Chapter 8

Decentralized Water and Wastewater Treatment

Decentralized water and wastewater treatment holds a rather distinct place in the water industry. This is partly because it encompasses a broad array of activities that are not neatly packaged within traditional centralized treatment (such as remote sites, point of use (POU), point of entry (POE), and on-site “packaged” plants) but also because it potentially represents a radically different approach to treating and reusing water resources (point-of-use-reuse, or POUR). An interesting aspect of the discussion about decentralized water and wastewater treatment is not just the parallels to distributed energy and the logical economic transition to a distributed model but whether a decentralized structure for the water industry may be a better approach in the first place.The developing countries are likely to be the experimental ground for this determination. It ultimately comes down to the question of whether decentralization as a treatment mechanism will facilitate or impede the protection of human health and sustainable water resource management.

Decentralized Treatment

Disruptive Decentralized Development (DDD)

The markets are replete with examples of a seemingly contradictive technological approach’s radical transformation of an existing structural paradigm. The reverse flow of technological innovation for bottom-of-pyramid (BOP) markets is a phenomenon that can be seen in a number of industries. In telecommunications it involves the buildout of a network of telephone wires to remote regions when a more advanced mobile network could be implemented at a fraction of the cost. With respect to electricity generation, the notion of distributed energy produced with solar or biomass alternatives may be an obvious preference to centralized fossil fuel consumption. By extension, why build massive conventional, centralized water treatment plants when the science behind biomembrane reactors, for example, might represent a more sustainable approach through a decentralized framework? The notion of DDD is an issue of great potential importance to investors in the water industry. Not only does it portend a global macrotrend to a dedicated water industry in emerging economies, but it also provides a fertile ground for institutional change and the commercialization of enabling technologies that are gaining momentum in developed countries.

Decentralized or Distributed Treatment: Which Is It?

Decentralized systems serve 25 percent of the U.S. population, are used in about one third of all new housing and commercial development, and are utilized extensively in rural areas. While decentralized systems that are properly sited, designed, installed, operated, and maintained protect human health and water quality, the reality is that these systems have the enormous potential for creating water resource problems, either for our health or for our environment.The U.S. Department of Commerce estimates that between 10 and 20 percent of all on-site systems are not adequately treating waste.¹ Greater than 50 percent are more than 30 years old and more likely to malfunction. Finally, septic systems are the second-greatest threat to groundwater quality, second only to leakage from underground storage tanks. It is against this backdrop that a comparison between distributed electricity generation and distributed wastewater treatment begins.

Comparative Characteristics. It is in vogue to extend the reality of distributed energy generation to the evolution of decentralized wastewater treatment, that is, distributed wastewater treatment. Distributed generation is a market-driven trend contributing to a restructuring of the electricity industry.The extension of this phenomenon to wastewater treatment is intended to be predictive of the future of the increasingly dynamic wastewater industry.While energy generation and water provision share a history of centralization, the emergence of a “distributed” model in wastewater treatment does not necessarily follow. Many commentators draw their vision from a rather superficial application of overly broad definitions. Distributed generation encompasses many technologies and is subject to a seemingly endless number of definitions. One definitional grouping focuses on scale, and, at least on the surface, this is where comparisons are made with the emergence of distributed wastewater treatment. The reason for concern is that there is growing acceptance that this is a new market with investment potential comparable to the rationalization of the electricity grid.

Distributed generation is often defined as small-scale electricity generation, that is, the production of electricity at or near the point of consumption (use). Size is considered a defining characteristic of distributed generation, used primarily to meet on-site requirements for individual homes or businesses or small clusters of customers. Rather than having one central, high-capacity plant that provides power for a large area with long transmission distances, potentially dangerous electromagnetic fields, and a high risk of catastrophic blackouts, small plants offer communities independence from a wide-area grid, boosting resilience.

But, aside from scale, the technological innovations and the changing economic and regulatory environment that drive distributed electricity generation are vastly different than the necessity of decentralized wastewater treatment. The International Energy Agency cites five factors that have contributed to the evolution of distributed generation:

1. Developments in distributed generation technologies

2. Constraints on the construction of new transmission lines

3. Increased customer demand for highly reliable electricity

4. Electricity market liberalization

5. Concerns about climate change

The bottom line is that the benefits of distributed energy generation are the result of efficiency and reliability considerations within the framework of a commoditized market for electricity and the transformation of global energy.

Wastewater Treatment

As with large-scale electricity production, centralized wastewater treatment developed initially in response to a belief in economies of scale. The bigger the plant, the more customers served, the lower the average cost. Centralized wastewater treatment was considered the most cost-effective method to manage the process to ensure human health and environmental protection. As funding for centralized wastewater collection and treatment has diminished, there has been a dramatic shift in interest among professionals and the public toward decentralized wastewater technologies, which can be environmentally compatible and cost effective. Decentralized wastewater treatment, while a necessity under various conditions, differs from the deliberate application of a distributed wastewater treatment structure.

Some of the key advantages of distributed generation include improving the level of power quality and reliability, reducing the amount of electricity purchased during peak price periods, serving niche applications, lowering of energy costs through effective demand reduction, cost savings in transmission and distribution, and environmental benefits. It cannot be said that distributed wastewater treatment shares these beneficial characteristics. For example, wastewater treatment does not exhibit peak load characteristics like electricity consumption. Generator installations relieve congestion in power lines during periods of peak demand, helping to defer investments in additional transmissions and distribution capacity. If anything, drinking water treatment is more amenable to the distributed resource management concept than wastewater treatment, but not when a POU system is receiving potable water from a centralized treatment plant; that is, the enabling technologies that give rise to distributed generation have no analogy in drinking water “generation.”

Distributed generation technologies are widely available. Gas turbines, microturbines, fuel cells, photovoltaic cells, and renewable fuels enable the distribution of electricity generation. In wastewater treatment, decentralized technologies are critically dependent on the characteristics of the wastewater stream and the sensitivity of the environment into which the effluent is discharged. One of the main problems associated with making the leap from decentralized to distributed wastewater treatment is the concern over human health and effluent water quality. Accordingly, management of these systems is of great concern.

Emerging Decentralized Regulatory Framework. The EPA defines five basic management models, ranging from basic regulatory oversight to full-scale utility ownership, operation, and management of on-site and clustered wastewater systems.The Level 1 model entails a basic regulatory framework consisting of issuing permits, performing construction inspections, and maintaining records. At the other end of the spectrum, the management model calls for creating a private utility corporation or responsible management entity that would own, operate, and maintain all of the systems within its service area. This removes the property owner from responsibility and is analogous to a micro-centralized wastewater treatment system. This level of management provides the greatest assurance of system performance in the most sensitive of environments.

