New Utility Survey Available
Posted on Jun 18, 2012
Engineering firm Black and Veatch has just released its first-ever survey of the US water utility industry. That report is available here. The survey summarizes information from a "broad cross section of the industry and country." Not surprisingly, respondents identified failing infrastructure, the need for capital (and accompanying rate increases) as key concerns. Improved asset and energy management were identified as important opportunities. Last, and consistent with the findings of our grantee teams and advisors, survey respondents noted that regulatory actions drive investments, not financial incentives.
The Fund continues to look for teams that wish to innovate in these spaces. For more see this workshop report.
Do you have a powerful innovation- financial, operational or behavioral- that you want to test?
Drop us a note and start a conversation!
Posted by David Rankin
A Report You Should Read
Posted on Jan 26, 2012
A new report, Financing Sustainable Water Infrastructure, is now available on the Johnson Foundation at Wingspread's website. I recommend this to anyone who is interested in what our water service sector will become, how it might be supported financially, and what has to change between now and then. The webinar introducing the report was recorded and can be accessed here.
This report summarizes a series of web-facilitated and in-person meetings focused on how to finance the new needs of water management entities (drinking water, storm water, waste water, and possibly other water management utilities). I was honored to be asked to participate in these sessions and did my best to share the expert advice the Fund has received on these issues and the lessons that Fund-supported teams have learned by exploring financial and market-based tools in this sector. This work has been substantial and the learning impressive. Some of these approaches have blossomed. Others have not worked. Some are still a work in progress.
If you want to learn more, a few resources follow.
The Fund has sponsored a number of teams exploring how to identify, package, and exchange water-based ecological services like nutrient removal, sediment control and flow restoration. Case studies produced by a team led by the Environmental Trading Network identify how to structure effective water quality trading programs, how to creatively use assets of state revolving fund programs and how to think strategically about storm water projects. Their work is nicely summarized here.
Alternate Financing Approaches
Two Fund-supported teams evaluated how the cost of financing and/or the cost of subsidies for water infrastructure can be lowered. These teams identified that a number of mechanisms could lower financing costs.
At the federal level, tax credit bonds can substantially lower the costs of water infrastructure to the federal government, as well as lower the costs to those who take on this debt. More on this approach can be found here and in this report (pdf format).
At the local level, use of tax increment financing might allow new sources of capital to flow to restoration activities. More on this approach is available here (pdf format).
Interestingly, neither project could attract partners to test how these approaches would work on the ground. The teams felt (oversimplifying here), that slightly less expensive financing did not overcome the barriers to action. Financing appears to be necessary, but not by itself sufficient, for the sector to become more sustainable.
New Transaction Models
The Fund has recently supported two teams that are designing and testing new ways to reduce the impacts of run-off in urban and rural settings.
One team is exploring how to pay for the performance of practices of agricultural producers. Many farms undertake conservation practices like buffer strips and grassed drainage swales to keep nutrients and soils on the land, rather than in the water. This team looks to design payments for what those practices do in the way of improved stream health, so that producers receive higher payments for better performance. More is available here.
Another team is designing a series of investment grade, coordinated, integrated, distributed storm water management practices in three Great Lakes urban centers. They want to develop a series of site-based rainwater harvesting and management systems, bundle their performance, find private financing, and negotiate sales agreements to public or private entities that will benefit from storm water management. They expect to create a template for such transactions, and an electronic platform to reduce the transaction costs of creating and selling these services. More is available here.
We Want to Hear from You
The Fund is very interested in working with teams to help shape the future of water management in and around the Great Lakes. If you have a new idea you want to try, drop us a note, and let's start a conversation!
Posted by David Rankin
Future of Water Infrastructure
Posted on Aug 23, 2011
I have just returned from a three-day expert workshop on Financing Sustainable Water Infrastructure sponsored by the Johnson Foundation at Wingspread. This is one of the best and most useful gatherings I've attended on the future of water, wastewater, drainage and other "utilities." Financiers, C-suite executives, entrepreneurs, ngo leaders, and regulators explored what the "utility" of the future would do, how it might be capitalized, and how ongoing services would be paid for. This discussion is closely allied with two workshops that the Fund recently hosted exploring similar issues.
Reports on all three will be forthcoming shortly-- watch this space for updates.
Based on the energy and enthusiasm in these sessions, it seems like the utility space is not only ripe for innovation, but that we are already in the early days of transforming what we now call water "utilities." A few common themes: distributed technologies (think green infrastructure, rainwater harvesting, and agricultural BMPs) are disrupting the natural monopoly of utilities-- opening up new ownership structures and access to different capital sources; revenues, currently from rates (based on cost recovery) can move toward prices (based on creating shared value)--think about on-bill financing of efficiency technologies, point-of-use services (like carbonation or filtration), and buying a share of equity in the utility; integration and consolidation makes financial and performance sense--there is one hydrologic cycle, but our services are fragmented, myopically optimized, and often operate at cross purposes; and last, change is happening-- Milwaukee, Philadelphia, Seattle, and Cleveland are fundamentally rethinking how they deliver services. Some of these things will work, other won't, but there is much learning underway. What is exciting is the chance to embed positive ecological change in the center of whatever water "utilities" become.
For another attendee's take on the Wingspread meeting, read Peter Malik's post here. Thanks to the Johnson Foundation, American Rivers and CERES for planning this event.
We welcome ideas for projects that try a specific action which will catalyze the changes underway in this industry. Have one of those ideas? Let's start a conversation.
Posted by David Rankin