The Economic Incentives of the Water Reuse Revolution

In the face of escalating water scarcity and the pressing demand for sustainable solutions, the concept of water reuse has surged from a niche environmental concern to a central economic opportunity. No longer just a conversation about conservation, water reuse has evolved into a narrative of smart economics, where the value of reprocessed water is recognized not just in terms of environmental benefits, but also in cold, hard cash.

So why is this shift happening now? As industries, municipalities, and agricultural enterprises grapple with the financial burden of water acquisition and the risks of unpredictable supply, water reuse stands out as a beacon of efficiency and reliability. The economic incentives of the water reuse revolution are becoming too potent to ignore, promising not only cost savings but also a competitive edge.

After the social dynamics of water reuse earlier this (special) week, today we dive into the economics of water reuse, uncovering the incentives that are driving its adoption at an accelerating pace. We’ll explore how this revolution is not just sustaining the environment but also swelling the wallets of those who have the foresight to invest in it.

with 🎙️ Aaron Tartakovsky – CEO & Co-Founder @ Epic Cleantec

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The Economic Drivers of Water Reuse

As we pivot from understanding the ‘why’ to exploring the ‘how’ of water reuse, it’s clear that the economic drivers play a pivotal role. The incentives are not merely about reducing costs; they’re about redefining value creation in the water cycle.

  1. Cost Efficiency: Water reuse systems, once set up, offer a predictable and often lower cost for water compared to traditional water supply systems. This is particularly compelling for industries and regions where water scarcity leads to volatile pricing.
  2. Enhanced Resilience: By reducing dependency on conventional water sources, businesses safeguard themselves against drought-induced disruptions and the associated economic volatility. This resilience translates into better long-term financial planning and stability.
  3. Regulatory Incentives: Governments across the globe are increasingly offering tax breaks, subsidies, and other financial incentives for companies that adopt water reuse practices. These can significantly lower the initial barrier to entry and enhance ROI.
  4. Revenue from Byproducts: Water reuse often involves the recovery of valuable byproducts, such as biogas, which can be an additional revenue stream. This turns waste treatment from a cost center into a profit center.
  5. Societal Goodwill: Companies leading in sustainability can leverage their water reuse efforts to build brand value and corporate reputation, often translating into economic benefits through increased customer loyalty and brand differentiation.

Each of these drivers is a cog in the wheel of economic sustainability, propelling the water reuse revolution forward. The message is clear: investing in water reuse is not just environmentally responsible; it’s a strategic economic decision.

Cost Savings and Efficiency in Water Reuse

The bottom line in any business decision ultimately revolves around cost—and water reuse is no exception. It’s a realm where the adage “waste not, want not” gets a modern makeover, translating into real economic savings and operational efficiency.

The immediate benefit of reusing water is the direct reduction in water purchase costs. Especially in areas where water is scarce, the price of fresh water can be exorbitant. Reuse systems transform this dynamic, offering a more predictable and significantly cheaper alternative in the long run.

Moreover, reusing water means less money spent on wastewater discharge and treatment fees. By treating and reusing water on-site, businesses can drastically cut the costs associated with sewage and the energy-intensive processes required for potable water production.

But the savings don’t end there. Modern water reuse technologies are becoming increasingly energy-efficient, meaning the energy costs associated with water treatment are on the decline. This energy efficiency is a double boon, offering cost savings and enhancing a company’s green credentials.

In industries like agriculture and manufacturing, where water is a major input, the impact of these savings can be transformative. When water is reused for irrigation, crop yields can increase while input costs decrease. In manufacturing, water reuse can mean the difference between profit and loss in processes that require large quantities of water.

Stepping into the future, these cost savings are set to become even more significant. With technological advancements, the initial setup costs of water reuse systems are decreasing, and their efficiency is increasing, promising even greater savings—and profits—for those who invest early in this sustainable technology.

Policy Impact on Financial Viability

The intricacies of policy can often be the linchpin in the success of water reuse projects. While the technology and desire for sustainable practices set the stage, it is the policy framework that can spotlight water reuse as a financially attractive option.

  1. Incentivizing Adoption: Around the world, governments are waking up to the pressing need for sustainable water management. They are crafting policies that incentivize the adoption of water reuse, from tax credits and rebates to grants and loans, lowering the financial hurdles for businesses and utilities to invest in these systems.
  2. Regulatory Certainty: Effective policy provides a stable framework that can give investors the confidence to commit capital. This regulatory certainty is crucial for long-term investments in infrastructure that may take years to yield returns.
  3. Catalyzing Innovation: Subsidies and financial incentives also serve as a catalyst for innovation. They encourage companies to develop new technologies and approaches to water reuse that are more efficient and cost-effective, further driving down costs.
  4. Driving Economic Growth: The implementation of supportive policies has a multiplier effect. It drives job creation in engineering, construction, and technology sectors, all while promoting the growth of local economies.
  5. Setting a Global Example: Progressive policies not only foster national and local advancements but also set a global example, encouraging other regions to follow suit and invest in the economic potential of water reuse.

