[00:00:00] Speaker A: What we need to be aware of is climate change as not only impacting the increase of temperature but is impacting the severity of extreme weather events. Weather is having extreme flood or extreme drought.
[00:00:22] Speaker B: I am Reece Tisdall and this is the Future of Water in which we talk about all the ways which companies, utilities and people are addressing the challenges and opportunities in water. Welcome to episode 105 and I know it's going to be a good one. That's because today I'm joined by my colleague Zineb Momin. She's an analyst and expert in Bluefields Europe municipal water team and with her I'm hoping to explore two recent developments impacting Europe's flood management strategies. One, the increasing investment in flood infrastructure driven by things like climate change, including a recent storm, so called Boris, that dropped 500 millimeters of rain, or I guess in my parlance that would be almost 20 inches of rain in a matter of hours. So pretty quickly. So Zineb will provide some details on that. But it also makes me think of Nate Bargace's Washington Dream Saturday Night Live skit that makes fun of the US's usage of the imperial system for measurements rather than the metric. Go find it on YouTube. I think it's hilarious and my kids think I'm ridiculous for watching it over and over. So if you're looking for a pick me up, as I oftentimes do, that's the skit that I check out on YouTube. But more importantly into the topic at hand. As extreme weather events like storm bores become more frequent, Europe is ramping up its investment flood defenses, including traditional engineering solutions and advanced technologies. So Nab and I are going to discuss how these changes are shaping the market for engineering firms, utilities and technology providers, including digital tech, which is what we are seeing more of. But also we're going to talk a little bit about what the future holds for flood resilience in Europe. And you know, why is that important? Well, it's because climate has no boundaries and this is a significant problem which there's no true owner. We've talked about in our and that is Bluefield's recent stormwater report we did for the us. We had to look at real estate, property management sector, we had to look at transportation. Then we also looked at the municipal utility sector. No one's really in charge of stormwater management and that's what partly makes it so complicated. So if you have any questions about that and how Bluefield thinks about it, you can always reach out to us, whether it be in Europe with Zenab, as you'll soon hear, or people like Eric Bindler and Charlie Seuss and others in our US Team. But before we do that and before you reach out to us, you're going to have to bear with me and let me talk about what caught my attention recently. Got three quick things because last week I was out of the office for some personal reasons and so I'm off week. But three things have piled up. One, I think this caught a lot of attention. It's really important, and that is the Lead and Copper Rule improvements were finalized. I think it was just last week and issued by the EPA by the October deadline, which is what we're expecting. This update marks really the most significant revision to the Lead and Copper Rule since its introduction in 1991.
But this one goes a little bit further in its efforts to eliminate lead contamination in drinking water across us. But why do we care? Well, the EPA's number, at least this is what they put out, is 9.2 million lead service lines are going to have to be replaced and that's going to cost.
The number keeps climbing a whopping US$90 billion. And why is that important? Well, there's significant funding gap because the Infrastructure Investment and Jobs act, also known as IIJ, only allocates $15 billion to lead pipes. So who's going to pay for all of this? It's a big challenge, but it's also a significant step and needs to be done to address real drinking water quality issues in the US and this was catalyzed partly by Flint, Michigan. So if there's a benefit to come out of Flint, it is that it brought lead and the impacts to everybody's attention for good or bad or what, why, when or how it happened. And now here's where we are. So we've got $15 billion in US federal funds being delivered through the state revolving funds and an estimated $90 billion bill coming down the pipe, no pun intended. Secondly, what caught my eye, UK water sector is under review. There have been public apologies by government officials for the industry's performance as the utility sector faces its largest review since privatization in 1989. I think that is with the Margaret Thatcher days was also the year that the Berlin Wall came down. An independent commission is now reviewing the role of offwat, the water regulator. That is amid public outrage over rising bills, sewage spills and aging infrastructure. This has been a big issue, particularly since some major concerns, financial concerns about Thames Water and its ability to meet its debt obligations. But why do we care? Well, as I mentioned offwatt. It's provisionally announced a 21% average increase in water bills from 2025 to 2030, with Southern Water seeing a potential rate hike of 44%. So rising costs are going to test public patients as the industry grapples with infrastructure needs. It's more complex than just raising bills. As you can imagine, the UK has a very old system, it's aging, it's very capital intensive to keep up with it. To say that there haven't been improvements, whether it be on the sewer side or on the drinking water side, is not true. But that being said, no one likes to see rate hikes no matter what they are. And I think there's also an education issue that needs to be brought forth. And this is not unique to the uk. And that is out of sight, out of mind. No one really understands what's happening beneath the ground, whether it be in the UK and all those miles of pipe, the treatment systems, water, wastewater, it's not the sexiest beast on the market. And so having people understand what it costs to operate these systems is incredibly important and hard to do, particularly as you're seeing things like drinking or bottled water companies out there, marketing all over the place, raising questions and doubts about the reliability of tap water. But that's a whole nother story and a whole nother podcast, quite honestly, that I think we've already talked about. So you can go back in the archives and find that. And then lastly, my third point is the status of ij. That is, as I mentioned, the infrastructure investment jobs hack. This is a little bit self serving. Bluefield released its analysis just this past week. The status of the IJA and the funds, the $51.3 billion of funding that we've been tracking in their allocations and how they're rolling out to the market. So this program is from 2022 to 2026.
