Replenishing California’s Investments in Water Technology

Here in Cleantech Group’s San Francisco office, we are acutely aware of California’s climate problem—that is, the worst drought on record in the state’s history. What’s alarming is that, despite the two drought emergency issuances by Gov. Jerry Brown to reduce water use by 20%, statewide water consumption has in fact increased by at least 1%, up to 8% in some areas.

One might predict greater investments in Water and Wastewater to expedite solutions that address this current and real problem.  The 1Q2014 Water Innovation Monitor reported that water technology investments have stalled, but is it about to be back on the upswing?

According to Cleantech Group’s i3 platform, looking at California-based companies, eight equity deals have been closed in the water sector since January 17, the first drought emergency declaration. This sums up to a total of $88M invested, or 55% of the total global investments in water ($161M) since then.  Underground Solutions and Liquid Environmental Solutions top that list, receiving a combined $71.6M in growth equity.  This, at least, is optimistic and impressive news.

Examples of some companies doing innovative water technology work in California include WaterHealth, Observant, and WaterSmart Software. These start-ups are all coming up with solutions for water efficiency in agricultural, industrial, and consumptive uses.

Jeff Lipton, WaterSmart Software’s Director of Marketing, gives us a bit of insight into the opportunities and challenges facing investments in the water sector.  The historical framework of “prior appropriation” water rights laws, the deferred maintenance of existing water distribution infrastructure, and misalignment between cost and revenue in water rate pricing structures currently prevent successful deployment of large-scale water-efficient technologies.  However, the urgent situation of the drought has led utilities and policymakers to reconsider these obstacles and work with water efficiency entrepreneurs to fund or develop rapidly deployable solutions.

WaterSmart Software develops a platform for water utilities to allow their residential customers to view and monitor their water consumption compared with similar households, along with recommendations for conservation, in order to make behavioral use changes.  In light of the recent climate, Lipton reports increased interest in the solution his company offers, both in California and nationally.

Huge cleantech investments continue to be made in the area of Energy Efficiency and Transportation.  But how can investments in water efficiency technologies be driven?  Does it necessitate a severe emergency situation in order for considerable action to be made?

This is a pressing issue in a state responsible for a significant share of national economic activity, food supply, and jobs.  Encouraging innovation in water technology, and adoption of that technology, is absolutely crucial to restoring California’s water supply.  Keep an eye out for our 2014 Q2 Water Innovation Report, coming in mid-August, where we provide further insights into these emerging trends.