The problem is that the regulatory scheme has not yet effectively developed centralized management to ensure care of on-site and decentralized wastewater treatment facilities. Clearly, the technology exists to maintain on-site systems to work in perpetuity, but they must have the proper oversight. In this respect, decentralized wastewater treatment is far from the distributed generation model, which, other than the reliability issue, is not subject to the same management challenges.

The bottom line here is this: Wastewater systems have enormous implications for the quality of surface and groundwaters. If the discharge is to surface water, effluent limitations will be specified within a National Pollutant Discharge Elimination System (NPDES) permit to protect water quality standards and the designated uses of the waters. If the discharge is to groundwater, the permit applicant will be required to meet drinking water standards at the property boundary. In both cases, the permit will include monitoring of the effluent to ensure that standards are being met and to demonstrate that the system is operating efficiently.

As technology, regulations, and public perceptions change, so must the level of oversight for wastewater treatment and disposal. Decentralized wastewater treatment systems can be an effective option for protecting public health and the environment if properly designed, installed, and managed. Otherwise, they can be a significant threat to public health and the environment.

The reality of decentralized wastewater treatment (as opposed to drinking water treatment) has attracted the attention of distributed model advocates because of the clear need for on-site solutions, the overriding concern over the health issues associated with decentralized potable water treatment and the relative ease of on-site wastewater discharge. But the economic and regulatory forces that are driving the move to distributed generation are simply not yet present in the structure of wastewater treatment. If anything, a hybrid system of drinking water and wastewater treatment may be the optimal model for a distributed structure. I choose to refer to this as a POUR system rather than the less appealing “toilet-to-tap” label often used in obvious rebuttal to the concept.

Drinking Water

The necessity of decentralized wastewater treatment is acknowledged as an alternative to large centralized facilities. Decentralized wastewater treatment is vastly more expansive than traditional septic systems; it includes not only conventional individual on-site wastewater systems but also cluster or common systems and packaged wastewater treatment facilities.The point, however, is that to characterize decentralized wastewater treatment as a distributed concept similar to that used in electricity generation is counterproductive. The question now is whether drinking water treatment can fulfill the promise of distributed resource management.

The clear alternative to centralized drinking water treatment is embedded in POU treatment. By and large, POU treatment uses centrally treated water as the source water. And while there are clearly localized needs and aesthetic reasons to “treat” already-treated drinking water, this certainly does not rise to the stature of the benefits associated with distributed energy management. If anything, a hybrid system of drinking water and wastewater treatment may be the optimal model for a distributed structure such as POUR.

To reiterate, some of the key advantages of distributed generation include improving the level of power quality and reliability, reducing the amount of electricity purchased during peak price periods, serving niche applications, lowering energy costs through effective demand reduction, cost savings in transmission and distribution, and significant environmental benefits. Therefore, drinking water treatment is more amenable to the distributed resource management concept than wastewater treatment, but not when a POU system is receiving potable water from a centralized treatment plant.

Despite an understandable lack of public acceptance about drinking treated household wastewater, the fact is that all water is eventually reused; the hydrologic cycle is a closed system of continuous water circulation. The notion of water reuse can take on a variety of applications, from groundwater recharge to industrial recycling to irrigation and even direct decentralized potable reuse. The common thread is economics; different uses and reuses can be addressed with differing water-quality levels. It is the necessity of differentiating water supply needs that will inevitably govern the growth of POUR.

Water Reuse

On a macro scale, water is thought of as a renewable resource because it can be replenished fairly rapidly (on a human time scale) through natural processes. But the accumulated degradation of water supplies and burgeoning demand beyond the sustainable yield has modified its status on a micro level. Because of the imbalance of supply and demand, and the lack of a workable structure to achieve local equilibrium, water reuse presents a mechanism to efficiently allocate water, that is, replenishing a locally depletable resource through “recycling.” But one of the areas with great potential, yet significant cultural resistance, is the residential reuse of wastewater.

Water reuse generally refers to the use of wastewater following some level of treatment. Water reuse can be inadvertent, indirect, or direct. Inadvertent reuse of water results when water is withdrawn, used, treated, and returned to the environment without specific plans for further withdrawals and use. Indirect water reuse is a planned endeavor, one example of which is using reclaimed wastewater to recharge groundwater supplies. Artificial recharge of depleted aquifers using treated municipal wastewater is increasingly common. Direct water reuse refers to treated water that is piped directly to the next consumer or back to the same user. In most cases, the “consumer” is industry or agricultural activity. But indirect and even direct potable reuse remain viable options in residential applications and is increasingly being discussed as a water resource alternative in the age of sustainable utility practices. It is POUR that has the greatest chance of delivering the true benefits of distributed water resource management.

Nationally and internationally, pressure is increasing to introduce nutrient-reducing, water-conserving, and recycling measures for sustainable residential, commercial, and small community water/wastewater systems. There is a growing debate over the limitations of centralized treatment and the ability of municipalities to accommodate increasingly varied contaminant loads and volumes. The utilization of on-site rainwater collection, wastewater separation and treatment, and water recycling provides a proven, decentralized, economical, and sustainable alternative to the traditional drilled wells, piped water infrastructures, and commingled septic or sewer wastewater treatment systems.

POUR applications have the potential to alleviate many of the problems associated with septic systems. Septic tanks receive a commingled waste stream comprised of greywater and toilet wastes moved with substantial amounts of drinking-quality water; an average of 75 to 125 gallons of water per person per day. Approximately 25 percent of the estimated 109 million housing units in the United States are served with septic tanks, receiving and discharging 175 billion gallons of wastewater per year. The need to develop alternative water supplies, especially in drought conditions, is driving the demand for water reuse and recycling. In addition, over 10 percent of septic systems malfunction or fail completely at least once per year.The contamination of groundwater sources from failed septic systems represents a significant source of pathogens that can be alleviated with advanced on-site wastewater treatment systems.

The major sources of wastewater pollution in conventional septic and sewer systems are the toilet and garbage disposal. POUR wastewater systems can separate and treat those wastes at the source, reducing residential water consumption by at least 40 percent and commercial consumption by up to 80 percent while reducing BOD and fecal coliform by 99.9 percent, and nitrates and phosphorus by 99 percent. Because of the emerging trend in decentralized treatment in the context of water reuse, on-site treatment is likely to be one of the fastest-growing specialty segments in the wastewater industry.The study projects that almost 9 million homes will be served by on-site wastewater systems between now and 2015 and that a significant percentage of new installations will utilize alternatives to conventional septic systems. For example, mandatory hookups to central sewer systems, as currently required in Florida, are not seen as economically sustainable in the future. The opportunity for POUR systems is obvious.