We look at this on an ongoing basis to see which projects have been awarded, where the dollars are, particularly the 43 and a half billion dollars funneled through the state revolving funds. And despite the large funds, only 22% of the clean water and drinking water state revolving funds have reached their end users. And we're in 2024. So the disbursement has been a bit slower than expected. And there are a number of reasons. I've explained to clients, you know, it's the structure of the market is highly fragmented. We're not only talking about clean water, which is wastewater for us, but drinking water as well. So you got two programs you got 50 states, plus the territories that are receiving funding, and every state is a little bit different and people are trying to figure out what their priorities are. So every, like I said, it's kind of a, a bit of a rat's nest and working through that. But my colleague Charlie Seuss has done an incredible job at sorting through the data and the details.
And those are the three things I got. We are still on the road. It's Q4 at Bluefield Research. So if you're planning for 2025, reach out to us. We are going through our own planning, talking about what's happening in the world of water, what our research plan is going to be and how we're going to help clients, whether it be market research, reports, insights, data and analysis, but also consulting. So let us know. We're here for you. We're not doing this just for us. And with that being said, let's get to Zineb and see what she's got to say about Storm Boris and flood control in Europe.
All right, so I'm joined by Zineb. Zineb, how's it going?
[00:09:05] Speaker A: Very good. Thanks for having me today.
[00:09:08] Speaker B: Yeah, so you're half day ahead of me. So it's a Friday and you're wrapping up today, but the only one in the office, so I'm glad I was able to grab you for a quick recording. What do you got going on this weekend?
[00:09:22] Speaker A: So, yeah, maybe some parties and probably I'm going to go low key, so it depends on how I'm going to end my day today.
[00:09:31] Speaker B: All right, well, I'll be in Barcelona in a couple of weeks, so go all catch up then. And I know it's nice here, I'm sure it's nice there. But speaking of nice and weather, which is kind of the topic of conversation. So just this past week you put out a research note, some analysis on what's happening in Europe when it came to Storm Boris, as they call it, and really it's what it brought forth or sort of brought to everybody's attention was flood control in Central Europe and lessons learned. And what's happening when it comes to climate floods and all of the above, whether it be in Europe or the rest of the world. So why don't you give us a little bit of background on Stormboros and kind of why we decided to put some research together on this.
[00:10:22] Speaker A: Yes, sure. Actually, this happened when I was having my holidays and it started when I was in Austria. So it was the second week of September when the Storm Boys dropped 500 millimeter frame in less than 44 hours and causing over 3 billion in insured losses and a dozen fatalities across all central and eastern Europe. And the interesting point here is that despite the storm intensity advancements in flood forecasting, especially in the European Flood Averni system shortly named EFAS really minimized what could have been far more catastrophic outcomes because previous floods like those of 1997 or even 2002 were less intense but caused much more higher damage.
And of course there was an emergency response and the European Union mobilized 10 billion for flood recovery. And here where we see EEPC companies absorbing 50 to 60% of this investment, especially in drainage and fluid barriers.
The point here is that, okay, we got the damage caused by the storm and even if it was less than the previous one, it was three times higher than the allocated budget for the flood disaster.
[00:11:51] Speaker B: Yeah, I mean I think this is a topic that comes up again and again. I mean at the same time, just several weeks ago there were, there was obviously a hurricane in the US flooded North Carolina. But you said something that I don't think really anybody in the us let alone maybe the rest of the world knows about and that is the European Flood Awareness System. So what is EFAS and what does it do and how does it work?
[00:12:20] Speaker A: Yeah, EPAS actually is a system that collects ton of data from over 40,000 stations and 70 sensors across all European countries. And this data is fuels to hydrological model called LIS flood. And this model predicts flooding up to 10 days in advance and allowing authorities to be prepared for if there is a storm. Whatever. The thing is, EFAS doesn't just do a prediction, but it's also categorized flood by severity, kind of like mild, moderates or severe. And has built a notification system to keep the Emergency Response Coordination center informed about any possible upcoming flood events.
