Author Archives: Abhirabh Basu

Filtering out the Top Membrane Startups in the Water Industry

In a recent Water Journal (client registration required), Lux classified over 250 startups in the water industry on the basis of their technology focus. We concluded that nearly 20% of these companies exclusively focus on membrane based technologies. This week we take a closer look at these membrane companies by placing them on the Lux Innovation Grid.

While there are a number of promising companies, a particularly interesting cluster falls along the border between the “Long-shot” and “High-potential” quadrants. Overall, these companies offer competitive membrane technologies but are lacking a strategy to achieve significant penetration in the membrane market. For instanceMetalMembranes (client registration required) and i3 membrane (client registration required) offer new membrane manufacturing techniques to improve flux and performance of metal-based membranes. Both these companies have found unconventional applications using their membranes for medical and pharmaceutical diagnostics, which require strong “anti-leakage” material to prepare microbiological and liquid chromatography (HPLC) samples. While these companies are still at an early stage, they lack a roll-to-roll manufacturing process, which limits their applicability to niche markets.

A few companies within this cluster focus on improving traditional desalination membranes. Massachusetts based Anfiro uses block co-polymers that align cylindrically to form “self-assembling” high-flux reverse osmosis (RO) membranes. Its membranes are robust to chlorine exposure, an Achilles heel of traditional RO membranes. Using Anfiro’s membranes, desalination plants could potentially reduce the frequency of membrane replacement, decrease disinfection costs, and lower plant down-time. The company is still developing a lab stage prototype but is confident that its membranes are strong enough to challenge the incumbent technology on both price as well as performance at scale. Oasys Water founder Rob McGinnis established Nagare Membranes in 2013, and in December 2014, it raised $10.5 million in series A fundingto commercialize its carbon nanotube (CNT) based membrane technology. While its membranes offer notable benefits including resistance to chemical cleaning, high salt rejection rates, and potential for roll-to-roll manufacturing, which is a unique step forward in CNT membrane production. The company faces challenges in terms of membrane costs and strategy as it is targeting low value added markets such as seawater desalination and small-scale point-of-use. Both these challenges can be tackled through partnerships that could drive Nagare’s technology into new markets.

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Companies in the “Dominant” quadrant offer state-of-the-art membranes in the industry. For instance, Vontron Technology (client registration required) is a leading Chinese manufacturer of polymer based RO and nanofiltration (NF) membranes. Its membranes offer a salt rejection of up to 99.7% and are suitable for low pressure treatment for feed streams, such as brackish groundwater and surface water sources, as well as seawater desalination. The company is one of the few membrane manufacturers that can ship its membranes dry, which helps reduce membrane shipment and storage costs, and increases membrane shelf life. Like Vontron, China-based Scinor Membrane Technology (client registration required) provides polymer membranes for UF and RO, but differentiates itself in the Chinese market by building membrane bioreactors (MBRs) and providing engineering, procurement, and construction (EPC) services through its subsidiary Scinor Water. Both of these Chinese companies are established in their domestic market and have expanded to Europe and parts of Asia such as Singapore through subsidiaries and forward channel partners.

Aquaporin’s (client registration required) disruptive biomimetic membrane technology rapidly and selectively allows water molecules to pass through the membrane rejecting all other species. The company shows up in the “dominant” quadrant due to recent investment activity (client registration required). Chinese and Danish firms have backed the company through significant working capital to scale up its membrane manufacturing. The company initially focused on selling its membranes for lab-scale forward osmosis applications, but through its Chinese investors, Aquaporin now hopes to enter China’s point-of-use market with a new flat sheet RO membrane. Commercializing this technology has the potential to revolutionize the membrane separation space as Aquaporin’s membranes are widely applicable to different membrane separations processes (client registration required).

High-potential companies such as Cerahelix and G2O water, both at early stages, provide functionalized membranes that improve the performance of traditional membranes. Cerahelix (client registration required) is currently raising $5 million in funding to build its first large-scale system to house a robust ceramic membrane templated with aligned DNA which reduces the pore size down to one nanometer (nm). While ceramics are more expensive than most polymer membranes, the company is targeting difficult-to-treat applications, such as frac water treatment, fine chemical separations, and acid mine drainage, where it will command a higher price point.

