[00:00:00] Speaker A: I think what's going to be interesting, what we're starting to see is more cities are starting to use treated wastewater for street cleaning and fountains and other urban applications, parks, things like that, which eventually are starting to build up the practice of using wastewater, which can then start to be applied for industry.
[00:00:28] Speaker B: I am Reese Tisdel and this is future Water, which talk about all the ways which companies, utilities and people are addressing the challenges and opportunities in water. This is episode 95, and I know it's going to be a good one. That's because we're going big again. I'm joined today by two Bluefield colleagues, Keith Hayes and Maria Cardinal, out of our Barcelona office. I wanted to talk to Keith and Maria because it's actually a lot happening in Spain's municipal water right now. No, it's not the biggest market on the continent. That position actually belongs to frontrunners. If it's a race, France, Germany, Italy and the UK. Spain is actually one of the more interesting, however, in terms of water management, because current impacts or recent impacts from climate, drought, southern Europe issues, but also technology adoption and the competitive landscape. Lots of interesting companies not only coming out of Spain, but also seeing what they're doing in the country as well as in other parts of the world. So I'm hoping that Keith and Maria can highlight some of the most interesting developments in the country, including the drivers trends and identifying some of the key players shaping the market and those that we should be looking out for. But before we do that, I thought I'd share some news that caught my attention this past week. Last week, the Wall Street Journal's Eric Mehler published an article in the Science section. The article was titled the Science behind why the world is getting wetter. There have been a string of climate related events that have, that are highlighted in the article. They point to a broader trend that we're seeing at Bluefield. And some of these events, quite honestly, I didn't even know that they were happening at such scale. So increasingly, stormwater and flooding are really a result of natural weather patterns that are being supercharged by record breaking global temperatures. So essentially, as the globe gets hotter, the atmosphere can hold more water, which then results in rainfall. And that rainfall is creating all kinds of problems, not only to communities and death tolls, but also financially, the impacts are pretty significant. So to point out a couple examples to prove my point, in April, east african countries receive four to 20 inches of rain. That's up to six times normal amount. So Nairobi, Kenya received nearly twelve inches in one week, causing dam burst mudslides and floods that actually killed 200 people. Dubai, also known as the desert, recorded its highest daily rainfall on record, over ten inches in one day, which submerged airports and surrounding highways. Southern China saw 17 inches of rain in April, triggering a highway collapse in one instance. Southern Brazil lastly got six inches of rain in 24 hours, causing a dam burst, flooding, and over 50 deaths. So why should we care at Bluefield, apart from the tragedy and the destruction caused by these large stormwater events? Well, based on client feedback and discussions, we seem to be entering a new phase of infrastructure investment and interest. And I would say this is that we're in the climate driven stormwater management phase that has long been overlooked. Prolonged heavy rains from warmer temperatures are making it difficult for soil to absorb water, increasing flood risk. Traditionally paved urban landscapes look no further than Houston. Texas are preventing water absorption, and the deluges are threatening property, agriculture and food production. So, to put it in perspective, and know, I've, you know, everyone in the US and Europe, you're not in the clear. This is not just about developing economies. Climate really has no boundaries. Since 2000, climate related events have caused $558 billion in property damage and agricultural damages. In the US alone of this, stormwater and flooding have made up almost 30% of the total. So the numbers are pretty staggering. And the concerns are, is that it is getting worse and worse. And one of the challenges, or if not the biggest challenge, is in places like the US and european, no entity is in charge of stormwater management. This is in stark contrast to, say, drinking water and wastewater utilities.
For stormwater, it's dependent upon the cities, the towns, the counties, as well as Department of Transportation, Department of Environmental Protection.
It goes on and on, and someone's got to pay for all of this, or at least the management of it. There's a lot of infrastructure that's tied to it as well as the policies related to it and how that is going to be managed going forward. So to that point, I might as well plug Bluefield's upcoming stormwater report that's about to be released in the next couple of weeks to a month.
What we're looking at is sort of market sizing of forecasts for stormwater by year, by product type, by end user segment. For the US, our current market size opportunity, this is the first you're going to hear of it.