[00:13:11] Speaker B: So are there examples in the rest of the world or is this the only one out there?
[00:13:16] Speaker A: Yeah, I mean I think UAS is way ahead in having the system. There are like a bunch of hydrological model and hydraulic model that is applied to do this kind of prediction from daily basis to hourly basis. And they are very adapted to different climate regions and categories. And actually there is a story when I was doing my Ph.D. i was looking for data on those platforms where I found my first job in Spain. So I think like it's a kind of duplicating the US system and hydrological modeling, but more into European climate context.
[00:13:59] Speaker B: Okay, no, that's interesting. And I guess the question is ultimately could it get to a point and maybe it is already used in some cases. I know there are companies like Opti in the US that, you know, they're using this type of data as storms move through, let's say networks, you know, is a way, is there a hardware equipment coupled with a software that can start managing the floods or the flood waters as they pass through. And so whether it be through storage and basins or even in pipes, because I mean, to this point, StormBoris, when you're getting, you know, would you say 500 millimeters? So that's about 20 inches for us listeners. So in 48 hours, that's, that's a lot of water.
[00:14:44] Speaker A: Yeah, it was a very huge storm actually.
[00:14:48] Speaker B: Yeah. And so what ends up happening is that's got to be managed. But so I mean, and that's really, this is one of the reasons we were looking at this is like this is a catalyst of sorts. So let's talk a little bit about like how climate change is influencing flood management investment in Europe and maybe even where are the opportunities that we're seeing?
[00:15:11] Speaker A: Yeah, actually what climate change and what we need to be aware of is climate change as not only impacting the increase of temperature, but is impacting the severity of extreme weather events. Weather is having extreme flood or extreme drought. So under the +3°C scenarios, the flood damage alone in Europe is projected to reach 44 billion per year in the long run term. And from here we have a very growing push toward investing in nature based solution such as green infrastructure. And I think this could take up 20 to 30% of future investments.
[00:16:00] Speaker B: I mean, that's pretty significant. In the lead in what I talked a little bit about was how is this all going to be paid for? Because one, the hard part about stormwater and floodwaters is there really is no boundary. There's no one entity that's in charge of it. So you know, when, when you're within a city, let's say if you're in Barcelona, there's a wastewater treatment system, a plant, someone's in charge of that, they're collecting it and then they're treating it and then they're discharging it wherever it needs to be. When it comes to stormwater, it hits transportation system, it hits the roads, it hits the parks, it hits the city streets, it hits the utility itself and it hits the private property owner. So it goes everywhere. And so that's one of the challenges. And then if you're talking about 20 to 30% of future investments, you know, capital Investments, I assume it's going to be pretty tough sledding ahead and require probably some more advancements and efficiencies in how we address these things. So I guess really why should the water industry care?
[00:17:06] Speaker A: An interesting point, because you got a damage that is costing money and then okay, you have two options or you are going to face the damage with maybe higher costs, or you are going to invest in long term, maybe with lower damage, but you will have much more benefits in long run. Here is something to think about actually, because in geography when we talk about risk, we're really talking about a combination of two things. We got the hazard, which is actually unnatural, that we cannot control, and vulnerability, which is something that we actually can impact and have a control over. So while we can prevent a hurricane from coming or forming, we can work to reduce how risk and vulnerability our infrastructure, cities and communities are to those events.
[00:18:02] Speaker B: Yeah, and it sounds like, I mean, there's an opportunity here too, right? And the research you put together, who are some of the companies that are probably or likely going to capture some of these dollars going forward?
[00:18:14] Speaker A: I mean, on the ground, the competition for contracts is very strong and with major players like Stravac, Octave and Scans are leading the charge. So as the need for resilient infrastructure grows and the future is here, a blend of physical defenses and digital solutions will be very mandatory. And with big names in the mix, it's a very good space we'll be watching in the near future.
[00:18:43] Speaker B: Yeah, it's a lot of big civil infrastructure, A lot of concrete is going to have to be poured at the same time there, you know, which leads to my next question that is sort of the role of technologies such as digital tools and technologies that play in modern flood management systems. So what role do they play, if at all at this point?
[00:19:05] Speaker A: Yeah, digital tools such as intellectual things, sensors, real time monitoring play an increasing and very, very significant role in managing those risks. Because digitalization reduces program costs and increase efficiency. And with real time control solutions, utilities and municipalities can better prepare for and response to extreme weather events. And here the shift toward digital solution is not only about having the flashy technologies, it's about creating a smarter integration system that helps us manage and mitigate risks before the damage happened. And of course, I mean the good example here is the IFAS European Flood Awareness system which has shown just how powerful prediction can be in reducing the impact of disasters. So instead of paying to fix damages after the fact, more investments is now going toward platform that provide end to end solutions from data acquisition all the way to action. Imagine just a platform that doesn't only do the forecast but triggers the responses whether it's managing a dam or sending out alerts to people.
