Waterworld: Global Perspectives on the Water Sector

Roundtable features perspectives from senior practitioners on the most pertinent issues facing the infrastructure industry. This edition features Christopher Yamaya, Peter Kydd, Paul Jones, and Dean Toomey discussing the outlook, opportunities, and challenges of the water sector in the United States (US), United Kingdom (UK), Middle East and North Africa region (MENA), and Australia (AUS).

US Perspective

Amine Stambouli (AS): What is your outlook for the US water industry over the coming years?

Christopher Yamaya (CY): After years of stunted growth, many water infrastructure projects are finally entering the design and construction phases. These are projects that are needed, but until recently couldn’t be delivered due to funding and budget constraints. My first impression is that we will see many more water infrastructure projects advance in the near term.

In many areas around the country, large conveyance and wastewater programs are being implemented to move water or wastewater from one area to another. Municipalities like St. Louis, Kansas City, Pittsburgh, and Miami have all developed large water capital programs with spending in the billions that will be implemented shortly. I expect that new programs will emerge as the need increases to repair or expand water infrastructure.

Also in the near term, recurring extreme weather events such as droughts or storms will continue to increase public awareness of the need to address deficiencies in water infrastructure. Additionally, the pollution of water supply sources will become an area of concern and will drive new policies and regulations. The Chesapeake Bay, for example, is a water source to the Mid-Atlantic region that has been protected with innovative regulations to prevent continuous deterioration.

AS: What new trends or opportunities will emerge in the US water sector?

CY: The Water Infrastructure Finance and Innovation Act (WIFIA) is an opportunity to alleviate funding and financing challenges for water infrastructure projects. Although it is similar to the more popular Transportation Infrastructure Finance and Innovation Act (TIFIA) program, I think it will take some time to make an impact on the industry. I think it's great legislation for the water side of the industry, but it will be interesting to see how the program will evolve with changing political landscapes.

Another interesting trend that I’m seeing is alternative delivery and public-private partnerships (P3s) for water infrastructure. Municipalities continue to accept these alternate delivery mechanisms for transportation infrastructure, and I imagine they will also be considered for water infrastructure. As municipalities continue to create legislation that is accepting of alternative delivery, I think that the market will mature and water infrastructure P3s will become a common delivery mechanism.

AS: What challenges will the US water sector face in the near term?

CY: In addition to extreme weather events such as flooding that will continue to challenge water infrastructure across the US, I believe that recurring droughts (in Texas and California, for example) will drive innovation in the area of water reuse.

Another challenge will be to drive innovation for green water infrastructure that naturally and effectively treats water. To date, green water infrastructure has been popular with the public but the technology has not always created tangible savings or improved the effectiveness of water treatment.

UK Perspective

AS: What is your outlook for the UK water industry over the coming years?

Peter Kydd (PK): The water market in general has gone through quite a lot of change since it was largely privatized back in the late 1980s. The water supply and wastewater treatment sectors are largely privatized in England and Wales. In Scotland and Northern Ireland, these same sectors continue to be managed by the public sector. Other aspects of the water market, like flood management, are managed by government agencies and local municipalities. So we have a slight mix of different ways that water infrastructure is delivered depending upon what it is and what parts of the UK are delivering it. It’s worth noting that although there are a number of private sector operators in the UK, the water sector as a whole is regulated. The private sector companies are only allowed to charge their customers so much, and that dictates their investment plans.

Currently, there are two significant programmes that stand-out in the UK water sector. The first is the Thames Tideway Tunnel project in London that will provide storage and conveyance of combined raw sewage and rainwater that currently discharges and overflows into the Thames River. It is a US$6 billion investment for London that will require a new organization to finance and deliver. The second initiative focuses on smaller incremental asset replacement programs across the UK where water mains that were laid in the 1860s to 1880s are now being replaced.

We’ve significantly benefited from the investments made by our Victorian forefathers, but these assets are coming to the end of their lives and the focus has shifted to rehabilitation, effective asset management, and improved water quality standards. Since privatization in the late 1980s, there have been six regulatory programs, known as Asset Management Programs (AMP 1 to AMP 6), that have shifted the focus from capital improvements in treatment works when privatization began to operational improvements in river and coastal water standards.

AS: What new trends or opportunities will emerge in the UK water sector?

PK: I think a primary opportunity could be the increased adoption of tidal power as a viable energy source. The first of two tidal power concepts is tidal range power that can be generated like hydroelectric power using differences in elevation between the upstream and downstream areas of a dam. The head difference drives water through conventional hydroelectric turbines to generate energy. The other type of tidal power is tidal stream power which is comparable to power generated using wind turbines. In this case, turbines are placed underwater and are driven by the current to leverage kinetic energy rather than potential energy.

Tidal stream power generation occurs in areas of high current, whereas tidal range power generation occurs in areas of high tidal range. In the UK, we have fairly high tidal range on the western seaboard and in particular in the Severn Estuary where the tidal range increases to 14.5 meters—second to Bay of Fundy in Canada.

A main benefit to tidal power generation is that although it can be capital-intensive, the power generation assets have long lives with low operating costs, which can help drive the wholesale cost of electricity down. Additionally, tidal power generation is renewable, predictable, and does not create carbon emissions.