Advanced materials like graphene can provide significant improvements in flux and fouling resistance than traditional membrane materials. However, graphene membranes have failed to enter the membrane market largely due to the high cost of manufacturing, sourcing, and the fragile nature of single atom-thick sheets that break under high pressure. G2O Water (client registration required) has found a different method to use graphene in membranes. The company applies a 10 nm ultra-thin layer of graphene oxide flakes on top of conventional polymer and ceramic membranes to improve flux. While its membranes exhibit oleophobic properties and are suitable for oil water separations in the onshore and offshore industry, G2O Water’s recent partnerships (client registration required) in the U.K will see the company roll-out its first system to remediate wastewaters from abandoned nuclear waste sites.

Water treatment using membranes are becoming increasingly common, and advances in membrane technologies offer tunable solutions for a range of applications. Clients with capabilities in the membranes space or seeking partnerships in advanced membrane technologies should engage companies in the “Dominant” and “High-potential” quadrants. Clients should also consider partnering with companies currently trapped in the cluster between “High-potential” and “Long-shot” quadrants.

Update on State-of-the-Art Technologies in the Water Quality Analytics Space

In our last Lux Innovation Grid on water quality analytics companies (client registration required), we assessed advanced techniques to measure different water quality parameters. The report also highlighted high-potential companies like Neosens and Capilix (client registration required for each), which were soon snapped up by Aqualabo Group and Metrohm, respectively. Today, the analytics market is valued at about $2 billion, growing at 5% annually, but not all companies have taken advantage of this rapidly evolving technology space. Advanced Microlabs, NanoSelect, JMAR, and HydroConfidence (client registration required for each) have failed to penetrate this market. Lux has updated the Innovation Grid, adding several new startups.

Main Insight Graphic - Update on state-of-the-art technologies in the water quality analytics space

Dominant technologies provide simple and sensitive measurements for specific analytes. SenSevere (client registration required) has introduced real-time bromide and hydrogen sensors for industrial and municipal applications. The highly sensitive chemical sensors detect as low as 10 ppb of bromide in water. Among other dominant technologies, Alvim’s biofouling-specific sensors apply to a wide range of applications, including cooling water systems, industrial water treatment, desalination, food processing, and paper mills. Its current clients include GDF Suez, Danone, and several large international companies. Alvim is also developing an explosion-proof sensor for oil and gas applications. In a recent conversation with ANDalyze, Lux learned that the company is seeking a buyer (client registration required). The company has secured over 20 distributors worldwide, including analytics giant Hach (client registration required). Although its handheld device is currently restricted to testing trace-free metals, the technology has potential to detect trace levels of organics and bacteria which would provide a competitive edge to any analytics company’s offerings.

In Lux’s latest update on OptiEnz Sensors (client registration required), the company is field testing its fluorescence technology with new sensors for real-time measurement of organics. It has started generating revenue through tests with Fortune 100 companies for various industrial applications. Singapore-based Optiqua (client registration required) provides both an early warning system and rapid onsite testing to detect inorganic and organic compounds in water distribution systems. Its strong partnership with utilities including Singapore’s PUB and Netherlands’ Vittens provides the company with a platform for rapid technology development.

Most companies in the undistinguished and long-shot categories continue to operate and provide standard probes and common water quality sensors. Slow adoption rates and sales cycles in the municipal market have created barriers to growth for some startups. Meanwhile, monitoring waste streams due to tightening worldwide discharge restrictions and optimizing industrial processes to reduce downtime, provide an ideal testing ground for next generation startups. Clients seeking opportunities to enhance their analytical capabilities and improve process control should consider potential partnerships or license agreements with companies in the high potential and dominant categories.