The EPA promotes on-site treatment systems as a sustainable treatment and water recycling option. As they report in “Decentralized Wastewater Treatment Systems: A Program Strategy,” on-site systems “offer several advantages over centralized wastewater treatment facilities. In many communities, on-site systems are the most appropriate, least costly treatment option, and they allow maximum flexibility in planning future growth.”² The existing and future financial burdens of maintaining existing sewer collection and treatment systems is enormous compared to on-site options. But the EPA is far from blessing the decentralized treatment of wastewater for consumption as drinking water.

As the regulations that govern effluent discharged to receiving waters become increasingly stringent, municipalities have an economic incentive to reuse or recycle process water and wastewater. While irrigation and industrial, urban, and indirect nonpotable reuse are developing applications for reclaimed water, the challenge is public acceptance, and protection, in the application of reclaimed water to potable uses. Relative to drinking water regulations, standards were developed piecemeal to address problems in traditional water sources. They do not fully address the problems of converting reclaimed water into drinking water in the areas of virus control and organic matter. As such, significant progress must be made in legislating additional criteria for controlling contaminants in the water reuse process. While the dual distribution system (which distributes both potable and reclaimed grades of water to the same service area) is practiced under strict state guidelines, a next step in the evolution of reuse is likely to be POUR.

Convergent Technologies

Critical to this evolution, and a major opportunity, are membrane technologies and multiple-barrier methodologies that will drive the expansion of water reclamation—an analogy to the technologies that enable distributed electricity generation, such as gas turbines, microturbines, fuel cells, photovoltaic cells, and renewable fuels enable the distribution of electricity generation. These bioreactor systems biologically convert 90 to 95 percent of all toilet and kitchen garbage disposal wastes into odorless carbon dioxide and water vapor. Oxygen-consuming (aerobic) organisms thrive in the systems, converting the remaining portion into a beneficial soil amendment. Utilizing blackwater separation and greywater treatment, filtration and disinfection technologies for partial or total reuse represent a cost-effective option for reducing and eliminating water supply pressures while improving and protecting national security.

It is clear that water reuse is an economic proposition that is inevitable in the future of the provision of water. As a general category, it has yet to fully emerge as an industry segment of the water industry capable of defined investing. At the same time, there is a great deal of private investment interest in the residential application of reuse technologies due to the “large-market” potential; substantial opportunities exist for early entrants in the field with demonstrated technologies and products. Residential POUR has broad implications for existing segments such as privatization, distribution systems, infrastructure components, disinfection technologies, and membrane utilization. And as the public accepts reclaimed water as part of the recycling ethic, POUR will secure a permanent position in the scheme of efficiently providing water for residential consumptive uses.

Why does it even matter whether we call noncentralized water and/or wastewater treatment decentralized or distributed? The reason is that if the industry improperly develops the notion of distributed resource management with respect to water, the likelihood of reaching sustainable solutions will only be delayed. The investment potential inherent in the water industry critically depends on the right choices.

The Roots of Decentralized Treatment

Residential POU Market

There is a groundswell of activity in residential water treatment equipment that represents a mature but changing subculture within the broadly defined water industry. In contrast to municipal and industrial water treatment markets, which are currently influenced largely by direct government regulation, the residential markets are driven by economics. As a result of deteriorating municipal water quality, both perceived and real, end users are taking control of their own water by purchasing home water treatment equipment. The market here is obviously enormous, comprising nearly every household, condominium, and apartment in the country.

The market for residential water treatment equipment is a billion-dollar-plus industry and is expected to grow significantly over the next decade. And these figures could pale in comparison to the actual market numbers upon full realization. At the same time, the next five years represent a good transition period and can probably be estimated with reasonable clarity. Beyond that time horizon, however, the landscape of what constitutes residential water treatment is likely to look dramatically different, that is, whole-house units as commonplace as an air conditioner or a standard kitchen appliance in white, black, or whatever color is the trend at the time.

For these reasons, it is useful to delineate certain segments within the market for home water treatment equipment. For instance, water softeners, probably the most traditional and established home water treatment product, should experience rather staid growth. And sediment filters, another segment, are also expected to remain at a stable growth rate. But product segments that involve more recent and innovative water treatment technologies will grow at a much more rapid rate through the end of the decade.These technologies include reverse osmosis (RO), ozone, ultraviolet (UV) radiation, and microfiltration (MF). Residential end users have been slower to accept these newer technologies, but are beginning to do so. None of the segments in the residential water treatment market have been saturated and are either in growth or development stages.

Water Conditioning

Water softeners represent a mature but stable segment. Softening refers to the removal of calcium and magnesium ions that react with soap to form curds and create water that is “hard” for washing. Softened water used in the home enhances bathing, washing, cleaning, and heating. Other ions that are removed by softener resins include aluminum, lead, ammonia, cadmium, barium, copper, iron, manganese, zinc, and naturally occurring radium. Resins in home water treatment units can successfully reduce a wide range of contaminants and are experiencing renewed interest as selective applications expand. Specialty chemical companies that produce ion exchange resins should benefit from this activity as pricing pressures subside. And while the basic technology has not changed much, certain component innovations have altered the performance of these systems. Demand-initiated regeneration in water softeners, provided by advances in controls and valves, is enabling many residential softeners to use much less salt and water and discharge less brine. Other mature segments, such as carbon and sediment, are also benefiting from new technology. Advanced media technology in carbon block filters and molded sediment filters is producing greater mechanical filtration, allowing these filters to treat water for both aesthetic and health problems.

At the same time that established home water treatment technologies are being boosted by innovations, newer technologies are also beginning to significantly impact the market. Although the market for UV, MF, and RO are all in the intermediate to later stage of development, they are becoming accepted by residential end users. Improvements in these technologies are progressing and are expected to increase popularity of these products within the market. For example, advances in thin film membrane technology have increased the retentive capacities of RO systems in addition to making them more space efficient. Chlorine-resistant thin film membranes are gaining favor in the residential market where chlorine degradation is a problem for membranes.

Technology is not the only factor that has spurred the dramatic growth of the home water treatment market. Major trends in marketing these products have also had a role. Health issues have led to wider distribution of products and created awareness. And microbiological contamination aside, other less threatening parameters such as taste and odor have taken on greater significance to households. For one thing, these measures are relatively easy to apply by using two of the senses. And for another, they are simple to cure with even the most basic water treatment equipment. The temptation to exploit such appeal by those who serve the home market is probably the greatest problem facing the industry. But it also the catalyst for the onslaught of a hugely powerful marketing trend, namely, retail sales.

The growth in home water treatment equipment is very much a function of expanded distribution channels. In a market traditionally controlled by water treatment dealers, the movement to mass merchandisers and retailers will not take place overnight. A number of manufacturers or assemblers boldly state that they will not “destroy” the industry by selling directly to mass retailers or wholesale clubs.This logic is more than vaguely similar to the water supply industry’s reluctance to face the reality of the home treatment market itself.