In essence, when policymakers get it right, the economics of water reuse shift from being viable to valuable, propelling a surge in adoption and innovation.

Long-Term Economic Benefits of Water Reuse

The trajectory of water reuse is not just reshaping current economies; it’s setting the foundation for a sustainable and profitable future. The long-term economic impacts of this revolution are profound and far-reaching.

  1. Sustained Industrial Growth: Industries heavily reliant on water, such as textiles and agriculture, stand to benefit immensely from the security that comes with water reuse practices. Reduced operational risks and increased predictability mean businesses can plan for expansion with greater confidence.
  2. Urban Development: Cities that incorporate water reuse into their infrastructure can experience growth without the traditional limitations imposed by water scarcity. This opens the door to new development projects and can elevate the overall quality of urban life.
  3. Agricultural Advancement: For agriculture, the implications of water reuse are revolutionary. With consistent access to water, agricultural businesses can achieve higher yields and better crop security, contributing to food stability and economic prosperity.
  4. Climate Change Mitigation: Water reuse is a key strategy in adapting to climate change, with the potential to mitigate some of its economic impacts by ensuring a reliable water supply in face of increasing droughts and extreme weather events.
  5. Innovation and Technology: The demand for more efficient water reuse solutions is driving innovation in water-related technology sectors, leading to the birth of new businesses and the expansion of existing ones, further stimulating economic growth.

By embracing water reuse, we are not only preserving our most precious resource but also unlocking its potential to fuel economies for generations to come.

Investment and Entrepreneurial Opportunities in Water Reuse

As the water reuse revolution gains momentum, it’s opening a floodgate of investment and entrepreneurial opportunities. This burgeoning field is ripe for innovation, attracting forward-thinking investors and entrepreneurs who recognize the intersection of environmental sustainability and economic gain.

  1. Growing Market for Water Technologies: The demand for efficient water reuse solutions is expanding the market for innovative technologies. Entrepreneurs who can develop or improve water treatment, monitoring, and recycling systems are finding a ready market.
  2. Venture Capital and Funding: The increasing recognition of water scarcity as a critical issue is drawing attention from venture capitalists and investors. Startups focusing on water reuse solutions are attracting significant funding, fueling a new wave of environmental entrepreneurship.
  3. Public-Private Partnerships: Governments seeking to enhance water security are increasingly partnering with private entities. These collaborations often involve significant investment opportunities and can be a powerful driver for innovation and implementation.
  4. Global Expansion: As more regions around the world confront water scarcity, the global market for water reuse solutions is expanding. Companies that can cater to these diverse needs are positioned for international growth and impact.
  5. Educational and Consultancy Roles: With this evolving landscape, there’s a growing need for expertise in water reuse. Professionals in this sector have opportunities to lead as consultants, educators, and policy advisors, shaping the future of water management.

In this era of water reuse, the prospects are as vast as the oceans. For those ready to ride this wave, the potential for impact and profit is substantial. The water reuse revolution isn’t just about saving water—it’s about opening new horizons for economic and environmental progress.

Full Transcript:

These are computer-generated, so expect some typos 🙂

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Antoine Walter: Hi Aaron. Welcome back to the podcast. Good to see you again. It’s good to see you in the flesh. Last time we recorded online. So that’s very different, a bit more noisy, but also more interactions. You will be very surprised at the topic I have to bounce at you, which is water reuse. My question is still the same after all that time.

Why when we have all the technologies in the world to advance water reuse, When we have all the signs that we will be missing water, that there is a water crisis, that our infrastructure isn’t going to get updated at the rate it should, why don’t we still reuse more water?

Aaron Tartakovsky: Inertia. We are battling against centuries of how we’ve done things.

A lot of the systems that we have in place, sort of the centralized paradigm has been in place. Since the time of the Romans, a lot of our, our, our centralized systems, the design principles we use haven’t fundamentally changed. So all of a sudden water reuse is a relatively new phenomenon and it requires the changing of not only the infrastructure, the regulations and also pretty critically the public.

We have literally conditioned society to think that wastewater is just that waste. We put waste. So all of a sudden when we’re telling people, well, this is something that we’ve been trained to send into our sewers, never think about again. Now we’re going to treat it. Whether we’re putting it back into irrigation, laundry, cooling towers are eventually into your tap.

