turn the tide.

China's pilots: experimentation on a grand scale

In Singapore, we saw an erupting landscape, a unified message, and a level of opulence more stunning than Times Square.  China was a different story.  With grey skies, post-earthquake rubble, and overcrowded cities, I was actually surprised by how much I ended up loving the country.  China is a very measured, thoughtful place.  They realize that they are not yet fully “developed,” but they are as pragmatic as can be when it comes to reaching this goal.  The Chinese government makes every decision with its overarching goals in mind, and the citizens seems to trust that their long-term interests are being met (even if this means some discomfort in the short-term).

We saw one example of China’s consistent, deliberate forward motion in their use of pilot projects.  It seemed that each company we visited had been part of an initial trial, a small-scale version of a potentially huge partnership set up to measure a company, project, or idea’s worth.  These pilots are particularly impressive for their breadth; China has been willing to take on a range of innovative, cutting edge projects, flipping through pilot after pilot, in order to achieve their aggressive growth goals. 

One such project that I found particularly interesting was the Tianjin Eco City.  To meet the need for living space in a time of rapid urbanization, China has been building entire cities on stretches of currently uninhabited (or, in the case of Tianjin’s chemically polluted marsh, uninhabitable) land.  Through a partnership with Singapore, they are cleaning the land and developing this city to meet a series of 26 diverse “green” KPIs by 2020.  To name a few: 50% of water should come from non-traditional sources like desalination and recycled water, 90% of trips within the city should be non-motorized or public, 100% of buildings should meet green standards, and sufficient local jobs should be generated for at least 50% of the city’s residents (to keep their commutes local).  Should the city of 350k be deemed a success, the government will use Tianjin as a model for future developments.

I should note that despite the country’s rapid urbanization, this pilot project is not entirely without risk.  Driving along the highway in sub-urban China, we passed “ghost cities” on multiple occasions.  Some estimates say that China is developing as many as 20 new cities per year while millions of residences stay empty.  These new cities depend on partnerships with multinational companies to create jobs and local economies; Tianjin has already secured agreements with animation and tech manufacturing industries to kick off the city’s growth.

I was actually really surprised by my fellow classmates’ reactions to the Eco City.  Many walked away from our meeting with comments such as “all they’re doing is cutting commutes,” “I thought they’d be completely off grid,” and “nothing here is groundbreaking.”  In contrast, I was again impressed by the scale, industriousness, and degree of forward thought that the Chinese government displayed.  As our Tianjin contact said, they were not intending this city to be the next Masdar, a powerful showcase but overly expensive and elite.  Rather, Tianjin Eco City is a big step in the right direction: livable, marketable residences that make greener living easier for the average citizen.  

(By the way, for more detail, Greg did a great job of describing the city and the concept behind it here)

Some pictures (from the Huffington Post)

Calling all marketing geniuses: the water sector needs YOU!

In the water space, I must say that managers do a pretty poor job of making statistics meaningful to everyday people. Day after day on our trip to Asia, we were bombarded with quotes of water consumption, treatment plant capacity, and flow rates in units such as cubic meters/day, acre-feet/person, and even tons/year.

Huh?!? Who, outside of the very small circle of water uber-nerds, has any clue what consuming 200 m3/year means, or how much water a treatment plant with 1 million tons/year capacity REALLY produces?

One of the key takeaways of the trip for me was that water-scarce countries will only succeed in fending off crippling future supply-demand imbalances if they learn how to effectively communicate the importance of things like full-cost pricing, conservation, wastewater re-use, and virtual water. This starts with making statistics more understandable to the Joe the Plumbers of the world, but it goes much further into explaining why consumers must change their relationship with water in the future. 

To make this happen, water utilities around the world will need to invest in effective marketing campaigns. Take Singapore as a good example of this fact. Dependent on imported water from Malaysia, Singapore needed to find ways to overcome its domestic water scarcity. Realizing that technology had advanced for treating wastewater back to drinking water standards, Singapore's Public Utilities Board created a marketing campaign that effectively sold the idea of wastewater re-use to the public.