Recirculating Aquaculture Systems Drive a $13.3 billion Water Treatment Market in 2030

Lux Research Consulting

Demand for fish is leaping: in the last 20 years, demand has grown by 64%. Despite “vacuuming the sea” with overfishing and rampant illegal fishing, the traditional fishing industry has failed to meet this growing demand. Instead, it is being filled by aquaculture, the revenue for which has sustained an extraordinary 8.3% annual growth rate over the last decade and a half, rising from $51 billion in 2000 to $144 billion in 2012.  During the same period, the industry produced a total of 66 million tons of fish and 24 million tons of aquatic plants (mostly seaweed), growing at a steady rate of 6.2% over the last decade. The estimated number of fish farms grew from 3.9 million in 1990 to 16.6 million in 2010. That said, while aquaculture currently provides 42% of the global fish demand, continued growth depends on better technology: the market for advanced recirculating aquaculture systems (RAS) that reduce water consumption and intensify production is growing rapidly across the globe. Today, such systems provide 6% of the total production in China and 12% in both the U.S. and Europe. However, by 2030 aquaculture will meet 62% of the global fish demand, 40% of this production will be supplied by advanced recirculating systems. This represents a $13.3 billion market for water treatment, growing from $7.2 billion today.

Recirculating systems treat enormous volumes of low-grade wastewater, conserving both water and land by maximizing production in a relatively small, closed loop. It consumes 80% less water compared to conventional pond cultures.  Operators employ a biological treatment to control biological oxygen demand (BOD), nutrients, and dissolved oxygen in order to boost production using the same amount of water. A typical system must treat around 100,000 m3 each day. While this underserved market currently falls back on traditional treatment technology, efficiently treating such volumes to a quality that will support delicate, densely packed fish populations is overdue for new innovation.

In terms of global distribution, 2012 saw China lead in aquaculture production worldwide, and it will continue to do so through 2030. While RAS represents only 6% of current production in China, the strong trend toward larger, more efficient systems is driving rapid change. Europe will also emerge as a large scale adopter of recirculating systems as demand for high value products such as seabass and salmon continues to increase. Research institutes such as the Denmark Technical University (DTU Aqua) and Nofima in Norway will push further commercialization of these systems to improve efficiency and environmental integrity. Finally, amid strong competition from importers, producers in North America will increasingly look to high-efficiency RAS systems to remain competitive.

RAS production has grown over the last 15 years even as traditional production has declined. Still, there is enormous potential for new adoption of advanced systems providing an opportunity for all suppliers in this value chain.

Source: Lux Research report “Blue Revolution: The Fast-growing $7.2 Billion Water Treatment Opportunity in Aquaculture” — client registration required.

AccelerateH2O – Texas’ New Water Technology Accelerator

We recently spoke with Ed Archuleta, the Chairman of AccelerateH2O, a San Antonio based Texas water technology accelerator. The accelerator was born out of the Texas Research and Technology Foundation (TRTF) in 2014. AccelerateH2O is a non-profit organization that provides open research and resources for water technology startups. It will also provide a database of technical papers and patents found among Texas’s academic institutions and research organizations. Still in it early stage, the accelerator has received a $500,000 grant from the Texas Economic Development Council to initiate its first program focused on identifying critical water issues within the state. Ed said that the organization will focus on investing and promoting new and existing technologies including direct water reuse, concentration management, and zero liquid discharge for difficult-to-treat wastewaters.

AccelerateH2O is now part of many water technology clusters that have emerged all over the U.S. Other clusters include the Confluence Water Technology Innovation Cluster, for Ohio, Kentucky, and Indiana, which is located in Cincinnati; Brew in Milwaukee; the Michigan Water Technology Initiative in Michigan; the New England Water Innovation Network in Massachusetts; and Bluetech Valley in California. Ed said that the organization is currently in talks with institutional and research partners to support its further programs which will focus on assisting startups to run tests and demonstrations, and conduct investor forums.

In 2010, freshwater and groundwater withdrawals in the state of Texas were equal to around 24,800 million gallons per day with thermoelectric power using 45%, agriculture using 4%, and public supply using 16%. Parts of the state continue to face a growing pressure from drought, which has forced water suppliers to adopt extreme measures (see the insight, “Extreme drought prompts the U.S.’s first toilet-to-tap project, in Texas” — client registration required). Technology clusters will be a part of the solution to water challenges in many U.S. states, as organizations such as AccelerateH2O try to bridge the gap between water businesses, researchers, and state agencies. Clients looking for regional water technologies in incubators and clusters should consider taking a closer look at AccelerateH2O.

