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Water Is the Next Oil

VC hopes to capitalize on an increasingly scarce resource.

Wednesday, April 09, 2008

By Kevin Bullis

Oil, of course, dominates world economics and politics. But it's conceivable that some day, alternative fuels and other clean technologies, combined with the rising costs of extracting oil, could diminish petroleum's influence. But by that time, another scarce commodity--water--could come to dominate geopolitics, and venture capitalists are starting to take note.

The thinking goes like this. Biofuels are enormous consumers of water, says Jim Matheson, a general partner at Flagship Ventures, a venture capital firm in Cambridge, MA. And water is not always abundant where it's most needed. "So, increasingly you're going to see water as a scarce resource. I think it's going to drive not just economics but also a lot of geopolitical dynamics. So, we're trying to find technologies that can allow us to plug into this enormous value chain." He's interested, for example, in membranes and other water-treatment technologies that will allow biofuel-makers and others to reuse water. But he says there's a big challenge to making these new technologies successful. There has to be a way to scale them up to bring down costs. "The problem is that water is like the Internet. People love it and they use it all the time, but they don't want to pay for it," he says. "So the question is, how do you come up with a business model that actually works?"

One option, he says, is to develop technologies that can both clean up wastewater and extract energy from the waste, effectively adding value to the water. Matheson spoke as part of a panel on "green technology" investment at the Venture Summit East conference in Boston yesterday.

Tags: energy, petroleum, oil, geopolitics, membrane, water

Comments

	Water williammeadlynch on 04/11/2008 at 1:04 PM
Posts: 1 Avg Rating:	Water is indeed the next oil. In the southwest water commodity prices are growing at multiples of general inflation. Four years ago water privately traded around San Antonio in the $2,000 per acre foot (~320,000 gallons are in an acre foot)and now in 2008 private transaction are occurring in the $6,000 per acre foot range. In parts of Northern California, water trades are occurring in the $35,000/a.f. range in small volumes so developers can prove sustainable property development. I believe technology will be hard pressed to compete with inexpensive agricultural water that will be shifting away from irrigation and toward urban applications as water's value increases. The biggest arbitrage will occur in rural / agricultural areas over the next decades. Technology will be a bit player until the commodity itself reflects its true and as yet unrealized value. Rate this comment: (Reply)

	water is a public resource UpComing on 04/11/2008 at 10:09 PM
Posts: 2 Avg Rating:	The potential social disruption when water becomes unavailable due to climate change is enormous and possibly catastrophic. To be thinking about how a buck can be made off of this when the issue is survival is nearly grotesque. When water becomes privately owned and managed for private use and some people end up without it or unable to afford it, they will revolt; because they will have to. Yes, technology could/should be in the service of humanity. Those who develop useful technologies deserve ample reward. But ultimately, non-public control of water is in essence, immoral. If the technology leads to hegemonic control of the public resource (water) it will be enormously problematic. I sincerely hope that is not the aim of these developers. Rate this comment: (Reply)

	Re: water is a public resource javs on 04/12/2008 at 9:08 AM
Posts: 74 Avg Rating:	Should water be rationed? Are gas and electricity public resources? Is there a minimum amount of water, gas, and/or electricity that could make non-disruptive social sense at a given location, under private utility management? Can the responsibility to serve be shifted to a regulatory compact with a responsibility of transport at the three utilities? That way the responsibity to serve goes to market competition for service above the minimum non-disruptive service requirement, under efficient pricing in an open market. That will produce rational rationing in the Third Industrial Revolution. The market vs. market competition (that precedes the company vs. company competition) case for electricity is already well documented in the EWPC Blog, where there are more than 110 articles already. Those articles can be though of as a holographic image from a different perspective of the whole EWPC market architecture and design paradigm shift. Please take a look at the EWPC article The Electricity Revolution, that reflects the latest findings on the US and Europe of the ongoing revolution that is heading into a large value destruction dead-end at the moment. Rate this comment: (Reply)

	The Future - Selling Air gabrielg01 on 04/13/2008 at 6:20 PM
Posts: 317 Avg Rating:	If the Wall Street-type extreme capitalists have their way, then one day even air will be privatized, and traded. You'll have a quota to breath in, but if you want some extra air, or better quality air, you will have to pay up. We will have premium brands like "RAINFOREST FRESH" or "MOUNTAIN BREEZE" or "BEACH SURF"...or whatever other bullsh*t names the marketing people will come up with. One hundred years ago, if someone told you that water will be sold in stores, under "premium" brand names, you would have said that this person is insane. Well, insanity has become reality. Way to go! Rate this comment: (Reply)

