[00:00:00] Speaker A: Foreign.
[00:00:06] Speaker B: This is the Future of Water where we talk about all the ways in which companies, utilities and people are addressing the challenges and opportunities in water.
Today it's a little bit different. The latest episode on the future of water, this is episode 29. We're going to take a little bit of a different tactic if you don't know this already. Our team of water experts frequently presents to clients by way of webcasts, not just podcasts. We got a lot of channels out there. We do webcasts as well. So over the last 12 months we presented nine times to clients on a range of topics including the impacts of COVID on capital and operating expenditures, private water investments, digital strategies, M and A trends and opportunities.
But on June 9th, John Barryman, Keith Hayes and myself, we put our heads together to discuss what we think about when we think about water. What does that mean? Well, the Bluefield team is always reading the news, following trends and tracking and talking to water companies and also in other non water companies. But rather than focus on the nuts and bolts of the water industry, many of which we have already discussed, things like water scarcity, climate change, wastewater affluence, regulations and policies, we wanted to kind of step back a little bit and share our thoughts on broader market trends that are really exciting our team and not just this year, but also going forward. So there are about three factors this year that influence the choice of seven topics that Keith and I talk about. John was the emcee of the discussion.
Those three things are Covid disruption on business models and business approaches, political shifts, new and potential investment drivers coming out both Washington and Europe in particular, and then changing consumer behavior and habits that being shaped by technology firms, product offerings and sort of external business factors that are having impacts on water usage and management as a whole.
So this special episode is the three of us talking to our clients about what seven factors we see that are really interesting to us. And these include everything from energy transition to big tech to the future of agriculture and then some. So feel free to let us know if you have any questions about this after listening to the podcast. Enjoy.
[00:02:52] Speaker A: Welcome everyone to Bluefield Research's third webcast of 2021. Thank you all for joining us today. My name's John Berryman. I'm the Sales director for Bluefield Research. For those whose first time it is. Bluefield Research is an independent insight firm focused exclusively on water. We help businesses address critical questions and strengthen strategic planning in an ever dynamic water landscape. A few quick items before we get going. We'll be doing a Q and A at the end of this. So please feel free to write your questions in the chat as we're presenting and we'll do our best to get through as many of them as time permits.
Secondly, after this presentation, we'll be sending out a link to a survey. These webcasts are designed for you guys to be as useful and relevant as possible, so please take a minute to fill it out if you can do so. It does help us curate our future webinars.
I'm joined today by Rhys Tisdale, president of Bluefield Reese. Good morning. How are you doing?
[00:03:50] Speaker B: Hey, John, how's it going?
Thanks for emceeing the event.
[00:03:56] Speaker A: Absolutely. And next is partner in crime, our vice president and head of consulting, Keith Hayes. Keith, thanks for joining us.
[00:04:06] Speaker C: My pleasure, John. How you doing, everybody?
[00:04:09] Speaker A: All right, so for some perspective quickly here. Over the past year, Bluefield's provided a steady stream of webcast presentations to clients.
That's on top of the research Deliverables, the weekly Waterline newsletter, analyst perspectives podcasts. You guys hear from us. So this is our ninth webcast in a little over 12 months. As you can see, the topics have varied widely from forecast updates to digital water strategies. Things in between Today we wanted to take a different tack. So our team is always reading the news, following trends, talking to companies, talking to you guys today. Rather than focus on the nuts and bolts of the water industry, many of which we've discussed, we wanted to share broader market trends that are exciting our team not just this year, but going forward. So there were three factors this year that influenced our seven topics we'll be speaking about today.
Those were one, obviously Covid, and that's disruption of business models and business thinking.
Two are recent political shifts, so new potential investments and drivers coming out of both Washington and Europe in particular.
And three, changes to consumer behavior that's been shaped by technology firms and product offerings.
What's covered today?
To put it simply, we wanted to talk about key issues that we're seeing globally that could impact demand for water and wastewater treatment, water supplies, technology and solutions, among other things. Some of our recent client engagements have centered on some of these topics, so we thought we'd provide a big picture perspective to support companies long term strategies.
Now, the next slide, what we're calling the basics are many of the headline issues we've discussed both in prior webcasts and have been covering through our services throughout the years.
Things like water scarcity, industrialization, climate change, urbanization, aging, infrastructure.
These are by no means to be ignored, but we're not directly talking about these today. Still not to be overlooked though.
All right, let's move on. So Rhys, we've got seven topics to cover. Why don't you lead us off with your first one.
