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US water spending is up 23% in 2022. Where next?

The world of water through the eyes of GWI publisher Christopher Gasson.

The latest data from the US Census Bureau suggests that annualised water, sewer and waste disposal construction spending was up 23% in October this year compared to a year earlier. It makes 2022 one of the best years for the sector on record, but it begs the question: where do we go from here?

The US economy is in a strange place. Higher interest rates and the end of the COVID boom in online activity have led to mass lay-offs in the software engineering sector. In turn, this has led to repeated downgrades in overall growth forecasts for the economy. But the water sector seems to exist in its own micro-climate.

The $50 billion of federal spending from the Bipartisan Infrastructure Law remains largely unspent. So does the $4 billion for water under the Inflation Reduction Act. Furthermore, from 1st January, Tier 2 restrictions are coming into force along the Colorado River, forcing a 21% supply cut for Arizona, and an 8% supply cut for Nevada. At the same time, Taiwanese chip maker TSMC has announced a $40 billion investment to increase chip production in Arizona. It is a very thirsty industry.

There is too much demand for too little capacity. If water were a country, it would be struggling to contain hyperinflation at the moment. It isn’t. It is a neglected but infinitely renewable resource. The pressures on it will drive up prices, but more than that, they will accelerate change within the sector. It can’t meet the demands put on it by climate change, economic growth, and regulatory ambition with its ageing workforce and ageing infrastructure. It is time for a rethink.

Rethinking Water is, of course, the theme of the American Water Summit in Los Angeles next month. These are the urgent questions which I want answers for at the event:

• Who is winning: the federal government or the Federal Reserve? One is pumping money into water infrastructure spending, while the other is raising the cost of borrowing. We need to know what the net impact is.

• Are we going circular? I want to know whether serious money is now going into water reuse, energy recovery, and brine mining, or whether it is just sweet talk to help politicians and industrial leaders through the drought.

• How will the supply chain emerge from this? Inflation and Buy American requirements are creating huge challenges for a procurement model based on fixed prices and offshore manufacturing. These pressures must be creating some interesting opportunities.

• Is this the moment for productivity? The pressures on the US water sector seem almost insurmountable. It means that a step change in productivity has become an imperative. Digital technologies can deliver on this, but they are going to require a radical change in thinking.

• How much of a commitment to Net Zero is there? It is an existential issue for all of us, but this doesn’t seem to be translating into accelerated investment in decarbonising the water sector. What are the obstacles to action?

• Will the Moonshot work? The EPA is putting $150 million into making sure underserved communities can deliver world-class services. Will it open up a huge new market, or is it just a ploy to keep the private sector away from weak utilities?

• Are US industrials ready to be water-positive? The drought has exposed the true economic value of water to businesses. I want to understand how it is changing the logic of investment in water.

• Is this the high tide of regulation? The event finishes with a debate on whether regulating per- and polyfluoroalkyl substances at the parts per quadrillion level makes sense. We have roped in lawyer and campaigner Erin Brockovich to argue why it does. It should be a fun way to end the event, but there is a serious point at stake. How much will Americans pay to protect themselves from things that can’t be measured?

The summit is shaping up to be a great event. I am looking forward to seeing you all there.

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Emphasis mine