While service and credibility are key concerns in the emerging market for home water treatment, consumer-driven market forces will simply not allow such archaic stands to survive. Standardization is rapidly developing. Collaboration on standards by the National Sanitation Foundation (NSF) and the Water Quality Association will begin to solidify the impact that standardization has among both consumers and retailers and marks the beginning of the large-scale production, characteristic of new markets that can stand on their own.

Branded^® Consumer Water Products: Part 1

The retail market for water filtration products continues to grow and evolve in response to concerns over the quality of tap water. That consumers perceive a blanket need to filter municipally treated water is, in part, the by-product of a burdensome regulatory system and a complacent water supply industry. Without arguing the merit of consumer perceptions, the reality is that this concern has created a huge demand for residential water treatment devices, a demand that is now being addressed by some of the biggest players in branded consumer products. While it is difficult to predict just what brands will be successful in the retail market, let alone find a pure play in which to invest, the magnitude of the payoff warrants an updated look at the current status of the field.

As predicted, many of the early entrants to the residential filtration market have fallen by the wayside, an inevitable result of the diseconomies of a “cottage” industry. Large retailers have added marketing prowess to an industry that was not only unskilled in the vagaries of volume pricing but was also characterized by a product-push attitude with me-too products.The entrance by large consumer-driven companies into this category has opened up the traditional housewares retail channels and has fostered differentiated designs, colors, and features that are appropriate to housewares merchandising.

Much like the growth in home water treatment equipment, the market for drinking water filtration products is very much a function of expanded distribution channels. The bulk of housewares-type POU sales are concentrated in two low-cost product categories: faucet-mount filters and pour-through pitchers. The largest increase in sales was registered by faucet-mount filters, followed by pour-through pitcher sales. And innovation is finally creeping into an otherwise traditional business with devices such as “filtering faucets” with filter cartridges built in.

While it is difficult to estimate potential market size, there is almost certainly going to be a number of years of very rapid growth. The market itself is expanding as the industry caters to an increasingly knowledgeable consumer.The marketing of water filtration products has drawn extensively from other retail consumer products. Lower prices and greater health claims have accompanied the strategy of creating brands. There is “Water by Culligan,” “Desal inside” (GE/Osmonics), GE SmartWater™ (GE), and PūR™ (Proctor & Gamble), to name a few. A strong brand, however, is no assurance of success in this increasingly crowded market. While the end-of-faucet category is becoming more crowded with a variety of products, the similarities are apparent—low cost and focus on the household. Another category is countertop water filters, which represent a small fraction of industry sales.

As mentioned, the growth in home water treatment equipment is dependent upon an expanded distribution structure.While service and credibility are key concerns in the emerging market for home water treatment, consumer-driven market forces will simply not allow such archaic stands to survive. Standardization is rapidly developing. Collaboration on standards by the NSF and the Water Quality Association will begin to solidify the impact that standardization has among both consumers and retailers and marks the beginning of the large-scale production, characteristic of new markets that can stand on their own.

Branded^® Consumer Water Products: Part 2

The previous section focused on the status of faucet-mount and flow-through pitcher devices as branded consumer water filtration products. That segment is characterized by an abundance of low-volume, small-appliance offerings at an impulse-buy price point. While the level of health claims on these products is rising, there is a noticeable reluctance on the part of consumers to address their water quality concerns with what may be perceived as a partial solution. It was reported that among U.S. consumers considering water filtration, a large number want under-the-counter (POU) or whole-house (POE) methods.This is a vastly different market and one with far greater long-term implications.

Faucet mounts and filter pitchers are clearly an intermediate step in the evolution of consumer water products. As consumers become aware of the technologies available and demand more comprehensive solutions, residential water devices will take on a different functionality. At this juncture, “home treatment” (as opposed to lower-priced filtration products) can be generally defined as either POE (whole-house) units or POU treatment that consists of multiple devices (i.e., a “system”). According to this criterion, more comprehensive and complex water quality problems can be addressed. This is why it is said that decentralized treatment is embedded in the concept of treated water at the place where it is to be used.

The Ultimate Tap-Water Substitute: POU Filtration

By definition, POU units can utilize virtually any treatment method, but are currently dominated by RO, ion exchange, and/or filtration technologies. Certain components of this segment are mature, such as softeners (ion exchange) and basic RO units. Others are developing, such as ozone, pulsed UV, automated RO, combination systems, and package units. At this relatively early stage in the evolution of the home treatment market, there is a substantial divergence between what is technologically possible and what is widely available to homeowners.

The opportunity in residential water treatment is, therefore, more one of what is likely to develop than what is currently offered. The marketplace is glutted with softeners and me-too RO units with ghastly product designs and almost nonexistent service. That said, what was historically a smallish market crowded by water treatment dealers and direct sales organizations is yielding to the economics of volume pricing and retail merchandising. Because consumers do not know how to solve the water quality issues that they perceive, the notion of branding is a way to tap into broader consumer appeal. Retail branding is a trend that promises to open up the category, and it is for this reason that the current state of the industry, while not overwhelming, is important to monitor.

The added appeal of POU treatment systems and whole-house units is that these methods offer a cost-effective solution to more complex water quality issues. This equipment can be an alternative to centralized treatment technology for individual and small systems.While the current focus is on the branding of devices sold to residential end users, it is likely that small systems will increasingly use POE treatment as an acceptable technology for complying with drinking water regulations under certain circumstances.

If the consumer is concerned only with taste, odor, and color, water treatment is largely a matter of personal preference satisfied by many off-the-shelf products. But to solve specific contamination problems, such as nitrates, pesticides, volatile organic chemicals (VOCs), lead, arsenic, and the like, requires technical adaptations. Water treatment is rarely simple; a systems approach is crucial to designing effective treatment schemes. Pretreatment and posttreatment devices are often necessary.To this end, the EPA is currently operating and evaluating several small package plants and POU/POE units. Regulatory hurdles must be overcome. Neither POU nor POE is designated as a best available technology (BAT) by the EPA because of the difficulty in monitoring the reliability of treatment performance and controlling performance in a manner comparable to central treatment. Home water treatment manufacturers are cognizant of this concern; the base of “smart” faucets integrates an electronic monitoring device that indicates when the filters or membranes need to be replaced. Regardless, increasingly stringent state requirements will overshadow the self-regulating rhetoric of the home treatment industry and pave the way for more advanced products accepted by the EPA.

Residential Treatment

The home water treatment industry is a potentially vast, yet ill-defined, opportunity for many companies in the water industry. Product certification and, especially, monitoring are key to the advancement of the industry. The EPA is evaluating telemetry as an option for monitoring and controlling maintenance and operation of remote treatment units. It is conceivable that, in the age of information, home treatment units will be monitored much like security systems. As the home treatment industry responds to the tough issues in protecting public health, consumer water products will become commonplace appliances in the home.