[00:06:37] Speaker B: So I guess let's see if we can get this shifted over. So changing gears a little bit. I'm not going to lie. The number one on our list and these aren't ranked as a team, I think I maybe have forced this one up there. But the energy transition is one of my favorite topics partly because Keith, who's also with us and I have in depth experience in the renewable sector prior to Bluefield. So we know a fair amount about it, are pretty excited about it. We worked in the renewable space specifically, but also because the factors at play are so dynamic and it's really changed just since even when we found a Bluefield in 2013. The types of questions we're getting when it comes to energy power and its impacts on water. But put things in perspective, the rapid changes across the power landscape are really incredible. Globally. I mean, I think to think about it, the shale gale, as I think is a strong growth of hydraulically fracked gas and oil was once termed, you know, in the previous decade. It's really already giving way in some respects to even cost competitive renewables, which includes battery storage at scale in really less than a decade. So the numbers really do bear this out as you can see.
You look at the global power sector transformation on the left, you can see that really renewables take on a bigger share of the additions going forward out to 2050 in StarStep fashion. The shift to gas from coal really has already driven water efficiencies across electric power landscape, shaving water demand through newer, more efficient systems that in some cases now include zero liquid discharge. So we're not here to say that gas is going to disappear as a fuel supply, but even shift towards newer additions and capacity is driving efficiencies, particularly when you're not considering coal.
The next step down towards what I would say increased renewable capacity that really uses no or very little water has even a bigger impact. And we're seeing policies in place that are driving this shift once again, plus battery storage and other solutions that's even more significant. And this transition takes us to more than half a gallon per kilowatt hour to effectively zero in many cases. So this is sort of the simple, you know, these are the basics that we look at when we read the news, but I think the other on the other side of it, or on the back End of this, where we get really excited is now we're talking about, and it's not unrelated, that's the production of electric vehicles, which are also tied to the grid. We're seeing, you know, new greenfield opportunities for water systems, whether it be at a Tesla Gigafactory or even at other auto manufacturers as they build out their capacity. I think I read in the Wall Street Journal just yesterday or the day before that Ford is now working on an electric truck which is actually going to be able to not only store electrons, but also put them back into the grid while charging, let's say, overnight. But speaking of vehicles, the rising interest in policies and opportunities which is influencing the development of hydrogen, transportation and power is also becoming more real than ever. We're a long way from the Hindenburg. We're now seeing real what I would super majors and renewable globally leading renewable ipps developing hydrogen strategies partly for, like I said, transportation, but also for power, power generation, but also storage. The electrolysis to crack the water molecule will definitely drive significant demand for volumes of water and also just the management at varying levels. So We've tracked over 100 projects globally focused on power alone.
So that leaves out transportation for hydrogen. And lastly, I think the other thing that we see is, and this is related to the renewables, but also electric vehicles, and that's the mining for rare earth metals. That's going to require water for the process in mining. And I know in some cases it's isolated in a couple countries, but now we're seeing if there are opportunities out there, we expect that to expand globally and once again elevate the questions about water going forward. So, in a nutshell, the traditional focus on water for power, quite honestly, in little less than five years or let alone a decade, has changed dramatically. At least the conversation has. And so as a result, we definitely see water playing a key role in all of this.
[00:11:30] Speaker A: Thanks, Rhys. Keith, I want to kind of give you the mic for a minute. Coming from Europe. Do you have any perspective on this?
[00:11:39] Speaker C: Yeah, no. I think, as the slide indicates, we are talking about a global transformation here. It's true that Europe was probably ahead of the curve versus the US in building out renewables.
Most European markets, aside from France, are less dependent on nuclear power, which is very water intensive.
So this shift is definitely underway. There is a big push to implement circular economy policies in Europe, which would support both recycling, but also trying to reuse waste and heat and trying to reduce both the water and the emissions footprint of the power sector. So I'd say This is true, if not even true in Europe. I think the penetration rate of renewables in some countries now is over 50% just with wind and solar alone. So this is definitely a trend. The green hydrogen infrastructure is definitely a hot topic for discussion right now. So I think it's definitely have an impact on the overall profile of water consumption for the power sector, the energy transition.
[00:12:55] Speaker A: Right, thanks Keith.
Rhys, let's move on to the next topic. What do you got?
[00:13:01] Speaker B: Yeah, so give it a shift. I think this probably goes without saying in many respects it's no surprise that the role of data storage and management is on the rise. And I think through for clients, I think we've showcased this in some of our deliverables. In fact, I think we have a report on this specifically. But you know, from zoom calls such as this, I mean we've, we are recording this, it'll be stored on, in a data center somewhere. And you know, from so from zoom calls to Netflix to Bitcoin, the rise of data data storage demand is increasing. But the trend in connectivity is really illustrated by some data presented by Cisco that you can see here on the left that really shows a number of connected devices growing at about a 19 + percent CAGR, which I'm surprised quite honestly that the total number is not higher than that. But the growth is strong and not expected to slow. That also includes water assets, whether it be pumps, SCADA systems, all of these assets across a utility or even an industrial facility water network include data. But not to digress, with all the devices comes data centers and storage. And the number of large hyperscale data centers now surpasses over 500. And these are massive multimillion square foot facilities. And right now, according to our most recent data, almost half of these are so far in the US but we're also seeing growth in China, Japan, the United Kingdom. So what does this mean? So the growth in these hyperscale data centers really means that there's greater demand for water. And our data suggests that water usage has increased about 13%, will increase by 13% by end of 2021 to about 221 million gallons per day of water usage. So it's always hard to kind of think of 221 million gallons per day. You know, what does that mean? Well, an Olympic swimming pool, we've all seen that. And if the Tokyo Olympics happen, we're going to see that a pool require an Olympic size swimming pool requires about 666,000 gallons. You fill it once and you're kind of done These data centers, really the lion's share of the water demand is for cooling. So apropos to the previous slide, we're seeing some collaborative approaches when it comes to data center owners and developers turning towards wastewater treatment facilities for reuse offtake or reclaimed wastewater from municipal treatment plants and other more innovative, more advanced cooling strategies.