[00:20:33] Speaker B: Yeah, I think that's the interesting part is, you know it's, we're not only talking about just property damage. I mean at the end of the day if you know it, it's ideally to protect lives as well. Right. And we've seen that a number of times these major floods to that point. How are insurers or financial services adjusting to flooding? I mean are you seeing any insights on what's happening or do they're key players than the market that are talking more openly about water flood management?
[00:21:03] Speaker A: Yeah. Insurance company including some big names in Eastern and central Europe like Unica face several record breaking claims especially in Poland and Austria for example in Austria it's saying that the highest flood insurance claim in history and the damage reached around 700 million which is very, very huge. So with the flooding becoming more frequent of course insurance companies like Allianz and Munich are capturing new opportunities in parametric insurance and flood risk packages.
[00:21:40] Speaker B: So at the end of the day, I mean, so and that's my last question for you is like then why should we care? Because it's happening.
[00:21:50] Speaker A: So of course I mean we're seeing institutions from local governments to global organizations like grappling with the sheer expense of these damages and it's not just the upfront costs. Insurance companies are sizing the opportunity to raise their rates making it harder and harder for people to afford coverage. And the Kiko, like many insurers are now backing out of high risk areas entirely. And take Florida as an example, like insurance companies are increasingly refusing to cover homes and property due to the high risk from flood and storms. And of course back to our second point, that's driving new urgency for effective flood protection and preventive strategies at every level of society.
[00:22:46] Speaker B: Nice. Well, I mean I think this is really interesting research note you and the rest of the team put out. So thanks a million for sharing this. If anybody's interested you can always reach out to Zaneb or the Europe team. You can go to water
[email protected] ask any questions, we're always available. So before I let you go Zineb, what, what else are you working on? Just so the listeners will have an idea.
[00:23:11] Speaker A: So we had a very interesting deliverable in the Europe service. So we are working on very big industrial forecast reports covering 12 industrial segments. We're looking at how the water is cycle is working inside each industrial segment and doing the CAPEX and Apex prediction of the total markets for that. So that going to be our Europe future reports.
[00:23:38] Speaker B: Nice. I look forward to that. I know that's a heavy lift. I know there's one happening in the US as well, which is where I am, obviously. And I know what goes into those things because the one challenge when it comes to industrial analysis and definitely forecasting is that no industry is alike. They don't necessarily speak to one another. If you're within the municipal water sector, water, wastewater, there's at least some homogeneity to the analysis and the data and who's owning and operating these systems. But oil and gas doesn't speak to food and beverage and food and beverage doesn't speak to semiconductors and semiconductors, they don't speak to hydrogen. It's a lot of data. I know it's a heavy lift. So really look forward to that as well. So. All right. Well, that being said, it's Friday afternoon in Barcelona and you're the the lone person in the office hanging on to do this podcast. So thanks a million for the time and we will talk again soon.
[00:24:40] Speaker A: Thanks for having me and have a good day.
[00:24:42] Speaker B: All right, take care.
[00:24:43] Speaker A: Bye.
[00:24:46] Speaker B: All right, that's a wrap for the 105th episode. That means we got 95 more to go to get to 200. So thanks for being part of the journey and be on the lookout for more content out of our Europe office and from our team. That team is growing, whether it be in Spain. We've got people in Paris as well and continues to grow. Lots of great stuff. Another report coming out from the Europe team is a Europe digital forecast as well, looking at, I think, all European countries across the digital water landscape. So that will parallel or match or complement is a better way to say it. Our U.S. digital Water Report that we just put out last month. So if you have any questions about that and what else Bluefield has going on, definitely let us know. As I mentioned, we are always at water experts@bluefield research.com before we sign off. If you're in Boston, Barcelona, which is where Zinab is, let us know. We'd like to see you. We'd enjoy the opportunity for a meeting. Also, if you're in other parts of the world, we are spread out and we're always on the run. Whether it be at conferences, we're always happy to meet. Let me just put it that way. Please subscribe to the Future Water podcast. Give us a review. Just give us a star, five stars. That is, if you like the podcast. It's helpful to us. You don't even have to say how great it is or how useful it is. That's what we're looking for because it helps us understand what the market's looking for. Send us a notes to water experts@bluefield research.com with any topic ideas once again and always tell a friend about it.
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