That’s going to take some, some changing of, of mindsets and perceptions. It’s a question of inertia. It’s a question of policy. It’s a question of the public mindset. But the good news is that the momentum is building and we are seeing what we like to call a bit of a water reuse revolution starting to bubble up, if I may use a water pun.

Antoine Walter: So what triggers that revolution?

Aaron Tartakovsky: Necessity. The realization that we just can’t do things the same way that we have. The status quo is no longer sustainable. We are seeing cities that are no longer allowing construction of new development projects because they don’t have enough water. We’re seeing these massive tech companies building data centers to fuel the AI revolution, but we don’t have enough water in a lot of these areas to cool these data centers.

We have farmers who are, you know, letting their fields go fallow for the first time in decades because they don’t have enough water. We have ranchers who can’t provide water for their cattle, which is their lifeblood. So I think we’re starting to see it. Hit people’s wallets in a way that we haven’t before.

And I think fortunately, unfortunately, I think hitting people in their wallet is one of the fastest ways to see change. And, and look, we’ve seen that in Israel. Israel is a great example. Israel actually charges for water. They charge higher prices for water. And that’s actually one of the biggest and best determinants of changing behavior here in the United States.

We don’t charge appropriately. For water and for waste water and we don’t really charge for water We really only pay for its treatment and transmission But I think the status quo of not acting is starting to really catch up to us And I think that’s why we’re starting to see a lot more action

Antoine Walter: when we recorded together I think 18 months ago.

You highlighted how your approach isn’t replacing utilities. It’s complementing those utilities since then they were Numerous studies which shows that we are renewing our infrastructure at a rate that it’s supposed to last five centuries Which we know It counts. We see that investment programs aren’t pouring the amount of money which would be needed to revamp that infrastructure.

So I’m even more convinced 18 months down the line that your solution to reduce the burden on the infrastructure by closing the loop on a much shorter way is the right one.

Aaron Tartakovsky: First of all, thank you for remembering what I said 18 months ago. I can barely remember what I said last week, but I think you’re right.

You know, when we entered this space almost a decade ago. There was a different dynamic between us and the utilities. I think a lot of utilities saw decentralized as a threat to their centralized model. That it was us versus them. But I think now there is a realization that it’s not us versus them. It’s us and them working together.

I think we can look at the energy world and that analogy of seeing decentralized and centralized working together to create more resilient systems, to create smarter systems. And by the way, we can deploy these smaller distributed systems a lot faster and at a fraction of the cost. There is no one size fits all solution.

I think in a place like San Francisco, the original plan was to come up with a centralized model. We were going to build a central facility. We were going to dig a purple pipe recycled water distribution system throughout the city. But then they realized that the plant was going to take a long time, and was going to cost a lot of money.

And the direct economic cost, as well as the sort of secondary cost of traffic, digging up streets, putting in pipes, was going to be prohibitively expensive, and that’s why San Francisco created This onsite water reuse program to get us closer to our water recycling goals without having to build a centralized plant, or at least not one of the same scale.

So I think we’re seeing a lot more cities, a lot more states, and frankly, a lot more countries adopting this approach, adopting this mindset, because they realize that we just have to do things differently if we’re going to be able to keep up with the combined challenges Urban population growth, of aging infrastructure, of climate change.

I mean, look, the rate at which we are adding new buildings to our global building stock is like another New York City every single month from now until 2016. I think you remember that statistic. We just can’t keep up if we just continue to copy paste the way we’ve done things. And I think the industry now recognizes that and that’s why I share your optimism for what we’re doing as a company.

Antoine Walter: Let me first ask you and then I give you my personal take. What is the biggest driver to adoption? Is it policy or is it the money?

Aaron Tartakovsky: It’s both. I think, no, you can’t say both. Pick one. I I always say both. ’cause it is, it, it is a, it’s an element of both. I think no matter how green minded a developer is, and we work with a lot of folks who put sustainability at the top of the agenda.

If it’s not gonna save them money or it’s not gonna have a palatable ROI, they’re never gonna do it. There’s very few instances in which they will spend more just to be green. So saving money is the key driver, but I do think regulation is key to basically kickstart the conversation for a lot of folks.

What we as a company are asking people to do, on site water reuse, taking all of this wastewater, treating it, and reusing it in the building. This is a new concept for a lot of building owners and developers. These are very sophisticated people, building some of the most complex, beautiful, skyline changing projects in the world.