I think another thing that when we looked into this originally and have been doing so, it's also interesting just I think from a business development perspective, from water players perspective, is that it's interesting to look strategically at who is a customer base. Certainly companies or firms like Amazon, Microsoft, IBM, these are sort of the, the big players in the market. But there's also a lesser known or lesser publicly known group of real estate investment trusts and private companies like Digital Realty and Cyrus One, which play key roles in the ownership and operations of these facilities and development of new facilities. So I think from water services perspective, it's not like you just have to knock on Amazon's door. There are plenty of other companies out there, not just in the US but globally and also that number is probably going to grow.
[00:16:49] Speaker A: Yeah, this one makes a lot of sense. Thanks, Rhys. Keith, the floor is yours. I mean, you can, if you have anything to add to this. Otherwise, feel free to take us to the next topic.
[00:17:00] Speaker C: Yeah, I think it's important to consider what is the, the big tech position behind the deployment of these devices. And we said it's not just about knocking on Amazon's door, although Amazon and these players clearly do have a strategy when it comes to building out their presence in the water sector, leveraging their technology capabilities. So if we move to the next slide, John, we're talking about big tech here and we all know these companies, they are present in pretty much every sector you can imagine. But the question is, what are they doing specific to water? Where does water stack up in their overall strategy? And we do see that these enterprise software companies, cloud services providers, electronics manufacturers, they are taking notice of water as an opportunity, as another infrastructure sector that requires digital transformation. Now, most leading technology firms, they're tangentially exposed to water, working with some utilities, looking for some opportunistic sales, other products that they've developed probably for other industries like power, gas, electricity, transport. But we are seeing some trends starting to emerge amongst these three groups. So the first group here, cloud services, that's Amazon Web Services, Microsoft, Google, they're providing cloud services to a lot of water utilities and software firms. And that's a key solutions provider that is managing a lot of data. The Second group here are enterprise software players, so been around for decades. Oracle, IBM, Infor, SAP that obviously market their public sector expertise, their software, their ability to provide a platform for managing a lot of workflows across different departments that includes enterprise asset management, resource planning, customer management, billing for utilities. And then thirdly, we've got the hardware providers and here we're talking about an Apple or Samsung which are supplying the devices. So smartphones, tablets used by field operations teams. And they are starting to see more take up within the water sector, particularly amongst water utilities that are more pioneering and trying to become more data driven.
So the risk to water sector players who companies are already providing some software out there, seems like this does represent the future of water big tech. These companies may be starting to make more and more acquisitions of specific software capabilities or water utilities. And so we're expecting to see more connected assets and devices that feed into smart cities that are pulling together more holistic customer relationship management.
[00:20:12] Speaker A: This theme of big tech's entrance into the water market, something we've spoken about internally quite a bit over the last year. Rhys, I'm curious if you wanted to share any input or perspectives that you have on that.
[00:20:25] Speaker B: Yeah, I mean, I think it's evident definitely through our digital Water Insight service. This is something we talk a lot about and I think even just yesterday, for those who didn't see it, I had a long conversation with our research director Eric Bindler about this and that is Amazon yesterday launched Amazon Sidewalk, which I think we've known about for a little while and what the potential implications are. But fundamentally, basically what they're doing is they're basically bridging devices like Amazon Echo Devices, ring security cameras, outdoor lights, motion sensors, tile trackers.
They're doing that whether it be through Bluetooth. But also I think they may be using Lorawan as well. But I think. Why are we so excited about this one? I think I personally have communications on the mind and when it comes to water, because for one, and this is I guess selfishly a plug, we're about to release a market insight connecting water and water infrastructure which is about telecom company strategies in the global digital water market. So like I said, I have communications on the mine. I just reviewed the report two days ago, so that's going to be released soon. But I think to say it's disruptive, might be a little strong, but it's definitely interesting with all of the connected devices that require a communications backbone, whether it be cellular, whether it be, you know, broadband, you know, it'll be interesting to see what big tech's role is in all of this because also even the metering hardware vendors, they have their own protocols and platforms to move data back and forth as well. So I don't want to get too far out over my skis here, but I'm certain that my colleagues Eric Bindler and Nina Rossiter can share some more in depth perspectives outside of this conversation. But I'm really excited about this because. Because there could be real change here.