The residential POU market encompasses the filtration and/or purification of tap water by advanced treatment methods to ensure the removal of potentially harmful or unhealthful contaminants. The very nature of water “treated” in the home begs the question of what is effective treatment for each water quality problem. This confusion did not escape the less scrupulous players in the early days of the POU market. Rather than recount the nefarious history of the multilevel marketing phase of the POU market, the focus should be on the new entrants and the positive contribution that this form of decentralized treatment can ultimately provide.

Once the bastion of water treatment dealers, POU distribution channels now include mass merchandisers such as department stores, discount warehouses, catalogs, hardware and building supply stores, and plumbing supply companies. The “do-it-yourself” market will continue to grow as consumers respond to increasing reports of pathogens and other contaminants by demanding higher-quality water at the tap. The POU market is dominated by manufacturing companies and value-added assemblers. The filtration-related residential business of a number of companies offers tremendous investment potential. Perhaps the greatest growth is in the area of value-added resellers, where there are few barriers to entry and the technology is firmly established. An example of this strategy is the Watts Water acquisition of Topway Global.

Given the large numbers actively involved in the POU industry, consolidation is inevitable. Competition domestically will encourage horizontal mergers, and prospects internationally will send smaller firms looking for greater resources. It is likely that new entrants, in the form of large-appliance, consumer or water-related technology companies, will appear on the scene. This would expand the market significantly and bring with it product innovation and retailing expertise. Product innovation will likely take the form of new POU designs, increased efficiencies (ultrafiltration) and decreased purchase and operating costs. In addition, the POU market is likely to gain market share from other alternatives to tap water. Consumers of bottled water, for instance, are likely converts to POU water treatment. Bottled-water consumers are already convinced of the need for a substitute to their tap water and are beginning to recognize the cost and convenience components of water treated in the home.

When the enormous regulatory costs of a centralized water treatment and distribution system succumb to the economics of site-specific treatment, POU will become actualized. From a standard feature in new construction to the next appliance in the kitchen, water treatment devices will move from convenience to necessity in the quest for quality water.

Retail Perspective: The Water Filtration Category

The POU industry, though still the renegade by-product of a failed regulatory system and complacent water supply industry, has come of age. The entrance by large consumer products companies into this category has opened up the traditional housewares retail channels and has fostered designs that are appropriate to housewares merchandising. Such an interest belies the enormous potential for residential water filtration products when marketed properly.

Retailers have added marketing prowess to an industry that is not only unskilled in the vagaries of volume marketing but is too self-consumed to learn. This “aquacentricity” has allowed the “big-box” retailers to take over the market. The POU industry, as the name implies, relies on the “thousand points of light” at the end of the water supply system for its prosperity. And no other channel reaches the masses like the large brand-name consumer products retailers. They have entered the POU market with a vengeance, driven by consumer demand for better tasting, healthful water.

Manufacturers offer a wide variety of water filtration systems, from pitchers in a range of sizes and, most recently, colors, to faucet attachments and countertop units in various designs. In the mass merchandise channel, pour-through units represent the bulk of the sales to consumers, at 78 percent; followed by faucet mounts, with 17 percent of the market; in-line units, at 4 percent; and countertops, at 1 percent.³ Retailers often carry at least one of each type to satisfy the preferences of a diverse customer base.

The POU market is littered with casualties, from traditional housewares companies to small-appliance manufacturers, to home environmental controls divisions of major companies. And then there are those companies whose orientation is decidedly water filtration technology. As the number of large consumer products companies entering the water filtration category increases, the proliferation of water industry- based filtration companies will slow drastically. In fact, it will contract significantly as their me-too products sold directly are overshadowed by the branded products sold through housewares retail channels at lower price points.While it would be difficult to justify an investment in many of these diversified housewares companies based solely on the potential for the water filtration category, the power of the demand for these products should lead to consolidation in the segment. As that occurs, the emerging dominant players would certainly merit a look.

State of the Residential POU Market

The success of many technology products today is heavily dependent on the ability to plug into the broad-based appeal of a consumer culture. Purpose, functionality, and value (cost) all must come together at the right time and in the right proportions. In reality, more so than in theory, the residential POU and POE water markets should be no different. On the surface, the logic is simple: (1) consumers want to drink water at home or work that is healthful and tasty, and (2) there are many residences and workplaces, so (3) there is a huge market for additional water treatment at the point that it is consumed. So why has a subsector with such seemingly compelling fundamentals failed to live up to expectations? The answer is elusive, but several observations can be made to add clarity to the current state of the residential POU market.

Two conditions are implicit in the logic. First, even though tap water is considered safe, there must be a perception that POU treatment is “better” yet, whether aesthetically or healthfully. And second, POU treatment must be more cost effective or efficient than bottled water in the quantities consumed. To be clear, the focus here is strictly single, residential-type POU/POE, not small community, commercial, or industrial.There is clearly enormous potential in these other applications, a reality that the water quality treatment business should embrace, both technically and professionally. For example, POU (activated alumina and RO technologies) is recognized as an acceptable treatment for arsenic removal in small systems.

Now back to the residential market. Why does this conceptually sound, clean-tech-driven, health-conscious-motivated segment of the water business continue to languish, morphing from one misdirected strategy to another? Several current observations from within the residential POU business will be presented as anecdotal evidence of a continuation of the lack of identity. Then some opinions will be expressed to provide investors in this market with an actionable plan.

Part of the long-standing problem with residential consumer water treatment products is a monumental lack of definition and consumer understanding. Are water treatment dealers selling a process or a product? And if they are selling a product, it’s not clear where such devices would fall in the category of retail merchandise. The residential home water treatment industry would be well served to learn from the lessons of the consumer electronics business, for example, in applying market-driven innovation to consumers anxious to improve the taste and quality of the water that they drink. Whether a necessary appliance or a home improvement product, the POU water treatment industry must come to grips with the fact that they compete in a marketing-driven retail business. To date, the way in which the water industry has served this market remains a confusing blend of distribution channels, from direct sales to retail marketing and everything in between.

One of the most interesting aspects of the residential POU market is how the product is sold into the marketplace. By far the largest share of water treatment devices is sold to consumers through sales-driven dealerships that operate in limited geographic locations. These dealerships are supplied largely by a very specialized group of distributors, some value added but most just passing through the tanks, faucets, filters, valves, and casings that can be assembled by anyone wanting to sell to consumers. While substantially better than the multilevel sales organizations of times past, the current dealership approach for home water treatment products resembles an antiquated adaptation of a cottage industry. There is no end to the number of assemblers, dealers, and distributors that comprise the hugely fragmented residential POU market. The problem is that the dealer approach is not even closely scalable to the enormity of the consumer market.

