In May, more than 150 affiliate organizations are coming together to create discussion about infrastructural renewal. These efforts support Infrastructure Week (May 15 to May 19), a national advocacy and education campaign aimed at highlighting infrastructure as a critical issue in America. Water Efficiency magazine is an Infrastructure Week media partner and we’re pleased to help lead the conversation.
This year’s theme—“It’s time to build”—encourages citizens and leaders alike to invest in the projects, technologies, and policies necessary to make America competitive, prosperous, and safe. From roads and bridges, to rails, ports, pipes, and the power grid, infrastructure is the foundation for every aspect of our daily lives. And that foundation is in need of repair.
To initiate discussion, we’ve reached out to a variety of industry experts regarding the state of our nation’s infrastructure. Here Trevor Hill, chairman and CEO of FATHOM, offers his insight.
Trevor is a co-founder of both Global Water and FATHOM. Prior to that, he co-founded Algonquin Water Resources of America in 2003, a division of the Algonquin Power Income Fund, of which he served as director of operations from 2000 to 2003. In 1994, Hill co-founded Hill, Murray & Associates, a design-build firm specializing in the construction and operation of water reclamation facilities in British Columbia and the Canadian Arctic.
Water Efficiency (WE): We’ve seen a number of examples of failed water infrastructure recently. What legislation is needed to prioritize and fund the replacement of water conveyance and wastewater networks in the US?
Trevor Hill (TH): There is no doubt that the infrastructure we enjoy today is in danger of collapse. We have seen several instances of aging systems failing (eg. EPA has reported 240,000 water main breaks a year, losing 1.7 trillion gallons) and those systems that are not designed to handle the “new normal” of changes in both the timing and velocity of our natural water delivery systems (eg. failure of the Oroville Dam spillway).
The way forward is to rethink the way that water systems are operated. While discrete funding mechanisms like State Revolving Funds, Water Infrastructure and Innovation Act, American Recovery and Reinvestment Act, and the proposed Trump administration augmentation of infrastructure financing can result in instantaneous benefits for utilities, the problem is not a discrete function, but continuous. Therefore, we need mechanisms to encourage and enable utilities to enter into long-term service arrangements to meet their infrastructure needs, and to allow utilities flexibility in the way that infrastructure finance and delivery is structured. Further, removing the structural inequities such as the prohibition of access to Clean Water Act state revolving funds for private wastewater entities, and allowing municipalities to enter into longer-term services arrangements would see increased investment in the sustainability of our water and wastewater systems.
WE: What steps can utilities take today to prepare for future water quantity fluctuations?
TH: Before we jump into specific actions utilities can take, it’s important to understand the two sides of our water crisis—the ability to properly allocate enough water resources, or supply-side management, and the ability to manage consumer demand of existing water resources, or demand-side management. There’s not enough water in the right places at the right time in the world to properly address the supply side issue. As nations across the world are increasingly faced with water scarcity, it is much more likely to be solved by tackling consumer demand for water resources.
To properly address future water quantity fluctuations, utilities will have to ensure that their demand-side management practices are in good shape. What that means, in most cases, is data. Demand-side management is simply not possible without data. Through the data that comes from automatic meter reading, or AMR, utilities get the opportunity to look at a consumer’s behavior and begin the process of managing that demand. Only in the context of managing demand are utilities able to handle the supply-side fluctuations that are likely to come. Demand-side management is also one-tenth or one-hundredth of the cost of trying to manage the supply side of utility operations by building new water sources for cities. To better plan for supply-side changes, utilities must first have their demand-side management under control.
At FATHOM, we provide the infrastructure stack, plus billing and customer engagement-facing tools, that allow customers and utilities to understand exactly where their water resources exist on a geospatial and geotemporal basis. Through the combination of volumetric data, geospatial data, and customer data, utilities can get a pretty good understanding of how water is being used throughout a distribution system. A rich set of data points is the first step in allowing utilities to get a handle on how they manage their water supply going forward.
Advanced rate design also enhances resilience and can ensure that utilities won’t suffer a crippling financial result when water scarcity returns. Utilities have a limited number of options to ensure dependable revenue. During times of drought, they must meet conservation mandates even though their revenues rely upon consistent water use. To hedge against future fluctuations, utilities can structure rates such that utility revenue is not dependent upon customers using a certain volume of water each month. Base rates should be raised so they are sufficient to cover fixed utility operational costs and volumetric costs can be changed to be more in line with volumetric revenue—something that’s called revenue decoupling.
WE: How will technology and intelligent infrastructure support these endeavors?
TH: Technology really is the first step utilities can take to enhance resource resilience. Demand-side management tools allow utilities to display real-time water use from commercial, industrial, and residential clients in the distribution system. Historically, this information has not been well understood, but technology providers like FATHOM are able to synthesize data and provide a clear understanding of the spatial and temporal use of water in a distribution system.
Another critical aspect of water utility technology is customer engagement. With proper tools, customers can understand how they’re using water and when and what it costs at different times. Ultimately, the cost incentive and rate structure of water use is what helps utility customers manage and understand their own behaviors. When proper customer engagement technology is in place and water scarcity hits a location, city managers are effectively able to manage water usage with a laser focus and use price signals or peer pressure to drive consumer water use efficiency.
WE: What is the future of financing infrastructure repair/replacement? What successful strategies are you observing today?
TH: It is increasingly challenging to obtain funding for water infrastructure from both federal and state government, and we expect this trend to continue for years to come. Because of the nature of the economy and the federal government’s current debt level, we think that over time the financing of infrastructure repair and replacement will rest with the cities themselves.
Today, cities across the United States are successfully deploying technology to drive efficiencies and save on utility operating costs. These savings are then used to help the city access financial markets and improve faltering infrastructure.
So, on the one hand, it’s the worst of times for financing water infrastructure updates—government money is getting harder to access. On the other, it’s the best of times, because cities can get high efficiency gains through technology adoption and can easily sell these gains into the tax-exempt lease purchase markets due to the inherent low-risk associated with water investment.
Ultimately, the future of financing lies in technology. Water utility technologies can be deployed for about 10% of the cost of installing new water infrastructure, and are often financed from savings found as a function of deploying the technology. In this way, products like FATHOM are free. Through the monetization of efficiency gains, and low capital costs, water utility technologies pay for themselves.