The UK government has for some time been looking at whether it should be taking advantage of its tidal resources, and there have been studies of the potential for generating tidal power from the Severn Estuary dating back to the Second World War. Most recently, Parsons Brinckerhoff led a study for the government between 2008 and 2010 that re-examined the Severn Estuary as a candidate for tidal power generation and has been involved in a number of subsequent proposals using the tidal range, tidal stream, and wave resource of the oceans.

AS: What challenges will the UK water sector face in the near term?

PK: We’re seeing changing weather patterns globally, but these are particularly concerning in the UK. Three years ago, we went overnight from the widespread issue of drought orders into a prolonged period of record breaking rainfall. The UK average temperature creeps up every year and we are seeing increased variations between extreme high and low temperatures, all characteristics of climate change. We’re starting to experience more extreme weather patterns that we are not used to, and we shall continue to see increases in high winds, more intense rainfall, and sea level rise.

The impacts of these changes significantly affect the water sector, particularly on the flood management side. We’re now seeing ground water flooding in areas we hadn’t seen ground water flooding before. We’re also seeing much larger and more frequent storm surges, and increased river flooding due to high rainfall intensities. Tidal flooding is increasing exemplified by the frequency of closures of the Thames Barrier, London’s major defense against tidal inundation.

MENA Perspective

AS: What is your outlook for the MENA region water industry over the coming years?

Paul Jones (PJ): In the near term, the population in the MENA region will continue to grow and the consequent development will increase the demand for water supply, urban drainage, sewerage, and sewage disposal. Consequently, existing water infrastructure will need rehabilitation and new infrastructure will be planned to meet future demand.

In Doha, Parsons Binckerhoff is currently involved in the Local Roads and Drainage Program, which is a large program of approximately 200 individual projects designed to upgrade and expand the existing road and drainage networks across the country. Similarly, Kuwait is planning to renew its roads, drainage, sewage, and water supply infrastructure and will likely develop comparable programs to meet the demands of an increasing population.

In Saudi Arabia, planned developments for new urban centers will drive the demand for new assets that will deliver water resources in areas not currently served by existing infrastructure.

AS: What new trends or opportunities will emerge in the MENA region water sector?

PJ: A significant opportunity in the MENA region exists in Libya where much of the infrastructure has fallen into decline. The Libyan government was planning a program to rehabilitate and build new water supply and sewerage infrastructure; however, the revolution in 2011 prevented this program from advancing. Currently, the need for this program has increased and there exists a significant opportunity for water infrastructure investment across the country.

AS: What challenges will the MENA region water sector face in the near term?

PJ: A decrease in economic growth could have an adverse effect on infrastructure investment. Many nations in the MENA region have had the financial resources to continue funding infrastructure development because of the strong price and demand for oil, but any drop-off in growth could have a significant impact on infrastructure programs in the future.

Another challenge that may materialize will be in the areas of operations, maintenance, and asset management for water infrastructure. Currently, existing and planned programs are focused on rehabilitation and the development of new infrastructure. It will be interesting to see how these renewed or new assets will be operated and maintained as there are few comprehensive plans to dictate how the infrastructure will be effectively managed.

AUS Perspective

AS: What is your outlook for the Australian water industry over the coming years?

Dean Toomey (DT): In the 2000s, we had significant periods of drought across the country that drove the development of infrastructure to secure water supply for every large population center within Australia: Brisbane, Sidney, Melbourne, Adelaide, and Perth. This development increased water capacity in these areas as new sources of supply were injecting more water into the existing networks.

Parallel to this growth in water supply, efforts were made to improve water conservation through community education and public outreach in light of recurring droughts. This resulted in a decrease of wastewater demand as water supply increased. Consequently, areas that received infrastructure investments now had the capacity to provide water resources over a longer term.

Since then, we have gone from a period of heavy capital investment to a period of reduced spending. The investments previously made in water infrastructure have reduced the capacity of the public sector to take on any more debt. As a result, the water industry will continue to focus on sweating the existing assets and maximizing conservation.

AS: What new trends or opportunities will emerge in the Australian water sector?

DT: In the current retracting water market, there are significant opportunities in asset management and condition assessments for existing water infrastructure. Many utility companies have thousands of kilometers of underground water mains and sewage lines that may range in age from ten years old to over one hundred years old. The condition of those assets is not well understood, and I see an opportunity to develop new methods to prioritize condition assessments and develop inspections with actionable outcomes with regards to capital spending.

AS: What challenges will the Australian water sector face in the near term?

DT: I think that public policy, public awareness, and public spending with regards to water infrastructure are out of sync with the actual needs. Major weather events, such as recurring droughts, have driven investments in water infrastructure in response to public concern over water supply. The resulting investments were occasionally unplanned and direct responses to public concerns. Consequently, the decision-making for these large capital investments was not always effective in addressing the actual needs for the water networks.

Australia is certainly prone to future droughts, and climate change will only increase the frequency of extreme weather events. It is therefore imperative that investments in our water networks are planned, programmed, and effectively implemented.



Image Header Source: Lars Plougmann (Creative Commons)