But this past year, stormwater management capex, should I say, was $35 billion. This includes labor and equipment.
I might add that we're not just talking about utility management, we're talking about us stormwater infrastructure market, which also includes commercial and industrial, plus transportation as well as utility management as well. So the numbers are pretty significant when you look at the total dollars. We're also looking at the companies active in the space, the leading vendors, their products, their market positioning, the m and a activity, and their strategies overall. So the report we will be releasing will profile more than 30 of the leading stormwater equipment and infrastructure suppliers.
So I thought this was interesting. When I saw the article about stormwater management Overall, it made me think more about what's happening as well as in the US and Europe and what our research plan is for the next month or so. So we've had a lot of clients been asking about stormwater. So here's an opportunity if you want to learn more about the report. We already have it up on the website.
As far as the details of what it will include, you can visit
[email protected] so with that being said, let's get to Maria and Keith.
All right, so I'm joined here by Keith Hayes and Maria Cardinal. Keith, how are things?
[00:07:12] Speaker A: Good. Maryse. Right, Nick, so busy and energized at the same time. Got a bit of rain over here in drought stricken Spain, which we're going to talk about more.
[00:07:24] Speaker B: And, Maria, what about you? You're in Barcelona as well now?
[00:07:28] Speaker C: Yes. Kind of enjoying the rainy day, I have to say. We'll get plenty of sun in the coming weeks and months, so I'm happy.
[00:07:36] Speaker B: Nice. It'll be smoking hot before you know it. Then I guess the other part of it is I'll see you guys actually next week. So I'll be in Barcelona meeting with you guys. So that'll be good. Hopefully it'll be warm and sunny then because we're not getting that here. So obviously you guys are in Spain. So that's one of the reasons, as I said in the intro, wanted to get some insight into what's happening in the market. We also support a number of companies addressing the spanish market, let alone the rest of Europe. And so Spains water sector has evolved over time, quite honestly, and more recently because of somewhat unique challenges because of drought, water stress, but also there's just been a huge infrastructure build out over the past couple of decades with some obvious ups and downs, wave of, I guess, a population boom, a little bit of recession here and there, and then just climate issues overall. But the country is in parallel in many ways, has stepped up to deliver on such things as desalination, more advanced water management, as well as technology adoption. So this has catalyzed a number of companies growth in the global positions in the market. So what im hoping to do is take advantage of what you guys have been looking at, maybe get some perspective, share it with some of our listeners and clients. So including potential applications for their expertise in other parts of the world. So why don't we just sort of take a quick stab at Spain? Obviously, southern Europe, it's pretty warm, pretty hot. It's going to be that way hopefully next week. But Maria, why don't we start with you? What are the main challenges currently facing the water sector in Spain, and how are some of these challenges at least being addressed?
[00:09:23] Speaker C: Sure. So, well, I'd say that many of the challenges are not unique to Spain, but for Spain they are becoming increasingly important, starting with the environment. As you just said, we are getting ever higher temperatures and we are in a large episode of drought in Catalonia and also the south of Spain, although it has rained quite a lot this past month. So this has brought water stress now to regions and this impacts directly their economy, which is the second aspect of it, because Spain is basically focused on agriculture, and so a lot of its economy is relying on stable access to water. And agriculture takes up most of that.
[00:10:19] Speaker A: Water away just to drive home that point. 80% of Spain's potable water is consumed by agriculture, 80%, which was a pretty huge deal compared to most of, I would say, central and northern Europe.
[00:10:34] Speaker C: Yeah. And then to build on that in the regions where there's less water available, usually the coastal areas during the summer, Spain is dependent on the tourism as a main driver for the economy. And they consume. Tourism consumes a lot of water. So it's also very delicate equilibrium in those areas to control how much water is available and to what extent we can deploy it freely without thinking too much about it, then I'd say that in the political and administrative spectrum, we also have some issues there in terms of funding. For example, there hasn't been a lot of political will to fund water infrastructure, especially for maintenance and operating. And that has created this bottleneck where also tariffs are quite low. So then o and M expenses are not balanced out by tariffs.
And so then you get into this circle. Nowhere there's continuous underinvestment.