[00:22:30] Speaker A: Yep, that makes a lot of sense, Keith. It seems like a good segue for your next one.
[00:22:36] Speaker C: Yeah, so I mean we've been talking about big tech and Internet of things more oriented towards municipal utility customers, but smart homes and smart cities are also providing additional entry points into water.
So there are a selection of big tech firms that are leveraging their established consumer technology positions and brands. They're targeting smart home water management and in some ways they could in the long term move customers further away from the centralized utility model, at least the way that they take more control of their water consumption and their water use within their home. So a few examples of that. In January of this year Samsung launched Bespoke, which is an AI powered home water purifier. Got Amazon, they've invested in several smart home water startups, Conservation labs, Rockyo, and though neither Amazon nor Google have launched residential water management products of their own. So it's been more finding tech startups that understand the space that are starting to get some traction and providing a round of investment to them.
On October 27th of last year, US residential plumbing manufacturer Moen Incorporated announced a strategic partnership with the home builder Lennar Corporation to deploy smart home water management leak detection systems and newly built Lennar homes. So that's already from the start with new build to incorporate that kind of water technology, water consumption management for new residences. And then before the pandemic, you know, the residential digital water segment had seen a flurry of activity amongst some of these startups. So nearly a quarter of the new digital water market entrants that we track at Bluefield between 2015 and 2019 have been targeting the residential segment which to us is a signal of longer term growth.
Last point I want to make here is around partnership strategies. So number of smart home water management providers have been pursuing partnerships with homeowners insurance firms and the insurance carriers are offering rebates or discounted premiums to policyholders in exchange for installing these home leak detection systems which could prevent costly water damage which is one of the main sources of claims. So the US startup Roost has targeted this market channel aggressively. They've got over 30 leaks insurance industry partnerships including USAA, Erie Insurance, Hippo Insurance, and they're building that network out. And as a second example of that, the residential digital water firms such as Flume, Fin and Hive, catching names there. They all have also established partnerships with municipal water utilities and they're offering ratepayers rebates for home sports, smart home water management systems in exchange for access to the household water consumption data gathered by smart home providers. So this would lead to a whole new set of data here and insight into consumption in the home, feeding into utilities data strategies, bolstering the approach of some of these big tech firms to invest more in IoT that is improving the way that water is managed.
[00:26:33] Speaker A: Yeah, this one seems long overdue to me. Just kind of increasing the transparency to the end user.
Thanks, Keith. So something we've seen gain lots of traction really over the last decade is corporate sustainability. I mean, if you're reading headlines these days, it's pretty much all over. So Reese, do you want to take us through an example of that and how we see that affecting water?
[00:26:57] Speaker B: Yeah, I think this was actually kind of a, I don't want to say it was a hard one to put together. Actually we simplified it, as you can probably guess. You know, if anyone's reading the news, corporate sustainability, it's a thing shaped by ESG reporting and investment strategies, but also more critically because of climatic pressures and operational risks on companies. So we do look at corporate sustainability goals, targets. We've just gone through another wave of data collection on this.
It's a bit staggered or lumpy as far as the reporting schedules for a lot of firms. But what we thought we'd do is look, really there's no better example than the semiconductor industry, which admittedly it feels like we're reading about in the news every day, but because of, for those of you trying to buy a new car, a new dishwasher or a computer, semiconductors seemingly are the topic du jour, or at least the excuse when you go to Home Depot to buy your new smart fridge. But given the growing demand for more sophisticated electronics, Covid and also drought in Taiwan, we put some research out on this recently. Our analysts have really begun digging deeper into sort of the market landscape. And you know, over 20% of semiconductors are made in Taiwan, which was not hit by a rain soaking typhoon last year, which is actually a problem for them because that's where a lot of their water supplies come from. And so now they're being forced to ration water water usage. But in some cases, you know, semiconductor firms even listed here are being forced to truck in water to ensure ensure operations. I think they're always. There are statements being made that everything is fine and moving along swimmingly, but I think there's definite risk on the other side.
