A new report from Frost & Sullivan says a TOTEX approach is boosting investments in the European water utility services market, with smart solutions having a particularly positive impact on a market that is forecast to reach over $130 billion in 2020.
The report says that European water utilities are faced with the challenge of aging infrastructure in need of urgent rehabilitation - which can also be an opportunity as efficiency and modernisation are the key themes for growth in this market.
Given the large number of priority investment needs, the report says water utilities have identified the TOTEX mechanism - a cumulative consideration of both capital and operational expenditure - to help in the decision making process of rehabilitation projects. This is leading to strong business cases with tangible economic benefits.
The new analysis from Frost & Sullivan finds that the market earned revenues of $104.27 billion in 2014 and estimates this to reach $130.51 billion in 2020.
The study covers chemicals, operation and maintenance, process control and management, design, engineering and construction, and water and wastewater technology.
Frost & Sullivan Vice President Fredrick Royan, an expert in global water markets, explained:
"In the past, water utilities have largely used the CAPEX as the primary driver in deciding the fate of infrastructure upgrades, refurbishments or replacement projects. In the current scenario, water utilities are using the TOTEX (CAPEX + OPEX) approach to decide on water infrastructure investments, which is beneficial for innovative and smart solutions that at times are relatively expensive in terms of CAPEX but under the TOTEX approach appear to present tangible economic benefits and sometimes with attractive payback periods."
The report also describes the water utilities’ focus on achieving operational and energy efficiency as a major boon for the associated services market. In a bid to be customer-centric, the firms have been making investments to improve existing network, treatment and process control infrastructure.
“One of the key trends in the European utility services market is the adoption of smart water and wastewater solutions,” said Frost & Sullivan Energy & Environmental Research Analyst R Ramkumar. “This is driving spending and spurring strategic partnerships between companies and utilities."
However, the report is also warning that the investment required for water and wastewater infrastructure is currently staggering on many fronts. It identifies the slow but recovering economic scene, regulations governing water quality and private investments, and decreasing water and wastewater consumption as factors working against the growth of water utilities services.
“The nexus of regulations for water, energy efficiency and climate change will force European utilities to revise their strategies and support the industry convergence process,” noted Ramkumar. “New business models involving private players, build-own-operate- transfer or performance contracts as well as funding options will also benefit water utilities.”