That just makes it very difficult for the water sector to move forward, let's say. But at the same time, there are some drivers, I'd say, and that builds also more challenges, which is all the directives and the new regulations and the need for more water. Given the water scarcity in the region that is making it not so much of a policy choice, but a need to do more with less. And this comes around to the opportunities that we see now that is arising in Spain in terms of modernizing the water sector.
[00:12:31] Speaker B: So, I mean, Keith, you had brought up that 80% of the water in the country goes to agriculture, which actually is higher than, I think, the global average, which is closer to 70% to 72%. So it kind of gives some perspective on not only, like, where it's going, but sort of what is the general focus. And as we all know what. Managing water for agriculture is incredibly difficult for a lot of different reasons. But let's put so to that point, can we put Spain in sort of in some context? Like, how does it stack up relative to the rest of countries in Europe, even when it comes to municipal water management? Can one of you guys shed some light on what that looks like?
[00:13:15] Speaker A: Sure, I can take a stab at it. I know Korea knows this area really well.
So Spain, like two or three other european markets, has a pretty strong private water concession market. So I think around 50% of the population is served by one of the three major private water utility groups here. So that's biolia, which then acquired Agbar, which was part of the Suez group. You've got Aqualia and then you've got restagua. And these are pretty large companies. A lot of them were born out of engineering firms. Obviously, they are covering the entire water cycle. They are competing very tightly for concessions that are renewed on a 2030 year basis. And we think that that market is being put under a lot of pressure just because of, as Maria said, the resource conditions, the economics around water, and the need to upgrade a lot of the infrastructure which coming out of COVID there has been recovery funding divvied up across several southern european markets. Spain one of the main recipients. And leveraging those funding channels to drive particularly the digitalization of. Of water networks in Spain.
[00:14:49] Speaker B: I guess. Maria, for you, Keith, alluded to this. What's the size of the market overall, even capital expenditures? Because you guys have just put together a forecast for Spain itself. And then I'll get back to you, Keith, with a question I have about market entry and who to work with. Maria, what's the size of the market when it comes to Capex?
[00:15:09] Speaker C: Indeed. Well, it's interesting because in terms of capex, we do see incremental growth in Spain because of what Keith said. And so we currently forecasted the municipal order capex to approximately $3 billion per year. And it's mostly focused on wastewater, I think around 77% of it, and the rest is for drinking water. And the reason for this, we can go deeper into it later, but I think it's mostly resource optimization, finding basically doing reuse for agriculture, doing reuse for industrial activities outside agriculture as well, and also gaining back resources from this waste that currently is being discarded.
[00:16:07] Speaker B: Okay, so that makes sense. And I know we've also done a reuse report as well. So, I mean, Keith, back to you. Because you had mentioned mostly privatized, you're looking at three companies in particular. I mean, are those the partners for, if you're an outsider, sort of looking at the market? I mean, do you pretty much have to work with those companies? How are companies entering the market?
Or is it even a market that can easily be penetrated by outsiders? Or is it all spanish companies mainly driving the business?
[00:16:42] Speaker A: Yeah. So I think you probably need to define some different parts of the value chain and talk about them somewhat separately. Right. So you've got the concession operator type player, which was those three that I mentioned. That is very tight competition. You have a couple other players in there like Acciona and Safir, which do have, I'd say, smaller town concessions dispersed all over Spain, whether it be Andalonia. So that market is quite consolidated. And we've worked with some of those players who've assessed those markets. We know that there are dozens of concessions that come on the market every year, and they're all bidding against each other and trying to extend their footprints. So trying to get into that market is not easy. It's not easy to acquire, let's say, an acqualia per se. But then you've got the engineering market, the engineering services, design, build that market. There are larger groups there, like Ferrovial, which owns Cadagua, or even other smaller construction and engineering design firms that a lot of them grew up during the boom in real estate in the beginning of this century or around 2000, a lot of those firms caught on to a lot of the infrastructure build out. And so there are many construction firms that can be partnered with around the country. Obviously, a lot of them have built up engineering expertise during the last major drought we had, which is around 2000, 820 ten, when a lot of them were building desal plants.