Continued change in the residential POU market is inevitable. There are variables on all sides of the home treatment equation that are changing. Suppliers have been actively seeking new distribution channels. A number of industrial companies are seeking new distribution channels for their consumer water treatment products. As a result, there is an ongoing consolidation in wholesale distribution. New international manufacturers are also supplying the markets. On the distribution side, “big-box” retailers continue to take market share and are increasingly open to the low-cost manufacturers from abroad. Dealerships are finding it very difficult to compete on price and will be forced to reevaluate their traditional business models. In principle, however, they have much to offer in the value chain.

Though the water filter and pitcher business is profitable, top-line growth is declining as convenience-focused consumers turn to bottled water. Any gains in water treatment products will be driven in part by the development of more efficient and user-friendly systems with innovations such as faster operation, filter performance indicators, and higher-value purification technologies that can eliminate a broader range of contaminants. Above all, the residential POU market has to compete with the nondifferentiating (commodity) pricing of the over-saturated beverage industry. The intrusion of the beverage mentality continues, however, as evidenced by water filtration systems that allow consumers to add fruit flavors to filtered water. Can performance-enhancing additives be far off?

So who stands to benefit in the residential consumer water treatment market? In the end, it is likely that one particular distribution method will prevail, but for now the market is large enough to accommodate several approaches: local dealers and distributors, plumbing wholesalers, contractors, and mass merchandisers or do-it-yourself (DIY) centers. Watts Water’s strategy illustrates the dilemma. The company does sell to the big-box retailers (some actually refuse to) but recognizes that many POU products are sold by installers that do not go through traditional wholesale channels. Instead, they purchase components from the specialized distributors of water treatment products. The purchase of Flowmatic was to gain a key distribution channel into the consumer POU market. And, more recently, Watts acquired privately owned Topway Global Inc., to further extend its distribution network to independent water quality dealers, particularly in the Southwest. Topway Global manufactures (assembles) a wide variety of water softeners, POE filter units, and POU drinking water systems and sells its products to independent water treatment dealers, distributors, and original equipment manufacturers. At the same time, Watts is gaining shelf space in Home Depot and Lowe’s. Other early POU companies have made it their mantra that they will not sell products through mass merchandisers or DIY home-improvement centers. Clearly, the residential POU market is having trouble figuring out an effective way to reach residential consumers. Is it any wonder that the residential water treatment business has not fulfilled its retail potential?

Before the realignment of Home Depot, the company was very aggressively pursuing a move into the professional distribution market itself, seeking to acquire POU water treatment and distribution companies. The company had already made several large acquisitions of water product wholesalers to expand beyond its core DIY business (e.g., National Waterworks Holdings). The idea was to create an installation services business in the residential POU market. But a fall-off in base sales derailed the expansion effort, and they finally sold the wholesale distribution business to a private equity group for about $1.8 billion less than originally proposed.

It is also interesting to note the activities of the large consumer products companies that are increasingly active in the consumer water treatment market. Procter & Gamble is a case in point.After the acquisition of Recovery Engineering (PūR brand) many years ago, this preeminent consumer products company continues to sell its home water filtration products only through retail channels, including Wal-Mart, and manufactures filters that fit a variety of competing POU/POE products such as Ametek, Culligan, CUNO, and Teledyne. And now, after years of research, P&G is test-marketing a home water purification kit to be sold across the developing world. Under the PūR brand, the kit sells for only 10 cents and can reportedly provide safe drinking water in 20 minutes. P&G is currently focused on relief agencies. While the company is confident in the science, the business model is still uncertain. But as the product is designed specifically for developing countries, it is an experiment in basic decentralized water treatment. Investors should watch the progress very carefully.

Perhaps a telling example of consumer behavior can be seen in the contamination scare in Washington, D.C. After the D.C.Water and Sewer Authority reported that thousands of city homes had high levels of lead in their drinking water, consumers rushed to purchase home filtration products. And where did they turn? While many filtration businesses experienced an increase in volume, one big-box retailer in particular, Home Depot, was the source to which many consumers turned.

The emergence of water treatment products for the residential consumer market is clearly an area with potentially above-average growth prospects. But the retail market is easier to define for electronic equipment than for water devices. While the business model that attempts to crack the retail market for water treatment products is compelling, no one has succeeded on a large scale. For those in the water treatment business who believe that service alone can justify higher product prices, much can be learned from other retail markets. Despite the lack of clarity, the consumer market for water treatment products remains one to watch. The joint venture between Pentair and GE’s Water and Process Technologies segment, combining the companies’ water softener and residential filtration businesses, is perhaps yet another strategic restructuring of the POU market. All the confusion, however, plays into the simple appeal of tap water. After all, as the municipal water supply slogan states, “Only tap water delivers.”

Water Softeners and Salinity

With the enactment of a California law designed to restrict or ban water softeners, the issue of salinity is gaining recognition as a growing problem for many cities. Salinity (also referred to as total dissolved solids or salts) has long been a concern for irrigated agriculture but is emerging as a significant urban water quality issue as well, particularly for the arid southwestern United States and the West. While the magnitude of the release of sodium from water softeners is still being researched, it is clear that the contribution impacts the environment. The home treatment industry lobbied that restrictions are unnecessary. Municipalities argued that softeners jeopardize discharge limits. In the end, manufacturers will adapt to the regulatory framework just as in other segments of the water industry. The water softener issue is more an illustration of the trends in home water treatment than an example of imposing regulations.

Decentralized Desalination

Nearly a fifth of monitored surface waters in the United States with high withdrawals for municipal use have salinity levels greater than 500 mg/L, the EPA’s secondary drinking water standard (which equates to about a quarter teaspoon of mineral content per gallon). Because of the difficulties faced by many municipalities to comply with the standard for total dissolved solids (TDS), and the growing importance of reuse as a water source, the contribution of water softeners to the salt balance is increasingly under scrutiny. Water softeners (or water conditioners) are the most widely used POE home water treatment devices. Water softeners remove cations (positively charged minerals such as calcium and magnesium) and replace them with sodium. They consist of a corrosion-resistant brine tank that is filled with resin beads saturated with sodium. The resin prefers calcium and magnesium (the principle components of hardness) over sodium.As water passes over the resin, calcium and magnesium are adsorbed and sodium is released. The discharge from a softener occurs during regeneration and includes a salt solution (sodium or potassium chloride).