But they’ve designed their buildings the same way. We bring water in, we send wastewater out. So when we create these water reuse programs, which shows them, you know, here’s the checklist on how to do it. And you have to talk to the department of public health, the department of building inspection, the water wastewater utilities, in our case, the SMPC that helps to de risk it.

And once they’ve done one and they see, okay. This isn’t so complicated. We can do this. Oh, it’s not poisoning the residents in my building or all these other sort of doomsday scenarios that they conjure up in their heads. That’s what allows these types of projects to then proliferate, and that’s what we’re seeing.

I mean, there are dozens of projects now in development just in San Francisco. But we’re seeing it in L. A., in Austin, in Seattle, in Hawaii, in New York, and beyond the United States. I mean, we are hosting, almost on a weekly basis, delegations from around the world to our EPIC Cleantech headquarters in San Francisco.

People are coming and studying this model. And I think that’s what’s amazing now, is the first wave of projects are online or coming online. I mean, we are now operating, I think, three and maybe potentially four of the first approved on site water reuse systems in San Francisco. And that’s what we need.

We’re, we’re de risking it for folks. It’s going to start taking off, but to come back to the original answer, it’s money savings, but it’s policy. So I, I maintain my original position of both.

Antoine Walter: Last year you came to Switzerland and you earned a prize at the World Economic Forum in Davos. So let me bring you a Swiss story.

I sat down with some engineers. I’m not going to drop names because maybe they don’t want to share it. Uh, they were running some calculations as to does onset wastewater reuse make sense. And they were starting that with the aim to disprove it. Say look, it might be something if policy supports it, but in Europe and especially in Switzerland where we have plenty of water It’s not a thing and it will never be a thing.

And unfortunately for that thesis They ended up proving that it was absolutely worthwhile And that it would be two to three times cheaper than the existing approach The problem is that policy forbids them to do so. So it’s not that policy doesn’t incentivize Yeah, and reuse is that policy prevents actually That was engineers, to put it in place.

Even if Policy we’re not pushing everywhere. Yeah, the first step is to prevent them from hindering you.

Aaron Tartakovsky: I come from a policy background I worked in federal politics And I think a lot of people maybe have a negative viewpoint of policy and of regulations as a hindrance to innovation but I actually see it as critical and I understand the viewpoint of the regulators and Because of that our approach and again this everyone’s gonna find their own way to do it Our approach has been to work closely with The policymakers and to be the first ones to go into these places that have never done this, that have regulations that as currently written would prevent us from doing what we do, but we’ve actually had success in multiple cities, whether it’s San Diego, California, San Jose, California, and a few other cities and states that I can’t mention publicly yet, but it will be public.

We’re going to be the first ones to ever deploy onsite water reuse systems into those geographies, because we work closely with the regulators to say, look, here’s the playbook that we developed. In city A, B, C, or D. Here’s how we can do it in your city. Because a lot of times, it’s not that they don’t want to do it.

It’s just they got a lot of stuff on their plates. And all of a sudden you’re asking them to sort of deviate from the already full workload that they have to try something new and in their mind untested. So when we show them, look, here’s the template. We can copy paste this to your geography. We’ve seen a lot of success.

Once we get one system in a city, that then becomes sort of the beachhead for us to be able to get more. systems in place because they can come see it, they can feel it, they can touch it. I mean, in the case of us making a recycled water beer, they can taste it. And that’s the key. These topics are so unfamiliar that once you make it tangible and you let them see it with their own eyes, that’s changed the entire conversation.

Antoine Walter: Yeah, it’s this good old thing in the water sector that everybody wants to be first to be second. So, you need to find someone to be first so that the others can be second. Yes, I like that line. In terms of company updates on Epic CleanTech, you’ve been raising money.

Aaron Tartakovsky: We are not raising money right now. We raised money back in December, 2021.

We’re fortunate that not only do we still have a lot of money, but we are bringing a lot more money in. Fundraising right now is not a priority for us. We right now are just company building. We are executing, we are moving into more cities and more states. We’re growing the team. We’re growing on nearly every front and we’ve got some pretty wildly exciting product development efforts that I would say stay tuned in the next year.

We’re going to be releasing some new ideas that I think will be just absolute game changers for the industry.

Antoine Walter: What is there to invent in terms of technology? Come on, it’s waste water.

Aaron Tartakovsky: You know, I think it’s an interesting point. I often tell this story that my father, born in Ukraine, was trained in the Soviet space program and, you know, as he often says, You know, what do you think the astronauts have been drinking for the last decades?

You have this technology. It’s about finding ways to deploy new and interesting ways. In our case, we use membrane bioreactors for those who know membrane bioreactors. They know that those have been around since the eighties, but what we’re doing is taking them and putting them into a form factor to go into a nine and a half foot basement, the bottom of a luxury high rise in downtown San Francisco.