So it just sort of reinforces the importance of water management within corporate sustainability planning, which we're seeing more and more of. It's no longer just a carbon discussion, but also water, carbon and energy discussion. But it's also, there's a water management side of the equation which we see more of companies like Intel, TSMC and Micron, they're expanding with new multimillion dollar investments and new capacity additions, including facilities in the US Southwest. I know intel basically out of the Phoenix area is basically created a hub of sorts the region. And so there's a lot of intellectual capacity and knowledge in the region. So others are moving in that direction, I think. You know what it's kind of crazy is that there's not a lot of water there. If you've been looking at the news about the Western U.S. even Arizona, which is a desert, there's not a lot of water there and they're in worse shape than they were. So it's interesting to see that that's their plan. I think that ultimately might be. Well, it is a solvable problem in many respects through reuse. But for the leading fabricators, as you can see here, they've set water targets to address high demand for water, but also to avert risk. And also Micron's recent investment in a water treatment technology firm in New Mexico is a further signal that, hey, they can bring this in house and they can deploy water conservation and recycling strategies across all of their facilities. So it's not like, I mean, another example outside of this, I mentioned the automotive sector a little while ago and that is, you know, Tesla has its own patent for water treatment and sort of and is working with H2O innovation in Texas for its water management strategy. So that's gigafactory, definitely in the Texas, New Texas gigafactory, but also elsewhere around the world.
But I think like I said, the reality of it is these firms, they know what their water usage is, the water usage is increasing, they know what the risks are. And quite honestly, I think they are solvable in many respects. And so they seem to be taking this into their own hands. So it'll be interesting to see how it plays out with particularly the new build going forward.
[00:31:18] Speaker A: Yeah, Rhys, I mean, you actually were alluding to it little bit there, but just to kind of ask the obvious, why do you think intel and Micron would be building facilities in places like Arizona?
[00:31:31] Speaker B: Yeah, so one is, like I said, the university institutions, the intellectual knowledge that's within the region, broadly speaking.
But also places like Arizona, they're not, it's not California. So you have less issues with earthquakes as you can imagine, what even minor, minor earthquakes can do to semiconductor fabrication, it can create a problem. Also, there are fewer wildfires, I think. Also there's also labor related issues there as well.
So you kind of have to weigh the options, the pros and cons of where they're going. It just happens to be that they're going to a place that, that doesn't have a lot of water, but they seem to feel like they can manage it.
[00:32:22] Speaker A: Right, makes sense.
So next up is something we've actually been approached by a number of our clients to look into and research and it's wastewater based epidemiology. Keith, why don't you take it from here?
[00:32:40] Speaker C: Thanks, John.
Wastewater based epidemiology, pretty hot topic, right? I mean, we are coming out of a, we're coming out of a pandemic or hopefully most of you listening are starting to see the light at the end of the tunnel here.
And you know, the ability to detect a signal in wastewater, I think, and perhaps get an earlier warning on contamination and outbreaks in communities was obviously provided a lot of promise around April, May last year. A lot of studies going on since the start of the pandemic. You know, mining wastewater for insights has been something that a number of clients, as John said, have asked about. And it's been, you know, to the extent that is an opportunity to get more data, not just about COVID 19, but were there other applications? So, you know, for us it is an interesting future. Just getting more insight out of wastewater and what that can mean. And there are some players focusing on that space already.
And what I mean by that is that although there may not be regulation long term, that's going to compel utilities or other facilities managers to test for Covid it may be a launching point for smarter cities, meaning looking for other types of contaminants from wastewater or if there was another outbreak, to very rapidly have a workforce set up to test for it. So right now, the cost benefit analysis by segment for COVID 19 detection, it's very different considering the different target segments. Some segments, they don't have the budgets to invest in a device that could capture a signal of COVID 19. Even if they could, is it pinpointed enough? So if you're, if you're testing just at a wastewater facility, may not really know what's going on deeper inside the community to really be able to isolate and apply more targeted quarantine policies, for instance. So the precision around the solution, that's one question, the budget around it. But I think also it really does come down to the regulation. And once this subsides, is there going to be regulation that's going to force greater, greater monitoring of wastewater? And if there isn't, could there be something else? Could there be other information gained from understanding what's happening in the community through the wastewater flowing through the sewers? Health care, there are limited resources there and there is challenges in terms of funding. So there would definitely need to be some sort of federal state programs in most countries to support deployment of a solution like this. But if it could avoid increased hospitalizations by more quickly isolating specific populations, such as in elderly care facilities, that could be of interest. But more broadly, could it be applied to other sectors and industries? Because maybe the payback is the data and the other uses of information outside of healthcare, such as for pharmaceuticals. We're also detecting other types of contaminants before they hit waterways, which is probably a long term game in terms of looking to detect those kinds of compounds.
Very exciting to see that the capability is there to detect viruses. It was successfully deployed to help eradicate polio in Israel back in 2013. There are a selection of technology providers, a couple in Spain like Idrika, Goagua and Suez, that have deployed systems both in Spain and also looking to grow in the US and so we think that here we're not necessarily going to see a COVID 19 detection device deployed everywhere in the next year or two, particularly as the fear of COVID 19 subsides. But we are shining a light here on what are the possibilities for getting more insight out of wastewater analysis.
[00:37:08] Speaker A: Yeah, this one's super interesting. Thanks for the insight, Keith.
One more factor. What can you tell us about agriculture and the future of that industry's water management?
