Looking Back at OnWIN 2017: Innovating in Procurement and Investment Models
Leading up to this year’s Ontario Water Innovation Week (OnWIN), we’re publishing a short monthly series called Looking Back at OnWIN 2017 to revisit some of the critical topics covered last year. In this article, our correspondent Brenda van Ginkel shares some of the procurement and investment themes discussed at OnWIN’s anchor event, World Water-Tech North America 2017.
Water technologies fit into systems of designs and builds. This adds a layer of complexity that can sometimes make building, early adoption, and funding more challenging than it is for other clean technologies. In 2017, World Water-Tech North America featured two sessions exploring the nexus of procurement and funding challenges facing both entrepreneurs and the key decision-makers who have mandates to move forward with innovative solutions.
In the session Paving the Way for Innovation in Procurement Models, moderator Mohsen Mortada, President and CEO of Cole Engineering, asked his panel about alternate delivery models emerging between utilities and water technology companies that supported innovative solutions. Private-public partnerships figured in discussion and other panels that touched on funding for water tech. Across all the public sectors, British Columbia has been an early adopter of new financing models in Canada. Fred Nenninger, Director of Policy Planning and Analysis for Liquid Waste Services, Metro Vancouver shared that his organization adopted a design/build finance model to fund its new wastewater treatment plant, which is scheduled for completion in 2020.
Aging infrastructure was a common backdrop for discussions in the sessions and during the breaks. Municipalities across North America are grappling with how to upgrade their legacy systems. Private U.S. water and wastewater utility Aqua America has found a successful model by acquiring smaller utilities. The company’s CEO and President, Chris Franklin, shared how through upgrading and operating these smaller utilities, Aqua America has been able to capitalize on efficiencies in procurement and maintenance through scale.
Purchasing processes and regulation can often pave a path, or present barriers, for innovation. In his panel, Mortada noted the lag in implementing innovative technology in the water sector, asking Patrick Ryan of Evoqua Water Technologies how his company addresses that challenge. Evoqua sees that most industrial and municipal customers are advocating for incremental progress, so the demand for new and innovative technologies was low. Ryan said that in places where traditional technologies tend to be performing well, clients are more likely to wait to introduce innovation; however, in cases in which there were regulatory pressures, the company saw a corresponding interest in more innovative solutions. The valuable takeaway for new water tech companies is that opportunities for customers are often where regulatory requirements are the strongest or strictest.
Emerging investment models
According to Chris Koski, Managing Director at Morgan Stanley Infrastructure, about fifty percent of all investment in the water sector is private, through pension funds, etc. He sees the standards that regulators are setting as opportunities for targeted solutions, such as desalination plants.
In some cases, there is a benefit to having both public and private investors involved. Nenninger pointed to the city of Vancouver, which developed a private-public partnership to fund its resource recovery project to create biogas from waste. For Vancouver, private-public partnerships for renewables and green energy have helped advance cleantech innovation. They have also supported the city’s efforts toward carbon neutrality.
Elsewhere in the panel discussion, decentralized solutions were cited as an attractive market for investors. Lynn Mueller, President of B.C.-based SHARC Energy Systems, one of the companies pitching in the summit’s technology showcase, showed how his company’s decentralized technology converts sewage to power for heat and air conditioning in municipal buildings, hospitals, and prisons. SHARC found success by helping its clients finance the systems. This approach to the business model was another useful learning for innovators trying to break into new markets.
In the session Do We Need to Rethink Investment Models to Spur Market Innovation, David Henderson of XPV Water Partners suggested that it was not realistic to look for disruptive opportunities in the water sector; instead, companies are finding more success offering solutions that are more evolutionary. As well, it is probably an easier road for solutions that can fit into operational rather than capital budgets. This makes digital products and services especially attractive.
Closing the panel, there was discussion about the possibility of finding creative alternatives to traditional funding sources. DC Water (in Washington, D.C.) was cited for taking advantage of green bonds and flagged for its Blue Drop program, which is a nonprofit spin-off of the utility, launched to market products and services DC Water has already developed, with the objective of generating revenue and improving water. The revenue funds the utility’s costs, protecting rate payer from rate hikes. Launched late in 2016, the goal is to expand its service area. If the model proves successful, perhaps there is an opportunity for other states and jurisdictions to adopt a similar approach.
Be part of conversations on innovative procurement and investment models at this year’s World Water-Tech North America summit, and don’t forget to register for your early bird OnWIN Combo Package before August 23. Register here.
Brenda van Ginkel is a brand strategist and creative director at The Narrative Build.