It’s finding new and innovative ways to deploy, but it’s also bringing smart technologies. digital solutions to an industry that has largely been governed by the clipboard army, which is to say folks who go and read a water meter or go to a control panel, write down a result on a piece of paper and then report it back to HQ.

We think we can bring a lot of existing technologies that have not traditionally been in water and do it differently. And I think you’re right that, you know, a lot of these technologies exist, but They’ve not been deployed into a lot of different industries, whether that’s high rise buildings, whether that’s single family homes, whether that’s into the food and beverage space.

And so I think that’s a place where we’re seeing a lot of success is making water and wastewater important and relevant in industries that have traditionally not really thought about it.

Antoine Walter: I’ve looked up the Imagine H2O job board recently, and you have several openings there. Yes. So you’re actively growing the company pretty fast right now.

Aaron Tartakovsky: We can’t grow it fast enough.

Antoine Walter: So that’s the limiting factor is that you can’t find enough brains at a time.

Aaron Tartakovsky: It’s not that we can’t find it. It’s just, uh We are looking for amazing folks. We’re looking for amazing men and women to join our team. I think we are a small, but mighty team. I think we punch way above our weight on many fronts.

I think a lot of folks think we’re bigger than we are, which is, which is fine. But yeah, we are growing. We’re expanding into new markets. We’re developing new products. I think this is really just the beginning of Epic Clean Tech.

Antoine Walter: Is it. Open data and things. You’re sharing the size of the company, your turnover, things like that.

Are you ready to share that?

Aaron Tartakovsky: Yeah. I mean, look, we are, our team is 15 people in terms of geographies where we are right now. We have folks in San Francisco, Las Vegas, Scottsdale, Austin, San Diego, and I think we’re going to be expanding even faster into places like the East Coast. You’re very distributed.

We are very distributed. You know, our base of operations is in California in the San Francisco Bay Area, but we are a distributed team that makes us lean and mean. I would say, you know, this year we are going to see about an 800 percent increase in our revenue. We’re seeing a pretty significant jump in our new bookings, in our sales pipeline.

I mean, we only commercialized at the end of 2020 and we’re now in the nine digits in terms of the number of projects that we’re talking to in person. It’s fun times at Epic Clean Tech.

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Rapid fire questions:

Antoine Walter: I have a set of super rapid fire questions for that water reuse deep dive. If you had to describe the future of water reuse in just one word, what would it be?

Sexy. That’s a good one. If you could instantly change one thing that would accelerate wastewater reuse, what would it be? The price of water. I’ve heard that already today, so it seems you have a good alignment with your co panelists. So what’s the most common misconception about water reuse that you’d like to debunk?

Aaron Tartakovsky: That the water is not safe. Is it still something you have to debunk? I would say for the general public, there is a yuck factor. I think there’s just a general reticence around the whole concept of recycled water, that it is lesser than drinking water than tap water. I would say maybe in the industry. In the sort of bubble that we operate in, there’s an understanding that water, recycled water, treated water, is all safe.

But I think when you expand out it to the general public, to our customers, building owners and developers, the people who live in these buildings, there is a misunderstanding about recycled water. So that is one that we definitely need to debunk further.

Antoine Walter: What’s the one thing you’d like listeners to do just after they listen to that?

I

Aaron Tartakovsky: want people to think about how water gets to their taps and what happens when wastewater leaves. their homes, what happens after they flush their toilets. Too few people understand how this, how these systems actually work. So what I would implore people to do is just take a little time to watch a YouTube video, maybe even visit your local water, wastewater treatment facility and learn about all of these folks who work 24 seven and through holidays to make all of these systems function.

I think that’s going to be a key thing. It’s just a general lifting. of the public’s knowledge of how these systems work because if they know how the systems work and they know what’s not working well, they’ll be better advocates for that change.

Antoine Walter: Well, Aaron, it’s been a repeated pleasure to speak with you.

I would love to one day visit one of your facilities and have a tour. I know that one of your facilities is pretty popular because it has a webcam, and I see regular screenshots of people visiting it, so I guess it must be exactly what you said. You need to have that beachhead, you know, to reproduce it.

Yeah. I’d love to have a tour one day.

Aaron Tartakovsky: One, there is an Always an open invite for you. And in terms of the camera, we like to create a little bit of a Disneyland experience where when you come visit Epic, you leave with a little souvenir photo. So that’s what we’ve done. We would be honored to have you join us to bring your recording equipment and maybe we’ll film an episode on top of our six and a half foot golden toilet throne.

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