Water Is the Next Oil
VC hopes to capitalize on an increasingly scarce resource.
Kevin Bullis 04/09/2008
- 14 Comments
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.
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williammeadlynch
1 Comment
Water
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.
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