And then leverage that experience outside of Spain into the Middle east, where many of them, like Acciona, have built huge desal plants.
To this day, they're still working on those. And then you've got the companies that are supplying equipment and other types of distributor type companies. So we've worked with some of them. You know, Spain needs more leakage technology. They can use more software services around that. And there, I'd say there's a pretty strong base of companies that have been, you know, doing either acoustic leak detection or been doing integration of ScaDA systems and some of the industrial automation that's been happening over the last couple of decades, which are potential interesting partners as well. So it's a relatively vibrant market. I mean, it is quite competitive because you do have these strong private utility groups which, by the way, have been able to test out a lot of technology in their own concession footprints. So not an easy market to get into, but at the same time one of the largest ones in terms of anticipated growth over the next few years.
[00:19:42] Speaker B: Yeah, I mean, I think we even have seen, at least back in the day, it was before Veolia acquired Suez. Suez would sort of develop technologies actually out of Barcelona and in Spain, and then they try to deploy that around the world to the consternation or frustration. I know of other markets when it came to O and M and services for some of their equipment, but it is a bit of an incubator of sorts. I mean, Marie, you've been working with a couple of clients on this. Can you discuss some of them? Keith alluded to this. Can you discuss some of the emerging trends when it comes to digitization or broadly smart water management within the spanish market?
[00:20:23] Speaker C: So I'd say that following on what Keith said, we, and he mentioned earlier as well, there are big EU funded pockets being dispersed currently into the water digitization sector, both for urban and for rural water.
I think that the main push we're seeing is for metering, mapping, a lot of njs, a lot of scada water loggers. And I think that overall there is a big imbalance, let's say, between big cities such as Madrid, Barcelona, Valencia, who have, who have had historically, I think, more funding and are more advanced in their digital, let's say, digital trip, not towards full digitalization of their water networks and water infrastructure.
But even with that, for example, in Madrid, there's still ongoing a huge rollout campaign for smart meters.
So there is still a lot of space to work with and different technologies to test as more cities of smaller size and also in more like rural areas that might be a little bit isolated need to deal with their water loss, reduce it, optimize resources, optimize as well operational costs as we also have a bit of a crunch in terms of human resources in the water sector.
So there is plenty going on.
[00:22:22] Speaker B: How much of the funding is coming from the EU versus the spanish government, or is it one flowing into the other?
[00:22:30] Speaker C: There is quite a bit of overlap.
For what is worth. There are different levels, let's say, from where funding is coming.
First is the level, which definitely is the main driver because it comes together with AU regulations that they then provide different, through the different recovery funds available to countries like Spain or Italy.
They are providing a lot of aid in that sense. But also we have, at national level, the hydrological plans, for example.
We have the fluid management plans, the drought management plans, river restoration plans, etcetera. All of these are at national level and then implemented also with some regional level funding, as Spain works in quite a federal way and local funding as well. That's more management, I'd say. And so there are different things that come together, and sometimes it is difficult to know where exactly the funding is coming from or to what percentage. So I'd say that, for example, for most of the digitalization of the water cycle, a lot of it is coming from the EU.
But that's not to say that if a region or a specific project doesn't have your funding, that it won't happen.
[00:24:05] Speaker B: So do I mean, to the point of sort of outsiders looking in, or foreign investors or vendors, should they be looking closely at the funding cycle? Is it entirely dependent on that, or are the utilities themselves a bit more proactive? I don't know if either you guys have a take on that as well.
[00:24:27] Speaker C: I'd say, and build on that. It depends sometimes on the utility.
Again, there are some, like Valencia Global omnium, which I don't think we mentioned before, but they are one of the main hotspots for digitalization. They're very forward thinking in that sense. They have a partnership with asylum through there, through Ivica. And so it very much depends. There are big utilities that have the liquidity, let's say, and the proactiveness of doing, for example, canal Sabala in Madrid is doing, I think, a record replacement rate over the next three to five years to reduce the kitchen, to reduce water loss, whereas maybe you can find other regions that for a number of reasons haven't been able to keep up with maintenance costs. And so they are a bit lagging behind and they haven't necessarily been moved on to more advanced management techniques such as remote metering.
