Morgan Stanley Global Investment Committee released a report titled Peak Water: The Preeminent 21st Century Commodity Story. The report cites key research including ITT’s Value of Water Survey, Global Water Intelligence as well as the United Nations Environment Programme.
Citing ITT’s Value of Water Survey, the report shows broad support for water-industry reform among Americans. About 80% of Americans agree that reform of our nation’s water supply is needed. The support spans regional, age, gender, political affiliation and household income demographics. Furthermore, the survey states that 95% of Americans rate water as “extremely important”, giving it a higher priority than other utility services including heat and electricity. About two-thirds of Americans say they’re willing to pay more now to safeguard clean water resources for the future.
Several factors are working in concert to increase water demand. Some are more obvious than others, such as population growth. Perhaps more interesting, per capita demand for water continues to grow at a faster rate than the effects of population growth. One of the factors being diet. Per capita caloric consumption is growing, and the trend is towards foods which require more water to produce. Natural gas drilling and hydraulic fracturing are adding substantially to water consumption. Combined, these influences are increasing water withdrawals, the amount of water used as a percentage of total available water. Global water withdrawals are expected to increase 600% in the two-decade period from 1995 to 2015, according to Global Water Intelligence (GWI).
To meet this increased demand requires increased investment. GWI forecasts 6.5% compound annual growth in capital expenditures for water infrastructure through 2016. GWI also forecasts 8.6% compound annual growth in total capital expenditures on desalination and 9.4% growth water reuse in the same time period. Municipal water utilities will need to change the way they do business to fund the capital expenditures required to keep pace with rising demand. In short, they will need to rely more internal revenue from operations and less so on local government support. In the long run, this could greater independence and autonomy for utilities as they move to fund capital expenditures from operating cash flow.