Exploitable Gas Hydrate Deposits May Fall Short of Shale Gas, Leaving Their Impact Largely Theoretical

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Two recent estimates of shale gas and gas hydrate resources point to a much smaller hydrate potential than conventionally recognized. A 2013 EIA study of risked shale gas-in-place – that is, gas that have largely not been exploited and therefore carries significant risk – finds a total of 35,782 tcf worldwide, two thirds of which is concentrated in experienced producing countries: the U.S., China, Argentina, Algeria, Canada and Mexico. The report fails to capture significant potential gas-in-place in critical areas such as the Middle East and central Africa. Overall, significant resources exist, quantified or unquantified, in regions that already have significant infrastructure in place to deliver gas to market.

Knowledge of hydrates in place remains even more spotty, with acoustic survey offering at best incomplete information and electromagnetic surveys still spotty. The survey published by Hydrate Energy International is a calculated estimate of gas in place for hydrates that operators are most likely to be able to exploit, namely arctic and marine sands. It finds a total of 43,311 tcf worldwide. Excluding difficult-to-exploit deposits in the Arctic and Southern oceans, the estimate falls to 33,101 tcf, nearly identical to the shale gas estimate. Ironically, the calculated approach based on globally available parameters is more geographically complete than the shale gas survey, so represents what is likely to be a less conservative estimate. Therefore, it is striking that hydrates do not dominate in volume. Japan, an enthusiastic player in the space due to its lack of other resources, has only 212 tcf according to the estimate, compared with 7,013 tcf in the U.S. and 933 tcf in India.

Unlocking even a fraction of new reserves can dramatically change the marketplace. North American shale gas sent local prices dramatically lower, prompting players to switch to higher value unconventional liquids. Those prices have recently also dropped, with Saudi Arabia even lowering its price specifically for U.S. customers in an attempt to discourage further unconventional drilling. However, with shale’s global potential barely tapped, the pure gas play hydrates represent is unlikely to see major international investment for many years. It seems unlikely the world is ready to develop another gas resource even as North American gas export facilities come online to help level out global prices. For the moment, Japan is the lone enthusiast in the space.

That said, the technologies early projects are developing promise to extend gas availability well into the future, with an emphasis on areas that have not directly benefited from shale gas. It seems likely that natural gas supplies will be available well into the future, with pressures on supplies coming more from environmental concerns than actual availability. These deposits represent long-term global energy security that should take pressure off downstream energy consumers as well as creating a robust feedstock for gas to liquid operations. We may not need the gas for some time, but its presence and the likelihood that a proportion of it is recoverable allows confidence in a secure long-term gas economy.

New Water Membranes Will Penetrate High Value Markets Worth Billions, With New Industrial Processes Calling for High Performance

Membrane technology has become an increasingly important tool in water and water-based fluid treatment and processing. While applications like seawater desalination and membrane bioreactor (MBR) wastewater treatment have become widely adopted from a revenue perspective, they are still just a drop in the bucket. In fact, market penetration in MBR is extremely small, well below 1% of the overall, potentially 125,000 square meter, market. Seawater desalination likewise occupies a roughly 1% market share of the drinking water market, with municipal drinking water being another attractive potential 125,000 square meter market, with tightening regulations driving growth.

Even with these opportunities with a lot of ramp in front of them, there are other very large segments that would benefit from appropriate membrane technology. Industrial markets are $1 billion today, but increasingly robust membranes will make the technology widespread across food and beverage and other industries. Membranes’ ability to finely separate materials based on molecular weight, charge, and other parameters makes them a unique value-added component in the milk industry today. Applications that have lead the way include alcohol processing and ultrapure water for electronics, but that is just scratching the surface. Next-generation membranes might separate individual sugars, drugs, and useful biomolecules, or replace affinity chromatography with systems that can release their high-value fractions with a simple backwash. Clients should examine other food and beverage markets closely for high-value separations that could be enabled by a variety of membrane types, whether microfiltration for fats separation, ultrafiltration to separate the casein from whey proteins, nanofiltration to separate lactose and water from other components, and reverse osmosis for efficient dewatering.