[00:25:49] Speaker B: Keith, I dont know if youre going to say something about global omnium or other utilities.
[00:25:54] Speaker A: Yeah, I think back to your original question, if you know, do they invest in these technologies beyond the funding thats being provided through these EU channels.
And id say theyre trying to maximize the profitability of their concession contracts, obviously. So unless there is a specific driver requiring them to invest more in that, they're not necessarily as proactive as they could be. But then you've got, on the other hand, large public utilities like canal and Sabel, for instance, they have to deal with leakage, they have to deal with uncollectibles. On the non revenue water side, they have to deal with sewer overflows. So they have been considering how to upgrade their situational awareness. I would say the amount of instrumentation they have on their networks can also bell, as Maria was saying, has a big rollout program underway to do more smart metering. But I think the other, the issue there is the regulation isn't necessarily forcing it. It's more dealing with scarcity, dealing with some of the operational challenges that probably all utilities didn't have.
[00:27:14] Speaker C: And if I may, then we're talking a lot about more on the technological side now of the utilization. But then there's also like the push because there's just such a need to change how things work. And that we can find, for example, in Murthia with Esamor, which is another public utility where they are doing 98% of reuse for agricultural purposes. So we do have some good examples together with some others that need to improve certain aspects. But I think it very much depends also on the geography and what are the immediate needs within the region.
[00:28:08] Speaker B: Yeah, I mean, I think to that point, this is exactly what my next question was going to be around was reuse. So I know towards the end of last year we had done a forecast looking at the reuse markets in Europe. And I think Spain actually is the biggest market of those. I mean, if 80% of water is going to agriculture, is there an opportunity for that? And you mentioned Murcia, which is 98% for Ag. So that lines up what other activities when it comes to reuse. I mean, that would be, is it innovative or is it just smart? Maybe that's a better way to look at it, to say, hey, we're a little tight on water. If there's extreme drought, whether it's relative to the rest of Europe or not, the fact of the matter is Spain is water stressed. So when it comes to reuse, what sort of trends are you guys seeing? And will Spain to be sort of the leading market and how do we see that changing going forward?
[00:29:05] Speaker A: Yeah.
So Spain does lead Europe. If you set aside Cyprus and Malta, Spain leads Europe. In terms of wastewater reuse, it's about 1214 percent of all that wastewater does get recycled, and probably 80% or more of that is for agriculture being a very thirsty country. In terms of agriculture being such a huge piece of their economy, it makes sense that particularly in areas like Mortfield, where I think it's over 90% of their wastewater is being reused for agriculture.
Agriculture reuse is not as technologically sophisticated, let's say, as other applications. So I think, you know, you know, the, maybe a filtration step in there before it's conveyed to irrigate. But I think what's going to be interesting, what we're starting to see is more cities are starting to use treated wastewater for street cleaning and fountains and other urban applications, parks, things like that, which eventually are starting to build up the practice of using wastewater, which can then start to be applied for industry, in industry. I think this drought that we've been having important for these different parts of the economy to consider going forward. If we are going to be facing drought restrictions, how do we start using more recirculated cooling water? How do we start implementing zero liquid discharge type practices? There isn't really a shortage of technology. I would say it just hasn't really been the impetus in terms of the economic model behind it or the lack of resource. But if this drought has taught anyone anything, don't take that for granted. And that's definitely been the case for agriculture, for tourism. And I think now some of the lighter manufacturing industries as well are definitely taking a second look at reuse.
[00:31:08] Speaker B: Yeah, I think it's the other industries. I think AG has been the big focus, but it's also maybe the hardest for reuse applications. It's disparate the volumes needed.
But as we see other industries, I know one of the reports we just put out, we just put out a global hydrogen report, which actually Spain is a target area for project developers. And the water demand is going to be pretty significant. I think we forecasted 26 billion globally in water management spend. If all of these projects, Spain and beyond, if they actually come to fruition.
So that's going to go either way. But Spain is out there partly because of its large renewable footprint.