[00:37:22] Speaker B: Yeah, so thanks, John. And yeah, I agree with you. The epidemiology piece is really interesting and something I think we've been excited about, trying to figure out where that market's heading. But back to the, I think, is it the elephant in the room, as we might say, agriculture? Obviously, when it comes to water use and consumption, agriculture is like that big piece of the pie. A lot of people don't quite know what to do with.
But from cannabis, I guess, to the cornfield, there's kind of. There is a shift happening in agricultural water management. Part of this is driven just through technology solutions. I mean, in recent months at Bluefield, we've had analysts that have been digging into the sector really to better understand what are the implications of things like drip irrigation, vertical farming, new investments. We've been seeing a lot of M and A or private equity investments in various aspects of the industry.
So as we look deeper into this, digital solutions really do emerge as a big role. And you know, like we've talked about smart homes, we've talked about big tech. Digital is a big, big thing for Bluefield. I think we've carved out a good position in analyzing the market and understanding what's happening. And agriculture is another area we're digging into. So. So to kind of put things in perspective, of the three irrigation methods deployed in open fields, drip irrigation systems have grown about 19% since I think, 2013.
So this transition from what we know is more traditional gravity or sprinkler systems is really being driven by technology innovation, but also climate concerns and operating costs. As you can see in this exhibit, the sector really is undergoing a strategic shift, at least across the value chain, particularly when it comes to smarter irrigation strategies. Companies are adding digital solutions, whether it be by organic or in house development, but also through M and A.
And you know, another way to put it, you know, put in perspective is the average farm uses about or spends about $27,000 on just energy alone to pump water. That's across the US So that's a lot of space, but that's just looking at the data presented to us. And between this and reducing water purchases, efficiency gains are definitely on the table through smart irrigation strategies that are happening. But admittedly, at the beginning of the year, our team dug into this and the role of private equity investors and alternative business models, or farming models such as vertical farming, really came to our attention. We've had clients asking about what is the role of vertical farming? And no doubt it's a really interesting solution because it really doesn't use a whole lot of water. And even within that, it's interesting. I don't know if anybody on the, on the call right now if this is an area of focus, but we've been looking also just at the strategies themselves to, you know, within the vertical farming space, you know, who's affiliated, let's say, with Whole Foods, you know, who's got a partnership or framework agreement, who, where they building out their facilities, whether it be close to cities. And it's not just the U.S. i'm talking a lot about the U.S. but when you look at places like Singapore or even the Middle east, right, you're likely or potentially going to see more activity there because in many cases it makes more sense. But that being said, there's a lot of new tech, new drones, satellites and seed innovation. But ag sector, I think one of the challenges is that in many cases it's like the municipal water sector. It's mature, it's slow moving. And also when it comes to water, it's hard to kind of put your finger on it specifically. But this could accelerate with new water related policies in the Western U.S. whether it be tracking or monitoring groundwater withdrawals, but also, like I said, technology. Also in Europe, we're seeing water reuse policies being started in places like Spain and Europe where that could have a greater impact on water management and the future of agriculture, as the slide says.
Great.
[00:41:44] Speaker A: Thanks, Rhys.
All right, let's go to one more slide. So some of the insights that were generated just for this presentation alone were prompted by client questions originally. So that's something we built into our business. Our conversations with you and the questions and inquiries from you all does help shape the research that we do and the research calendar over the year. So as a client, you do have an impact on that.
As a refresher, Bluefield offers three distinct products trying to provide different solutions to address your water questions and needs.
First, we sell off the shelf reports, which can be purchased and downloaded directly from our website. That's fairly straightforward.
The bulk of our business is our Insight Services, which is an annual corporate subscription service to our research and access to our team of analysts for consultative support throughout. As part of that service, you get access to our Data Navigator platform, which is an interactive data dashboard that you can drill down and cut the raw data behind these reports specifically to suit your purposes.
One seat comes included with your subscription and we can offer additional seats for an extra fee. So please, if you have more team members who benefit from accessing the DAP Navigator, reach out to us and we can have them set up with an extra seat.
And lastly, the third arm, we do custom consulting engagements for a number of types of companies, whether it's market sizing, due diligence, go to market strategy, you name it. These projects have spanned just about every corner of the globe, so it's not just us as well.
And in all, this isn't an either or thing either. So you're welcome to use us for all three of these products, which many clients do, all of them give access to underlying data and inputs.
So to wrap it up, this is a big time for water. I think we're all seeing it. There's a lot of change happening. There's a lot of disruptions in market entrance. We wanted to share a few of the key things we were looking at and as always are curious to learn what you're seeing as well.
Before we get to the Q and A, Keith, do you have a couple sentences or just.
[00:44:09] Speaker C: Yeah, I did want to just add, you know, we've been talking a lot about the technology itself and hardware and software services and networks. But we want to make it clear that we're not overlooking the fact that a lot of this has to do with the people and processes around it. And you know, I think there is the tendency to focus a lot on innovation and disruption and a lot of that doesn't really happen unless you have right leadership with a vision to implement those technologies. So let us not overlook the fact that a lot of these markets aren't going to grow unless there are. There's a lot of innovative thinking out there and innovative leadership and management that I'm sure a lot of you kind of bring to the table and we look forward to discussing that more with you.