Without the catchy term "NEWater", the trendy NEWater Visitor Center, and the many marketing campaigns created for students, families, etc, I bet Singapore's wastewater re-use ambitions would have fared similar to California's "toilet to tap" strategy: failure.

In the US, I would argue that marketing campaigns are most needed to convince residents to accept higher water rates. According to this chart, the United States has some of the lowest water rates in the world (red bars), and therefore Americans also consume more water per capita than any other country (gold bars). This is utterly unsustainable, as climate change, economic growth, and population increase (and shifts to the water-scarce West) will make our national water supply inadequate at these levels of consumption. 

Source: International Water Association, International Statistics for Water Services, Montreal 2010

US water managers need to find ways to dialogue with their customers, and tell them the truth about the need for increasing rates in a way that is understandable and pallatable. One such manager on the front lines of the battle is George Hawkins from the Washington DC Water and Sewer Authority (DC WASA). [See the NYTimes article about Mr. Hawins here.] 

Mr. Hawkins, educated at Princeton and Harvard Law School, took to environmentalism after becoming disillusioned with practicing law. He took over DC WASA in October 2009 with no practical experience running a water utility, and has since tried to make the case to DC residents that major rate hikes are in the public's interest.

Mr. Hawkins has started a Facebook page explaining why, on average, one water main breaks in DC every day, and why double-digit annual rate hikes are needed. He also frequently shows up at sites of water main breaks and uses the opportunity to dialogue with local residents about the age and condition of the pipes. Mr. Hawkins tells DC residents that current revenue levels would only allow DC WASA to replace all of the city's water mains (some of which are already 100 years old) in 300 years' time, while the useful life of a cast-iron main is 50-70 years. Without immediate rate increases, leaks will continue to pop up throughout the system, allowing more and more contaminants to pollute the water consumed by DC residents.

Unfortunately, despite Mr. Hawkins' best efforts, the DC WASA Facebook page has only 800 followers, and many of the residents he speaks to do not seem to be getting the message. What DC WASA - and utilities around the country - needs is an infusion of marketing expertise that can create the messaging needed to preserve the sustainability of our water systems.

Here's hoping that these utility managers steal a page from Singapore's playbook and find the marketing talent they need to survive - and that more savvy marketers take up the challenge of making water infrastructure sexy. 

A meeting with the China Development Bank

I was very excited about the meeting with CDB because last summer I had done an internship at the Inter-American Development Bank, and I wondered how similar the two institutions might be. Both banks work directly with the private sector with a shared goal of improving people’s lives. One key difference is that the IADB is owned by 48 member countries, whereas the CDB is wholly owned by the Chinese government. Additionally, whereas the IADB has a large research arm, the CDB organized more for loan execution.

During the first part of the meeting, we heard from two speakers: a director in the Education & Training group, who oriented us to the overall bank mission and strategy. Then we heard some specifics about water from a leader in their project management group. The overall tone of the meeting was very positive: according to the government’s 12th five-year plan, water treatment rate is targeted at 90% (they already have capacity to treat 77%). In addition, the bank’s loans for water projects have more than doubled between 2007 and 2010.

One of the most interesting aspects of CDB was its process for loan distribution and service, which is designed to fit the needs of multiple stakeholders. The province-level governments develop a program for wastewater treatment taking into account the central government’s directives. After a construction contract is awarded, CDB works with local financial institutions to co-sponsor the projects. I was expecting a more command-and-control loan process, but the CDB approach appears to be relatively balanced between centralized and decentralized decision-making.

Throughout the meeting I had to keep reminding myself that CDB is in the business of making loans; it is not solely in the business of water provisioning. They have a lot of expertise in financing large scale water distribution and wastewater treatment projects; however, issues such as utilization of the water treatment plants relative to capacity, or overall water access and quality would be out of scope.

Following the presentations, we were treated to refreshments and Q&A, and then invited to a tour of one of Beijing’s water treatment plants – Gaobeidan. We received a very warm welcome from the China Development Bank, and I’m thankful to have had the opportunity to learn about the great work that they are doing to make water services available throughout China.