	Re: The Future - Selling Air javs on 04/14/2008 at 10:51 AM
Posts: 74 Avg Rating:	"Wall Street-type extreme capitalists..." distorted deregulation by downplaying MIT research by Prof. Schweppe and his team. But, in the end it was government that have kept price controls in the power industry with the great help of lobists. The result, the power industry keeps operating under financial capital. The third industrial revolution breakthrough market architecture and design paradigm is about eliminating government price controls in the retail markets. The result, the power industry will return back to operate under production capital. Under EWPC, customers will be able to have a single retailer for a few utilities, like water, gas and electricity. Today's responsibility to serve, where customers can purchase unlimitated water, gas and electricity, is just unsustainable. To support the new open markets utilities will become just transportation utilities with a responsibility to transport in a correspnding controlled markets regulatory compact. Read please about The Electricity Revolution under another comment above. Rate this comment: (Reply)

	Say has anyone ever heard of! Lasertop on 04/15/2008 at 11:14 AM
Posts: 5 Avg Rating:	Desalinsation, of course there probably isn't enough water in the oceans to solve our needs right? Nope, better to panic. Rate this comment: (Reply)

	Re: have you heard about the Aral sea? gabrielg01 on 04/15/2008 at 5:39 PM
Posts: 317 Avg Rating:	This is not about a few tons of water. It's about many billion tons of water; it's about entire river basins drying out. How are you going to resupply that amount of fresh water? How much energy would it take? Have you heard about the Aral Sea and what happened to it? Look it up: http://en.wikipedia.org/wiki/Image:Aralsee.gif Rate this comment: (Reply)

	Last I checked Lasertop on 04/15/2008 at 10:03 PM
Posts: 5 Avg Rating:	The Oceans of the world had a few billion to spare. I live in San Diego, we are building a Desal plant that will pump out 50 million gallons a day, that is enough water to supply the needs of about 7 percent of a city of over 3 million. Now 7 percent maynot sound like a lot, but when you consider that we basically live in a desert and only provide 10 percent of our water locally this is pretty big. Build me 10 more of these and you no longer have to drain the rivers and lakes like we do now. Rate this comment: (Reply)

	Re: Last I checked Kevin Bullis on 04/16/2008 at 6:13 PM		TR Staff Nanotechnology and Materials Science Editor
Posts: 58 Avg Rating:	Of course desalination is expensive and can take a lot of energy, considerations that are probably more important than the amount of water in the ocean. Rate this comment: (Reply)

	Re: Last I checked bkshilo on 04/21/2008 at 12:55 PM
Posts: 17 Avg Rating:	But cheap energy is exactly the point. If we make energy cheap enough, we can desailinate as much sea water as we need, and pump it to where it is needed. Rate this comment: (Reply)

	climate change is going to dry up all the lakes and rivers zig158 on 04/16/2008 at 2:33 AM
Posts: 64 Avg Rating:	I love the “climate change is going to dry up all the lakes and rivers” argument. It makes me chuckle. Every other time the world was warmer it became more tropical, why would this time be any different? Fresh water will never be an issue as long as we have the energy to move it to ware we need it, or make it from seawater. The more expensive the energy is, the more expensive the water will be. If we lick the energy problem, many of our other problems will simply evaporate. Rate this comment: (Reply)

	Water Is the Next Oil? jmaximus9 on 04/17/2008 at 1:36 AM
Posts: 47 Avg Rating:	Time to move to Michigan, the next Saudia Arabia. Rate this comment: (Reply)

	Re: Water Is the Next Oil? michigan32 on 08/06/2008 at 1:27 AM
Posts: 1	And dont think we forgot how everyone stopped buying american cars!!! Rate this comment: (Reply)

	That would be great! hyperion4ever on 07/28/2008 at 5:01 PM
Posts: 1	Glad to live in Austria, one of the water-richest states in the world =) But I'm sure there will be lots of technologies that will help us to get drinking water from the sea or from air. Rate this comment: (Reply)

	[no subject] MickeyFouse on 11/25/2008 at 9:04 PM
Posts: 19 Avg Rating:	The oil crisis confronting the world today is much like the looming crisis in water, with depleting supplies, unequal distribution and access, and the inevitable specter of rising costs and increasing conflict around the sharing of this vital natural resource. As with oil, water exploitation raises an inter-generational debt that will be hard to repay. The uncontrolled and rapacious exploitation of oil has led to unintended consequences, and if we continue on a similar trajectory with water, the oil crisis will seem like the trailer of some horrible disaster movie. All are saving gas. Rate this comment: (Reply)