The overall imperatives for membrane technology are clear, with three key issues being front and center: low cost, low fouling, and high flux or efficiency. There are a range of solutions. For instance, low fouling can mean making membranes more robust to chemicals to allow cleaning or more resistant to fouling itself. That said, the plethora of use cases and separations needs and the inherent Maslowian inevitability of the market’s growth should keep membrane development on the mind of growth-driven executives.

Source: Lux Research report “Revolutionary Water Membranes” — client registration required.

Despite High Profile Flameouts, Profitable Opportunities Abound in the $620 Billion Water Industry

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Recent headlines in the $620 billion water industry, including major companies like Siemens and Ashland selling off their businesses and Veolia continuing to hemorrhage, make the sector seem unnavigable. Bloomberg recently published what amounted to an autopsy of the most hyped water market in recent years, frac water treatment. Venture capital (VC) investors, citing slow adoption of new technologies in the industry, have largely taken their money elsewhere. Despite this drumbeat of pessimism, the water sector has large numbers of profitable – sometimes extremely profitable – large companies. A detailed value chain analysis reveals that the industry earns better than 12% operating profits across all sectors despite recent strong headwinds.

By targeting worthwhile market sectors and keeping in mind some key sector-specific principles, a company can build a successful business in this massive, growing, global industry. The companies we surveyed across the value chain, directly representing some 23% of the market, achieve an average 12.9% operating profit, torpedoing claims that it’s impossible to make money in the water business. Going a step deeper, chemicals and materials, equipment, and integrated systems achieve solid 8% to 11% average profits across the companies we surveyed, despite sector-specific headwinds. Customer-facing sectors in public service and small consumer systems do better than 14% profits. Huge profits abound in the highly political $120 billion public services market overall, with key opportunities to improve margins through innovation. Only the highly commoditized engineering and construction businesses, representing only a third of the industry, are stuck in the low single digits. Even in these sectors targeted plays achieve high margins.

With the flux in the industry, the opportunity to pursue acquisitions and enter target markets is ever-enticing, especially for those who mistakenly think of water as another little cleantech business they can roll up. However, water offerings must always rise from a coherent set of offerings that feed back on each other. There are thousands of technology startups in the water space, each focusing on improving some aspect of treatment. Keeping track of these early-stage innovations will allow portfolios to be assembled to leapfrog today’s overcrowded markets. Companies looking for a big idea to shape their water businesses can look at where the startup activity is placing its bets: improvements in wastewater treatment, like the nano-ceramic membranes for wastewater aeration offered by BioGill, and dramatic improvements in monitoring, such as those in ANDalyze’s portfolio, are good places to start. Both will be transformative, and companies that ride these waves will overtake more established players.

Source: Lux Research report “Making Money in the Water Industry” — client registration required.

 

Hype Officially Over for Frack Water Treatment

Every new field goes through an early hype period, followed by disillusionment, then slower, more measured growth. With small-scale investors and large companies like Schlumberger weighing in to report a much more fractured market than most expected (see the report “Risk and Reward in the Frack Water Market” — client registration required), the early hype is, or should be, finished. Don’t tell companies like Flowback Solutionz (client registration required), currently seeking $9 million to build its first prototype, but investors are headed for the door, some with less cash than they started with and some hard-won lessons in the water industry. The highly variable nature of the water from play to play has kept most non-chemical players out of the challenging Marcellus, which grabbed early headlines. The newest target, North Dakota’s Bakken, remains as enigmatic as previous plays, with operators banking on a wide range of fracking and disposal strategies.

Expect savvy chemical companies like Kroff (client registration required) to continue to make a killing, adjusting high-margin formulations to meet the industy’s evolving needs. Other solutions, like WaterTectonic’s (client registration required) and Halliburton’s joint treatment system, are casting around for opportunities in industries like mining. Expect thinning ranks of startups in the space. Clients interested in advanced water treatment methods should look through the wreckage in search of IP applicable to other industries. France’s Orège (client registration required) has shown that advanced oxidation is a good solution for difficult but predictable factory wastewater. In the U.S., advanced oxidation and electrocoagulation companies have been tilting at windmills in the frack fields. Clients looking for technology to take in new directions will likely find willing partners with names like Aquamost (client registration required), Ecosphere (client registration required), Neohydro (client registration required), and Produced Water Solutions (client registration required).