The salt balance is surprisingly complex. Salinity is inherently an ecosystem (watershed) level problem that requires a holistic management approach that integrates source water management, drinking water treatment, wastewater treatment and disposal, and irrigation management. Conventional water treatment methods do not reduce TDS content in source water supplies, so it is critical that the salt balance be maintained. As water softeners are manufactured to assist in mitigating the TDS problem, as opposed to contributing to it, it is likely that widespread acceptance of POE units will be encouraged. Otherwise, the growing trend toward water reuse and recycling is likely to lead to more restrictions on the continued growth of water softeners nationwide. Units that demonstrate greater salt efficiency, portable exchange units that are regenerated off-site, and innovative technologies that rely less on the ion exchange process are all possibilities that create growth opportunities for the home water treatment industry.

Clearly, water softeners are not the only, or even most significant, source of salinity problems. Salts are concentrated by evaporation during the irrigation of lawns or crops, leaving them behind to accumulate in soils and aquifers. And the predominant sources of salts are natural, particularly evaporite minerals, which leach large quantities of salts rapidly. But salts imported by humans are becoming increasingly important as urbanization continues. For the Central Arizona-Phoenix ecosystem, for example, at least 70 percent of the salt that enters the system via surface water accumulates within the system.⁴ High salinity in water supplies forces municipalities to turn to alternative water sources and dramatically increases treatment and maintenance costs. In Southern California it is estimated that for every 100 mg/L TDS increase over the standard, entities are spending $95 million to repair damage to utility infrastructure, agriculture, and industrial facilities, not to mention the impact on wastewater treatment costs and the impairment of recycled supplies. It is because of this that municipalities are looking at all sources of salinity, and water softeners are one source that is suitable for regulatory control.

The controversy in California is particularly interesting because it involves a statewide ban. Assembly Bill 334 became law in 2003 after years of controversy. Earlier legislation modified a softener industry- sponsored state preemption of local control of softeners. However, under pressure from the water softener industry, the bill was amended to allow the option for local control. SB 1006 required a local agency to already be out of compliance with their discharge requirements before being able to ban self-regenerating water softeners and thereby did little to address the salt-loading problem that led to noncompliance in the first place.

Shortly after SB 1006 took effect, the WateReuse Association and the Association of California Water Agencies introduced AB 334, which did not require utilities to actually be in violation of their discharge permits before placing restrictions on automatic water softeners. This bill was designed to implement one of the recommendations of the Recycled Water Task Force and arose out of concerns that water softening was contributing to chloride levels. Higher chloride levels through the release of sodium in the ion exchange process of water softeners was believed to be a detriment to water reuse and added to wastewater treatment costs.

AB 334 authorizes a local agency in California to regulate the use and availability of self-regenerative water-softening appliances that discharge to the community sewer system. However, the softener law maintains provisions that all sources of salt must be defined, quantified, and controlled, and that restrictions on softeners must be “necessary” for a utility to achieve compliance.The ban was supported by a number of water districts, including Irvine Ranch Water District, the Los Angeles Water Districts, and the Inland Empire Water District. Opposition to restrictions came from those affected by a potential loss of softener sales, including the Water Quality Association, the regional Pacific Water Quality Association, and the California Pipe Fitters.

The home treatment industry lobbied hard to avoid restrictions as if the outcome would have created a bad precedent. In reality, however, the restriction on water softeners is an established means of controlling high TDS levels. Currently, communities in over 30 states, and some states themselves, have enacted bans on certain types of water softener discharge. Among them are Texas, Connecticut, Massachusetts, Michigan, New Jersey, and virtually all other states in the Northeast and Southeast. Salinity is increasingly becoming a key consideration in municipal water supply and infrastructure planning.

Higher concentrations of TDS are progressively accumulating in the soil and water. The collective impact of irrigation, urban growth, low rainfall, and the high mineral content of geologic features exacerbate the problem. To maintain or improve the quality of water with respect to salinity, several areas must be advanced. First, the efficiency of salinity treatment processes must be increased to achieve higher levels of brine concentration, thereby reducing source water losses. Second, the disposal or use of the brine concentrate must improve. And third, conditions or practices that result in salt accumulation must be modified (e.g., the widespread use of regenerative water softeners).

The focus on the softener/salinity issue is presented in detail because it symbolizes the main problem with residential POU devices: decentralized treatment without centralized control.

The home water treatment industry must understand that it is part of a number of comprehensive solutions to water quality issues rather than narrowly focus on self-interest. Whereas POU/POE dealers and distributors may feel the economic pressure of shifting regulations, the manufacturers are likely to adjust. Thus, the equipment manufacturers continue to have a bright future as long as they adapt to a changing regulatory climate and seek to become part of a larger water quality picture. In fact, the opportunity for the home water treatment segment lies in its ability to work with the municipal water industry in serving customers. The large, branded manufacturers will have a distinct advantage in technology, service, and acceptance. All have acquired technical expertise: GE/Osmonics and Ionics, MMM/CUNO, Watts Water/Topway Global, Pentair/Everpure and Omni, Procter & Gamble/PūR, Axel Johnson/Kinetico, and the Marmon Water/KX Industries. The residential water filtration market is the Schrödinger’s cat of the POU market—is the market dead or alive?

Groundwater Treatment

Groundwater is the source of potable water for approximately 40 percent of the population of the United States. Of a total of about 200,000 public water systems in the United States, 93 percent rely on groundwater as their primary source of water. Ninety-five percent of the rural population is dependent on groundwater for drinking purposes, and fully three fourths of the major cities in the United States are totally or partially dependent on groundwater.⁵ Groundwater is a vital natural resource that is gaining increasing attention as the extent of degradation unfolds. Of all types of water pollution, this is perhaps the most insidious because at low concentrations the contaminants rarely impart any taste or odor to drinking water.

The quantity of groundwater underlying the continental United States is immense. The amount that can be retrieved with current technologies is at least six times greater than all the water stored in surface lakes and reservoirs. But unlike many surface water environmental problems, the magnitude and complexity of groundwater contamination requires more than market forces to correct. Although hidden from sight, groundwater is not hidden from sources of contamination. Eventually, water becomes the ultimate repository of all substances released into the environment. Once contaminated, groundwater may remain so for hundreds or even thousands of years. Lack of sunlight, oxygen, and significant water movement inhibits the process of degradation. Groundwater is one of the more perplexing challenges in the water industry; every aspect of groundwater management is directly driven, defined, and in some cases created, by legislation and regulations.

Numerous and often complex federal, state, and local laws have been enacted for the purpose of investigating and remediating pollution of underground aquifers as well as controlling or preventing the potential environmental hazards caused by groundwater contamination. The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (Superfund); the Resource Conservation and Recovery Act of 1976 (RCRA); the Underground Storage Tank (UST) law; and the Safe Drinking Water Act (SDWA) all have provisions for groundwater within the context of their particular regulatory objectives. Each law addresses a particular source of groundwater contamination (i.e., municipal landfills, hazardous waste sites, septic tanks, underground storage tanks, injection wells, agriculture, and other nonpoint sources of contamination). And each law supports a growing level of business activity to service the regulation.