But if that is also just being squeezed by energy prices and such like the rest of Europe, other opportunities. Data centers are another one. Spain as a whole is pretty advanced when it comes to technology as well. So, you know, data centers play a big role as well. I don't know if you guys have anything to add before we wrap up. Is there anything else to be looking out for? If I'm looking at Spain as a market opportunity, like some of our clients, anything else they should be considering when they look at it, whether it be digital reuse or just advanced treatment.
[00:32:31] Speaker A: Overall, I think on the industrial side, I think industrial water is undergoing some interesting trends. One is, as I was saying before, that focus on how they can do more reuse. Also the implementation of circular economy principles and being able to capture, let's say, biogas and upcycle it to biomethane for an anaerobic digesters for industries that have more organic wastewater streams is a big theme that we've seen, and a lot of the major engineering firms are taking a look at that.
And then I think also just managing their water footprint. The global trends we're seeing in general is that large corporations, especially ones in Spain, for instance, the pharma industry is a big one in Spain, are having to begin reporting their water footprint if their facilities are of a certain size starting this year. So we think that industrial water in Spain is going to become a lot more interesting. You got a huge food and BeV sector here.
In addition to, obviously, agriculture. There is a lot of low hanging fruit there in terms of energy efficiency type projects, obviously reduce biogas, capture, sludge management. So there's definitely exciting things that we're tracking there and we'll be putting out more research on that.
[00:34:05] Speaker B: Nice. I like it. Maria, what about you?
[00:34:08] Speaker C: I was basically going to do that summary as well, including the biogas, because we had a project on that recently as well. So, yeah, I'd say to look out for the utilization in the water sector, especially looking at leak and non revenue water reduction, then energy creation with biogas and hydrogen, for which, for example, also wastewater reuse could play a role in hydrogen production, then wastewater reuse in general for the industrial side, as Keith mentioned, it's been increasingly used, and I think there are more and more industries that are looking to recirculate their used water within their infrastructure to then consume less water overall and.
Yeah, and metering to better monitor the network, be able to use fewer resources, less energy targets, better, different interventions that need to be done. And I think those are the main points.
[00:35:17] Speaker B: Nice. I like it. So I don't want to. Obviously, I know you guys got things going on there. It's also just by, because of time zones. It's headed towards the end of the day for you guys. So thanks again for jumping on and look forward to talking to you guys, not only next week, but again on future water podcast. So thanks. I'll talk to you later.
[00:35:38] Speaker A: Thanks, Rhys.
[00:35:41] Speaker B: All right. It was great to have those two to jump on. I mean, I knew going into this when I threw this out to them to say, hey, weve been looking, were obviously in Spain. Weve been looking a lot at Spain. Whats happening in the market? I think theres a lot to unpack there. And I think Keith and Marie did a pretty good job of wrapping up. I mean, if I had to sort of put it in summary, there are a couple of things that I would consider when looking at Spain, and one is just drought and water scarcity are driving a lot of initiatives, whether it be floating desalination in the port of Barcelona or reuse programs to support industry or agriculture to that point. When it comes to industrial, particularly agricultural related industries like food and beverage, they are kind of, there are a lot of industries in Spain, so there's a lot of opportunity for advancements, improvements and efficiencies. That also includes footprinting. There are new regulations that are requiring industrials to calculate or record their water footprints in the country, I think within the year. So that's pretty significant. Then lastly, I would say energy, not to be overlooked. Obviously, we've talked on this podcast about it, but the impact of energy prices in Europe, which have always been significantly higher in Europe than, than, let's say the US, where I am, but also because of the Russia Ukraine conflict, energy prices and the availability of natural gas to supply that market have created price pressures on the market. And there's also a big transition towards renewables or green power and maybe even hydrogen going forward. So those are the takeaways. Energy, water scarcity, reuse and desal and then industrial markets and footprinting when it comes to that.
I appreciate them jumping on. So before we sign off, if you are in Boston or Barcelona, let us know. We'd enjoy the opportunity for a meeting. If you're in Barcelona next week, I'll be there. So that's your opportunity. Please subscribe to feature Water podcast and give us a review. And send us a note to water expertsluefieldresearch.com with any topic ideas you would like us to discuss.
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[email protected] dot until we talk again, be well, be safe, and take care.
