Pablo Bereciartua on water utility innovation and the opportunities to break from traditional approaches.
Latin America is home to more than 600 million people. Countries such as Paraguay and Colombia are set to double their populations in the next two generations. It is a region with abundant natural resources, including large freshwater reserves, and with high rates of urbanisation. It is, therefore, an area of the world where it is possible to think about how to disrupt the water supply and sanitation industry – closing the gap of basic public services – and, at the same time, restore environmental conditions in large watersheds and achieve the UN Sustainable Development Goals (SDGs), with their 2030 deadline.
Traditional approaches have not been able to solve these challenges in Latin America. At present, half the population lacks a sewage connection and close to 25% don’t have a proper network drinking water service. Only an estimated 15% of collected wastewater finds its way into treatment plants, which, even then, often do not function properly. Around 26% of the population has access to forms of sanitation other than sewers, including septic tanks and various types of latrines.
“It is a region where it is possible to think about how to disrupt the water supply and sanitation industry”
Enticing questions can be asked about water supply and sanitation. How can new technologies, such as big data and algorithms, or renewable energies, be used to improve efficiency? How can new paradigms such as the circular economy or digital water be implemented? And how can new business models be designed to address these challenges with fresh approaches and, at the same time, attract public and private investments?
Foundations for innovation
There are two foundations for industrial innovation. One is new technologies – either available or at advanced stages of development – which may offer a new way of solving issues. Another is potential new business models.
Technologies include: big data; smart-metering devices; satellite image processing; the use of fibre optics for utility data management; higher efficiency for energy recovery and generation; and the potential use of hydrogen as an energy transition vector, coupled with distributed renewable energy generation. More broadly, there is the potential of learning algorithms and artificial intelligence to generate value with all the new data sources, as well as to improve and change how to frame and take decisions.
I would say it is not easy to find such new technologies in Latin America currently, with relatively few where the real rate of service extension offers hope of universal coverage as we reach 2030. A broad view of the region does, however, show recent experiences of working with potential new business models.
These include the case of Buenos Aires. In recent years, it has been possible to significantly, and in a fair way, increase the service tariff to reach financial equilibrium, and to greatly increase installation of metering devices in a city with 20% metering coverage, moving from less than 1,000 new meter installations per year in 2015 to more than 150,000 in 2019. These changes were the basis for the first private issue of bonds in London in 2018, which raised $500 million for infrastructure expansion to unserved neighbourhoods of greater Buenos Aires.
Another interesting case is Empresas Publicas de Medellin in Colombia, a very successful model of a publicly owned company with a wide range of public services, including water supply and sanitation, and doing it with a focus on reaching a universal service – including the most vulnerable citizens – and being profitable, in fact diversifying in other countries.
SABESP, in Sao Paulo, Brazil, deserves attention too. Responsible for the more than 20 million people in the metropolitan area of Sao Paulo, the company has opened its shareholder base on the Brazilian and Wall Street stock markets. Last, but not least, is the Santiago de Chile case, where a private concession has successfully reached universal service with very high environmental and operational standards.
There are more examples across Central America and the Caribbean.
The gap in service provision, the availability of new technologies, and the experience with different business models creates a potential for disruption. Against the backdrop of this, innovation takes on an important role.
A recent interesting example has been the creation of innovation centres by the UN Office for Project Services, including one in Antigua and Barbuda. This will foster innovation to help reach the UN 2030 SDGs.
Collaborations, such as research links between Buenos Aires utility AySA and Dutch KWR Water Research Institute, contribute to innovation. The private sector is a driver for innovation, too. This includes companies working in the region, such as Veolia and Acciona, and, importantly, private sector activity from the region – such as Mexico-based ORBIA, formerly Mexichem. This has acquired companies such as Wavin and Netafim, and established its Lighthouse Labs innovation centre in San Francisco with IDEO.
I see an opportunity for utilities, private business, financial institutions – such as the World Bank and the Inter-American Development Bank – and organisations such as the International Water Association, as well as stakeholders in the region, including universities, to collaborate to support innovation in Latin America.
A great deal is taking place in the public, private and academic fields that, together, can contribute to the future of utilities, and their potentially huge impact in cities and on social issues.
For more information on the Buenos Aires case and the industry in Argentina, see Bases for a Water and Sanitation Public Policy for Argentina (2018), P Bereciartua, available from Amazon.com (English and Spanish editions).