Eight and a half things I learned in Miami
Published December 8th, 2016
I have been in Miami this week for our American Water Summit. The event came at a critical time for development in the US water market – here are some of the key points raised by the speakers and delegates.
1) The barriers between the public sector and private sector are coming down. The event attracted the best showing we have ever had from public sector utility leaders. There is growing interest in what the private sector can offer in terms of finance, technology and services, which is to some extent being fed by the prospect of the Trump presidency.
2) P2 may be the key to P3. DC Water CEO George Hawkins outlined his new Blue Drop venture, which is about selling some of the services his utility has been successful with to other utilities through public-public partnerships. He made the point that many utilities are simply not equipped to undertake complex projects on their own, but if they could access DC Water’s expertise, they have the potential to be more ambitious in what they could do, including P3s (i.e. public-private partnerships). Two thirds of the audience bought his assertion that P2s would grow the market for P3s, although I am not sure that the contract operators in the room were so convinced. In the discussion, Hawkins raised an interesting point about the public’s attitudes to improving utility performance. He said that he had originally wanted to sign a performance-based contract with Veolia, but that this plan had been scuppered by the response of some NGOs, who took the view that incentivising a contractor to deliver benefits to the utility would lead to corners being cut.
3) There is no movement on private finance in the short term. Utilities are waiting to see how Trump’s stimulus package is going to be structured.
4) The water sector is still crisis-driven. We were honoured by the presence of the mayors of Flint (Michigan) and Toledo (Ohio) – two cities which have experienced drinking water crises in recent years. We also had an extremely motivational talk from the Mayor of Atlanta (Georgia) and a great keynote from the head of the California State Water Resources Control Board. It was difficult not to come away with the impression that behind every great water leader, there is a great water crisis.
5) Digital is the thing. Booky Oren ran a session on Uninvented Technologies, in which he encouraged a group of utility leaders to talk through their technology shopping lists. It was a fascinating session, with half the audience photographing every slide that the leaders put up on the screen. What struck me was that 90% of the things that utilities wanted fell into the broad category of “digital” solutions. I think that if we had run the same panel three years ago, water and wastewater treatment challenges and physical infrastructure issues such as stormwater separation would have had a much bigger showing. The take-away for me is the fact that utilities want better management tools, rather than better processes.
6) The vendor proposition is still difficult. We ran a pre-conference workshop titled "Empowering the Digital Utility", which began with various vendors spelling out their visions, and then gave utility leaders the opportunity to respond with their thoughts and experiences. The latter were much more down to earth. My feeling is that this market is still in the early adopter stage, rather than the early majority stage, and that these early adopters are pursuing their own visions for the future, which vendors have to fit themselves around. It means that the current market is more about piecemeal solutions than the complete suite of possibilities.
7) People think GE Water should be split. I ran a round table discussion on “Who will Buy GE Water?” Most of the participants supported my basic thesis that the chemical suppliers have the best synergies, the private equity firms are well placed because the company is easily leveraged, and other equipment companies are possibly less well placed – but there was a lot of debate about whether the business was worth more in two parts (chemicals and equipment) than together. My feeling is that it will be sold together because the short timetable for the sale means that it would be difficult to coordinate a bid based on breaking the business up.
8) The meaning of the water-energy nexus is the risk of catastrophic systems failure. The Gala Dinner speaker was Dr Michael Webber, the author of Thirst for Power: Energy, Water, and Human Survival. He gave an insight into the implications of the so-called water-energy nexus which I hadn’t thought about before. Mostly when people talk about the subject, they are making the obvious point that we live in a resource-constrained world. Webber highlighted the fact that the interdependence of water and energy means that if one fails, the other is more likely to fail as well: a drought means that power blackouts become more likely, which in turn means less water availability where it is needed, which in turn leads to more power system failures. Cities living close to their limits of power and water consumption become extremely vulnerable to the catastrophic failure of the two basic services that bring life (water) and wealth (power).
And one half-point. Next year we probably shouldn’t bother with an agenda: What we have created at the American Water Summit is the country’s premier water networking event. It is only wonks like me who listen to the speakers.