Remediation of contaminated groundwater is probably the most elusive portion of the otherwise promising investment potential in groundwater management. Most environmental engineering and consulting firms have activities in groundwater remediation. But this industry is beset by problems independent of the growing need to clean up and manage groundwater. Negative trends in the environmental consulting area, such as maturing markets for site assessment and underground storage tank cleanup, blur the overall prospects for these firms.

Another component of the groundwater segment of the water industry is the physical drilling of wells, both in support of the actual infrastructure needed to access groundwater for drinking water, irrigation, and industrial use, and as a means of remediating groundwater contamination.The demand for water well-drilling services is primarily driven by population movements and expansions, deteriorating water quality, and limited availability of surface water. The demand for environmental drilling services is driven principally by heightened public concern over groundwater contamination and the resulting regulatory requirements to investigate and remediate contaminated sites and aquifers.

Groundwater contamination prevention also offers long-term investment potential to patient investors. Substantial regulations have been enacted relative to the protection of groundwater from waste materials. For example, Subtitle D of the RCRA legislation imposes strict standards with regard to groundwater protection and requires, among other things, that all new hazardous waste landfills use lining systems. Further, the use of liners is a “presumptive remedy” prescribed by the EPA to alleviate the tremendous costs associated with Superfund cleanups. At the same time, the synthetic liner business is very competitive and suffers from overcapacity.

The greatest impediment to investing in the groundwater theme is the lack of an industry definition and the complexity of the regulatory environment.While it is true that, from an economic point of view, the marketplace will not properly protect groundwater resources, the regulations designed to intercede have also failed. Groundwater has many unique characteristics that make it a particularly difficult resource to manage. But because of the sheer number of people who depend on groundwater for drinking, the pattern of neglect is gradually yielding to one of proper development. As this occurs, the economics inherent in protecting groundwater supplies will channel technology into this arena and provide a substantial investment opportunity.

Table 8.1 provides a compilation of POU and “decentralized” treatment companies. It is important for investors to realize that this is currently one of the more elusive water investment strategies.

Membrane Bioreactors: The Future of Decentralized Treatment

The concept of “sustainability” is used as a blanket expression for describing the ultimate objective of water use practices.While the phrase is used loosely, and often without specific performance metrics in mind, it encompasses the notion that themes such as reuse and decentralization are essential for meeting current needs for clean water without worsening the situation for future generations. Membrane bioreactors (MBRs) are emerging as a key technology in advancing water sustainability because they facilitate water reuse and are highly suited for decentralized wastewater treatment.

Biological processes alone can successfully remove organic contaminants, nitrogen, and phosphorous from wastewater.The main operational and design challenge associated with traditional biological treatment, however, is the reliable separation of sludge (biomass) and water in the clarification process. The membrane bioreactor is an innovative system for the treatment of wastewater that combines an activated sludge process with membrane separation. Instead of gravity settlement, biomass retention is achieved by a cross-flow filtration process. MBRs eliminate the clarification settling process by immersing membrane modules directly into the bioreactor and separating water and biomass by passing water through the membranes, which reject the biomass and all other minute particles.

Table 8.1 Decentralized Treatment and Point-of-Use

With the substitution of the settling tank by a cross-flow filtration unit, and the commensurate increase in total biomass retention, even slow-growing microorganisms can be enriched efficiently. The biological breakdown of many contaminants, especially xenobiotic compounds, is accomplished by bacteria having long generation times. Because of this, the membrane bioreactor offers an improved degradation capacity for persistent chemicals. So, in addition to removing biodegradable organics, suspended solids, and inorganic nutrients (such as nitrogen and phosphorus), MBRs retain slow-growing organisms. This enables the treatment of more slowly biodegraded organics. For example, the higher biomass concentrations of MBRs have been shown to be suitable for the degradation of particularly stubborn polyaromatic hydrocarbons such as phenanthrene. MBRs also remove a very high percentage of pathogens, thereby reducing chemical disinfection requirements.

The high-effluent quality associated with MBRs is a significant advantage over other wastewater treatment methods, particularly with respect to reuse options. In addition, MBRs require less space than traditional activated sludge systems because less hydraulic residence time is needed to achieve a given solid’s retention time, and they create the possibility for a flexible and phased extension of existing wastewater treatment plants. MBRs are suited for decentralized treatment because they have fewer unit processes and are more automated and thereby simpler to operate.

Despite the benefits of MBR wastewater treatment, concerns over higher costs have historically dominated discussions of its widespread use. As Table 8.1 illustrates, although MBR technology ranks high according to the sustainability criteria used, sociocultural factors are the main impediment to embracing the technology. As is characteristic of the U.S. municipal water industry, innovative technologies (even if not new) are slow to be accepted and implemented. In addition to a relative lack of expertise in the technology, marginally higher costs have yet to be adequately compared with the economic benefits associated with future regulatory compliance and indirect operational efficiencies. It is anticipated that the growing field of research in the area will facilitate the transfer of technology to the marketplace and continue the rapid emergence of MBR technology, particularly in U.S. industrial applications.

MBR technology has already seen rapid development and penetration in the European market in the past five years and is arguably dominated by Japanese manufacturers. The ability to invest in MBR technology is somewhat limited because the technology is still early in gaining widespread acceptance. However, in recent years, MBRs have seen significant growth as the technology has been redesigned and greatly refined by manufacturers.

There are several reasons to believe that MBR technology will continue to gain institutional acceptance in wastewater treatment:

• The underlying technology is solidly based in engineering principles. There is a significant research effort under way to apply activated sludge-related biology to MBRs.

• There is a growing installed base of municipal and industrial MBRs available to verify performance and identify critical design and operating factors.

• Membrane manufacturing capacity expansion is driving down unit costs, which will likely spur further demand.

• Current water shortages in many parts of the United States are making water reuse and recycling critical.

Due to recent technical innovations and significant cost reductions, the applicability for the MBR technology in municipal and industrial wastewater treatment has sharply increased. Especially in areas where urban and industrialized areas are located near sensitive surface water, the MBR technology offers a number of advantages compared to the traditional activated sludge processes. While the international market for MBRs is sufficiently large for all of the technology leaders to realize significant growth, the landscape is likely to become very competitive over the next three to five years. Price will certainly be one aspect of that competition but product depth, service/maintenance, and technological innovation will also play a large part in shifting market shares. From an investment perspective, the potential of MBR technology can be best realized through the centralized treatment companies (presented in Chapter 7) as opposed to the fledging decentralized activities presented in the company listing in Table 8.1.