[00:45:02] Speaker A: Thanks. Keith Reece, how about you?
[00:45:04] Speaker B: Yeah, I mean, I think, I mean just to follow up on what Keith was saying about leadership. It's interesting and we've gone through this exercise.
It's been a little while since we did our member. I can remember the first time someone actually mentioned the idea to me. It was a client actually just sitting down, having coffee and it was. It would be interesting to look at all. Let's just go back to the water utilities. I know it's not a big folks, but it still applies to industrial or corporates as well. And that is when you look at the leadership, you know, how long have they been there, where did they come from? These are factors that we've considered and actually gathered some data on just to understand what is a typical program profile of a sponsor. Right. And that could apply to a lot of different things. It could be to digital adoption, digital technology, but also just to even like public private partnerships. Right. You know, if you go to somewhere like, you know, Miami Dade and they're talking about public private partnerships to deal with stormwater overflows and how to deal with that, do they. Is there a sponsor within the utility who's really driving that? And does the sponsor leave the organization and does Everything sort of fall by the wayside. Sometimes that happens, sometimes it doesn't. That's the sort of thing we like to look at. It's interesting. It's hard to put a specific finger on, on it, but it does play a key role. So, yeah, just to follow up on what Keith was saying.
[00:46:32] Speaker A: Yeah, thanks, Rhys.
So let's, we've got a few, just a couple minutes to do a Q and A. So let me pull up some of the questions that have come in and let's just go through them. So I leave it up to you guys, whoever wants to jump in.
But besides the seven factors that were presented today, what else is Bluefield looking at that's going to influence water strategies going forward?
[00:47:04] Speaker B: I'll jump in on that. I mean, I would say one of the things, I mean, I think from the outset you've mentioned Covid is one of the drivers to this conversation, what it all means. John, I think one thing that we've talked about, I think even we've had a specific webcast on it and that is the role of private participation in water. Are we expecting, you know, because of, you know, I guess experiences because of, of COVID whether it be remote workforce management, managing the data, but also financial stress, I don't think, you know, I know everybody feels like the economy is, you know, is in great condition in the US but it's not definitely not the case around the world. But are municipalities and in some cases private systems, communities, community owned systems, are they going to turn to the private sector to either play a role in the investment or just operations and management of the system? So I'd say that's one big one that we look at in great detail on an ongoing basis.
I think even I was speaking to someone last week on our team in the numbers. There has been a slight uptick of IOU, M&A specifically. So there are indications that there will be an increase.
That's just one area that I was thinking of.
[00:48:31] Speaker C: Yeah, I might add here just the trend which kind of is cross cutting around resilience. And we talked about smart cities before. We talked about responding to climate change and the number of billion dollar damage events in the US alone is a big signal that resilience needs to be built in and much more into city management. And for us that has a lot of different angles to it, both in terms of digital transformation, but also looking at things like stormwater management thinking much more longer term in terms of asset management and how populations are going to adjust to more predictability, more or unpredictability when it comes to resource management and how your assets are going to respond to that. So I think that's something that's kind of embedded in the way that we're looking at, for instance, wastewater reuse policies, also the investment in hardening infrastructure, and there's the climate change aspect of it, but then there's also the cybersecurity aspect of it as well. So a lot of different things to throw out there, but I would say resilience comes up as another aspect of it.
[00:49:52] Speaker A: Great, let's do one more here.
So you mentioned energy transition.
Are there other industries that you see the most opportunities for? Water?
[00:50:05] Speaker B: I think other. I mean, the funny thing back to my point about this is why the energy transition is so exciting is it's not just power. I mean, it's really, there's electric power, then you've got what's going to happen in the oil patch, right? There's been a lot of investment there over the past decade, so we're starting to see more activity there. I remember when we first started looking at hydraulic fracturing in 2013, 2014, there's a lot of focus on, hey, there's going to be a lot of reuse or reclaiming, recycling produced water from the drilling activities. But then, you know, about the economy tanked and then it went towards just water transport, moving the water around. Because as I think we've laid out in a number of different reports, you know, trucking or moving the water is about 70% of the cost of those operations. But so you've got oil and gas, but then you've got, as I mentioned, there's the mining sector as well. Right. So, you know, there's. Whether it be mining in Chile or mining in Australia or, you know, I don't know to the extent I read the Wall Street Journal every day. But, you know, there was something several months ago talking about mining for things like lithium in North Carolina, which would definitely be a change in geographies, but there will be water needs there and how it's going to be dealt with. So I think what we like to do is keep an eye on things like that.