Timely Technology Will be Critical to Reducing Water Risk in the Food and Beverage Industry

As established players have known for years, food and beverage is a multi-trillion-dollar industry with relatively minor variations in water quality and regulatory requirements. Moving forward, major societal drivers are pressing both industry and agriculture toward novel water solutions.

To control water risk, the food industry is expanding its focus beyond processing plants to water savings across the value chain. With deeper pockets and a better market-oriented grasp of costs than municipal water, this industry is rich with opportunity for technologies that can reduce water needs, promote reuse, and efficiently pretreat wastewater for discharge. The industry will be forced as never before to listen both to downstream retailers concerned about sustainability and upstream agriculture that makes up much of their water risk.

The range of applicable technologies is as diverse as the opportunity is large, demanding an analytical framework – the Lux Innovation Grid – for understanding all the emerging innovative entities in the space. Focused solutions are rife, from crop like AquaSpy and UgMO that use moisture sensors and crop knowledge to monitor field conditions and Capilix’s capillary electrophoresis sensor technology for monitoring hydroponics systems, to production plant where the likes of Bilexys and Emefcy look to apply their variants on microbial fuel cells to generate chemicals or energy from process wastewater.

The overall takeaway is clear. With increasing trepidation about population growth in the face of climate change, and increasing world affluence driving more water-intensive foods, industry demand for novel solutions from farm to factory have just begun to accelerate.

Source: Lux Research report “Farm to Factory: Technology in Reducing Water Risk in the Food and Beverage Industry” — client registration required.

Utah oil sands operator’s prospects dry up

US Oil Sands, whose name could be taken as a misrepresentation of their Canadian origins, recently faced a challenge from environmental groups claiming that the company’s water-intensive oil sands mining operations in Utah, requiring up to 84,000 gallons of water daily, would be too environmentally disruptive. Western Resource Advocates, a nonprofit environmental law and policy organization, appealed US Oil Sands’ mining permit, citing state regulators did not assess threats to groundwater when granting the approval. US Oil Sands has leased nearly 6,000 acres, of which 213 acres representing 189.9 million barrels will be initially mined, and targets production of 2,000 barrels per day by 2014. The Utah operation, using proven surface mining techniques deployed in Canada’s oil sands for the past three decades, will use as much as 636,000 liters of water each day in a desert that is already suffering the driest summer since 2002. Although US Oil Sands says 85% of the water can be recycled, an administrative law judge will rule on the company’s mining permit later this month.

Utah is the second driest state in the U.S., getting only 10 to 12 inches of rain every year, and has seen very little commercial development in its oil sands reserves due to water availability. Geological surveys of Utah’s oil sands reserves show that the state holds 25 billion barrels of “mineral matter consolidated” bitumen, in which the sand grains are cemented together with the oil and require the use of a citrus-based solvent, d-Limonene, along with hot water. US Oil Sands, however, struggle to even find adequate water sources to utilize in mining operations. They have drilled 108 holes, at depths of a few hundred feet, and four deeper wells, which all came up dry. Other oil sands reserves, such as those in Canada and Venezuela, are known as “water-wet” deposits, where a thin layer of water surrounds the sand grain, allowing for cost-effective and less water-intensive separation of sand from the oil. US Oil Sands’ second quarter statements identify the need to “source optimal water well locations for the Project’s future processing facilities.”

Potential exists to withdraw from the Colorado River, where Utah has not fully utilized its apportionment, but state regulators facing a growing population and recurring drought are not likely to grant oil sands producers these water rights. US Oil Sands may have two remaining options: the Ute Tribe of American Indians holds a significant quantity of water; and produced water from surrounding oil and gas producers, approximately 46.5 million barrels annually, could be used in the oil mining operation with significant treatment. US Oil Sands’ success hinges on their ability to secure water rights and prove that they are able to extract from Utah’s bitumen deposits.