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Key Takeaways

  • Treating waste water to make it fit for consumption is a key trend for smart cities.
  • In tandem with desalination, this approach now underpins a massive and growing market.
  • Investors can profit from this trend with a stake in a leading equipment supplier or a targeted ETF.

Wastewater: An Unlikely Source of Cost-Effective Hydration

A combination of periodic droughts and polluted water sources threatens the steady supply of clean and potable water. In response, new smart technologies are emerging that can replenish stressed water supplies. For example, there is growing demand for membrane systems that can purify wastewater and make it fit for human consumption once again.

Cleaning up waste water is just one part of the solution. Preserving that supply can be aided by smart sensors that provide early warnings about leaks and water quality issues.

Another solution for wastewater: Desalination, or removing salt from seawater, can also boost water supplies in countries including Saudi Arabia, where a reverse osmosis plant has been converting one million cubic meters of sea water into drinking water every day. That takes so much energy -- an estimated 2.4 megawatts of power needed every day to push water through membranes -- that the desalination plant is alongside a power plant.

The opportunity for investments in wastewater treatment is growing along with the rising demand. All of these technologies will underpin a $674.72 billion market by 2025, according to Hexa Research. That’s up from just $117.85 billion in 2016.

It’s not just countries who can adopt this technology. At the other end of the scale, consumers can buy their own solar-powered small desalination plants for under $500.

There are big risks, mostly around timing. By the time a severe water shortage crisis arrives, it’s almost too late to address the problem, as desalination plants and wastewater treatment plants can take years to construct.

As a result, more municipalities are moving ahead now with bold investment plans ahead of the next crisis. Considering that both desalination plants and waste water treatment plants use membrane equipment that can filter out even the tiniest impurities, membrane suppliers are a smart way for investors to play the clean water trend.

Water managers can seek a lower cost solution through plastic membranes, which promise low upfront costs but high ongoing replacement costs as the membranes wear out, ceramic membranes are more expensive but also much more durable and long-lasting.

Membrane bioreactors (MBR) are compact in size, and house a cost-effective combination of membranes, filters and organic material that bonds to solids to help them be more easily removed. France’s Suez and Hitachi Ltd. are leading MBR suppliers. Investors can also glean broader exposure to the water treatment equipment industry by investing in exchange-traded funds (ETFs) like the First Trust ISE Water Index Fund.

The demand for these smart technologies can help lessen the effects of drought and waterway pollution, leaving only one question: can cities keep up?