Underinvestment in water has consequences

Summary: Recent flooding, operational failures and under-staffing at Jackson, Mississippi’s primary water treatment plant, combined with decades-long infrastructure decay, resulted in an indefinite failure in the supply of safe tap water to Jackson’s 180,000 residents.

Why this is important: By 2030, water demand is expected to exceed current supply by 40 percent unless water is decoupled from economic growth. Impaired drinking water is not just a developing world issue, as this story demonstrates.

The big theme: Water is the critical resource to sustain life on this planet. It is essential for our bodies and those of the other living species on the planet as well as being an important resource in industry. Its availability, especially in potable form, is a macro risk factor as well as being an opportunity for innovation that investors can drive.

Recent flooding, operational failures and under-staffing at Jackson, Mississippi’s primary water treatment plant, combined with decades-long infrastructure decay, resulted in an indefinite failure in the supply of safe tap water to Jackson’s 180,000 residents. Mississippi Governor Tate Reeves declared a state of emergency in and around Jackson, the state capital and largest city. The state health department has warned that tap water is “not even safe to brush teeth with or give to pets”. Residents had previously been advised to boil all water before drinking. The Federal Emergency Management Agency head said it is still too soon to say when all Jackson residents will have safe running drinking water.

Why this is important

The United Nations determined that access to clean water and sanitation facilities is a basic human right and it’s one of the 17 Sustainable Development Goals. In 2020, 2 billion people still lack safely managed drinking water, including 771 million who were without even basic drinking water, half of whom live in sub-Saharan Africa. In developed nations too, there have been a number of well documented cases of impaired drinking water, most notably the Flint water crisis.

Investing in clean water, sanitation and hygiene is estimated to generate a return of US$21 for every dollar invested in the form of improvements in quality of life, reduced pollution and reduced healthcare costs. By 2030 water demand is expected to exceed current supply by 40% unless water use is “decoupled from economic growth.” Globally, approximately 19% of total water withdrawals are used for industrial purposes, on top of the 70% used for agriculture.

Water stress, or the proportion of freshwater resources that are withdrawn, is an important indicator of the risk of water crises. The chart below shows water stress for the top six economies. You can see a large reduction in Germany’s water stress from 1991 to 2013 as drinking water use declined by about 15% due to water saving household and sanitation technologies, awareness raising and the introduction of a largely consumption-based water tariff. The Water Framework Directive, introduced in 2000 has been a central legislative instrument aimed at protecting inland surface waters, groundwater, water courses and coastal waters in the EU.

India is the most water stressed of the world's top economies with a big reliance on the monsoon for its water requirements, climate change is make that increasingly erratic as well as impacting drought and flood frequency making water management more of a challenge. The World Bank for example is engaged in a number of projects as are a number of charities and foundations to support local measures.

What other issues does this raise?

Investing in water treatment and wastewater disposal has been a big asset class for many decades. And yet this event, plus recent similar problems with sewerage disposal in the UK, suggest that some apparently developed countries still have a lot of work to do.

A 2016 US Government Accountability Office report pointed to the risks of cities with declining populations and corresponding declines in ratepayers leading to under investment in water and wastewater infrastructure. And a 2019 joint report by the DigDeep Right to Water Project and the US Water Alliance concluded that race was the strongest predictor of water and sanitation access and poverty was a key obstacle in the US.

The federal infrastructure bill passed in 2021 will provide financial support but will take time to trickle down as it is allocated to state legislators with concerns being raised about political motives when it comes to dispersal. The UK faces a similar challenge with the dumping of sewage and capital is potentially going to be allocated for improvements and expansion of water treatment facilities.

Reducing the burden on treatment facilities, and hence reducing the need for investment, can also come from the commercialisation of grey water systems where water is collected and reused from showers and sinks in, for example, toilet flushes where the water does not need to be potable. These can be commercial or residential and are being explored in water stressed countries such as India. They can also be used for garden irrigation and, with the right local treatment technologies, for agricultural irrigation too. In addition the heat can also be recovered from waste water in a grey water system, referred to as a greywater recycling heat recovery system.

Scaling up the availability of Urine-diverting toilets which have a urine collection basin at the front of the toilet bowl, draining to a separate tank from the solid waste can greatly reduce the water required for flushing. A key advantage is their applicability globally in both with dried faeces being used in agriculture post composting - composting toilets are another alternative here. Urine also requires far less treatment, thereby reducing the stress on treatment plants.

Persistent flooding was a key factor in the ultimate failure of the water treatment plant in Jackson. Various urban solutions are being explored such as the sponge cities concept and other nature based solutions to reduce the risk of excess storm water leading to flooding and associated damage. These are important considerations in broader urban planning. Plus, from a regulatory perspective, in many countries, excess storm water is often permitted to mix with waste water and sewerage.

Finally, as part of the energy transition there is the question around “will there be a net increase or decrease in the competition for water”? As industrial processes are refined to become more water efficient, will this be offset by certain green energy technologies increasing water consumption? For example, approximately 2.2 million litres of water is needed to produce one ton of lithium. A topic for another day.

Please read: important legal stuff.