The electric vehicle side of it, like I said, you know, ultimately transportation, whether it be through batteries, battery storage or hydrogen, could all sort of tie into that. So there's a lot of money there, there's a lot of technical expertise and I think definitely a lot of need. I think one issue is that water is not the forefront of everybody's mind.
I think that's changing a Little bit. Partly because of climate. I mean, other sectors, this could go on and on. I like to say there are things like the Amazon effect. Right? You know, so what does that mean? Well, Amazon, you know, I've mentioned data centers, we talked about sidewalk and sort of its role in big tech as a communications backbone. But it's also changing procurement habits. What happens to brick and mortar stores? How are things being ordered? Where are they being manufactured? That's everything from, you know, your undershirts to, to your food. When they're owning grocery stores, do food and beverage habits or procurement habits change? So we get really excited about all this because water touches every little aspect of it. I think the harder part is identifying which ones are scalable from a market opportunity, but also is there a financial return to be gained there?
[00:52:52] Speaker A: Yeah, right. Here's another question. I mean, it's kind of calling out what we've said before, but the municipal water sector isn't exactly known as fast changing. But where do you see opportunity for disruption?
[00:53:06] Speaker C: Yeah, I mean that's an interesting one because it's like disruption almost has a different definition in water because you're dealing. If you're thinking about drinking water and municipal utilities, there's a lot of public health risk. So just by nature you're not looking to shift overnight some fundamental part of the water treatment or delivery process. But you know, I think speaking somewhat to the aspects that we mentioned before around like a customer in the home, I think customer management there, we could expect to see some shifts happen more rapidly. I mean, just in the last three to five years you see more transparent billing processes, you've got chatbots on utility websites. We've got a much greater focus on managing customers by using new technologies. And I think there is where you can definitely see some innovation just in terms of behaviorally how customers are managed, how they are communicated with how customers data is mined to optimize operations as well. There are all these little incremental things that are happening at the meter with those interfaces between customers and utilities. And those could be industrial customers with municipal utilities or other that I think are ripe for change. And I think that's where we see a lot of movement is these tech startups. We see there are several that are focused on the home, on customer management, but then also what kind of analytics can be applied in that dynamic. So I think for me that's one area where I would expect the kind of back end of that. If we think about underground infrastructure or the heavy hardware type stuff, that stuff's going to change more incrementally just because by nature it has to.
[00:55:01] Speaker A: Yep. Reece, do you have anything to add to that?
[00:55:05] Speaker B: No, I mean I think, I think that'll make sense. I mean I could go on and on, but yeah, I think what do we have time for? One more question, John. It looks, I see one good one.
[00:55:14] Speaker A: Yeah, if we could, we could squeeze one more in and then I think we gotta respect everybody's time. So last one here.
Where are we at with some of the. And they put it in quotes, old fashioned change factors such as desalination and reuse.
[00:55:32] Speaker B: So I like this one because I think it kind of gets back to the basics. I mean in some respects we probably included these are solutions obviously to things like water scarcity, but also just corporate sustainability like I mentioned, you know, whether it be automotive companies that are deploying reuse or just the corporates as a whole like semiconductors, reuse is on the upswing one because you're recycling or reusing an existing water source that's already being treated in some cases. So there are ways for partnerships among industrials as well as municipal entities.
But also, you know, we're seeing in places like the Middle east, which is the, you know, I think we just did. So we just released a report on reuse, municipal reuse in particular strategies and trends in GCC countries. And that's a region where desal is obviously strong because you get large seawater desal. There's even a change happening within that and has been over the past two decades from things like thermal desalination towards ro. But I think they're getting more efficient. The investments are large. But reuse in some cases can be a cheaper source of water depending on what it's going to be used for, whether it be just for irrigation.
It doesn't even have to be direct potable reuse which is what we're seeing in places like California. I think the other part of that is when it comes to reuse, as I would call it, and that would be decentralized reuse. And so we're seeing not just industries but also cities or states and policymakers looking more closely at deploying decentralized systems or smaller systems across a network to deal with more localized treatment needs. Because you know, there is a balance that I think cities or managers need to make and that is do they, you know, invest a lot of capital and which already is tight into like expanding the capacity of a wastewater treatment plant or can they work with stakeholders, commercial or industrial stakeholders and constituencies within their network to roll out smaller systems. So there are a lot of different ways to address that and use these. So to say that they're old school.
Yes, because they're well known, the technology exists. I think there are incremental improvements. What I'm really, I think we as a whole are really interested in are the business models behind them and how to deploy them in other ways.
[00:58:18] Speaker A: Great. So we still have more questions here, but as always, we will write these down and get back to you guys. We also always encourage you guys to reach out to us with more questions. So we're always happy to talk all things water, but other than that, that'll do it for today. So thank you so much everybody for joining us. Reece, thank you. Keith, thank you. And reach out to us. We'd love to talk more.
[00:58:43] Speaker C: Pleasure. Take care, everybody.
[00:58:44] Speaker B: Thanks, John.
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