Innovation Clusters: Water is Gold

Forget the gold rush.  A “water rush” is underway and water rich states are well positioned.

Just a few short years ago businesses expanding or relocating were likely to cite broadband and transportation networks among the most important factors in their decision process.  The Southwestern U.S. has been targeted for the majority of this investment activity. But with below average snowpack, higher temperatures, growing consumption, and extreme drought appearing to be the new normal, water has quickly become the new gold.

Las Vegas is the poster child of the challenge to come. Reuters reported in 2009 that “nowhere is the sense of crisis more visible than on the outskirts of Las Vegas at Lake Mead…the nation’s largest manmade reservoir has dipped to below half its capacity, leaving an ominous, white ‘bathtub ring’ that grows thicker each year.” (Reuters, March 10, 2009) And Lake Mead, the main source of water for much of the Southwest’s major metros continues to drain.

It’s a fundamental concept – without water, we don’t exist, let alone do business. And it is for that reason that access to reliable, abundant, and quality water resources is becoming a top asset for competitive and sustainable communities.

Water is not only an issue for large industrial users, but also for residents.  Sounds simple, but businesses and residents in water-rich states have a clear water advantage.

Pennsylvania: A Case Study

Last month a report released by Carnegie Mellon University entitled Sustainable Water Innovation Initiative for Southwestern Pennsylvania highlighted that “the headwaters of the Ohio River Basin are among the most reliable watersheds in the world.”  This reliable water supply is the reality for almost every corner of Pennsylvania.

A new National Resource Defense Council report, Ready or Not: An Evaluation of State Climate and Water Preparedness Planning, has identified Pennsylvania among the best prepared and most engaged states in terms of planning to adapt to the growing water crisis.  And among the least prepared – states like Texas who has had one of the fastest growing economies and population.

A Fourth Economy Consulting report entitled Pittsburgh’s H2O Opportunity which was commissioned by Sustainable Pittsburgh for World Environment Day 2010, also demonstrates that water supports a variety of markets in components, services, transportation and supply and treatment whose size exceeds $800 billion dollars.

In particular, water sustains the $13.7 billion energy sector, possibly the segment of the regional economy with the most immediate potential to generate significant growth and job creation given the explosion of natural gas drilling in the Marcellus Shale play.

Other key market drivers:

  • There are more than 3,000 firms already doing business in the Southwestern Pennsylvania that sustain more than 34,000 jobs.
  • Water represents more than $5 billion in direct economic activity.
  • According to McKinsey research, the global water product and service market is expected to exceed $770 Billion by 2016.
  • Citi’s top economist predicts that the water market will soon top the oil market with Platts.com research going further to say it will be a thousand time bigger than oil in 2030.
  • All major water sector areas including desalination, transportation and smart grid, energy storage, wastewater recovery and water treatment are all expected to grow dramatically through 2015.

While the immediate opportunities within the water sector are apparent, they are also diverse and varied, making it challenging for any one company, researcher or non-profit organization to easily identify and access key points for market entry.

Earlier this year a group of business leaders convened in the offices of the Allegheny Conference for a review of the Pittsburgh H2Opportunity report and a preview of Carnegie Mellon’s report.  These leaders quantified an immediate and urgent need for a concerted water innovation and market development effort akin to what is underway in other regions such as:

  • The Milwaukee Water Council (The oldest of the water economy effort in the country)
  • Confluence (A water innovation technology cluster centered around Greater Cincinnati and including the regional EPA office)
  • NorTech in Cleveland, Ohio (An effort mapping the region’s water technology supply chain)

To address the challenges unique to the greater Pittsburgh region, industry leaders expressed interest in forming their own network to advance regional water innovation, leverage market development opportunities and solidify our region’s competitive advantage.

Launched in September 2012, the Water Economy Network (the Network) will serve a critical role in strengthening Western Pennsylvania’s competitive advantage as a global center for water sector research, innovation and business development.  Fourth Economy is providing development and management services for the Network.

This working collaborative between private industry, academia and regional economic development intermediaries will help its membership access new water-sector business opportunities, encourages new company formation through innovative technology development and deployment, and attracts both national and international water related industry to the Western Pennsylvania region.

The Network focuses on 4 key water sector areas: 1) Drinking; 2) Waste-Water; 3) Energy and 4) Navigation, assisting its members by:

  1. Facilitating seed capital and investment funding for water related technology development and innovation.
  2. Identifying immediate infrastructure development project opportunities.
  3. Facilitating the formation of public and private member teams to respond to project opportunities.
  4. Making new connections among domestic and international industry stakeholders.
  5. Sharing information relative to technical developments, grant opportunities, collaborative teaming, and other critical information that will help connect our public and private sector members with new water sector market opportunities.

By helping existing businesses access new water-related business opportunities, encouraging new company formation through innovative technology development and deployment, and attracting both national and international firms that support the water sector, the region will benefit through new job creation, improved water quality and the sustainability of our water infrastructure.

The Water Economy Network is currently recruiting founding board members and partner investors to assist in the formation of a business plan that will further refine its mission, goals and services.  Already major players such as URS Corporation, Aquatech, Bayer MaterialScience, Calgon Carbon, Aloca, Veloia, the Allegheny Conference, and Sustainable Pittsburgh are helping to advance the Network’s efforts.

Working collaboratives like the Water Economy Network are gaining strength and popularity throughout the country as an effective model for both economic development efforts and private sector market development.  It’s a new way of doing business. And when the issue is as important and diverse as our water resources, it is critical that all stakeholders find a way to convene, share information and assets to both protect the resource while continuing to use it responsibly.

For more information on forming a similar working collaborative in your region, contact Stephen McKnight.

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3 Responses to Innovation Clusters: Water is Gold

  1. Innovation clusters: Water is gold | Economic Development.org

  2. PITTSBURGH’S GREATEST ASSET FOR ECONOMIC DEVELOPMENT | Bill Peduto for Pittsburgh

  3. “Water is not only an issue for large industrial users, but also for residents. Sounds simple, but businesses and residents in water-rich states have a clear water advantage.”

    I definitely agree. Without enough water, residents would have to migrate to other areas. Businesses won’t be profitable in a low populated area isn’t it?

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