China’s water prices ticking up

The Ministry of Water Resources of the People’s Republic of China has announced plans to raise the price of water sometime this year.

That announcement triggered a market reaction in which the price of water resources and utilities companies was driven up by some eight to ten percent in an otherwise down market. And the movement in water underlines the deep challenges ahead for China as it builds out on its infrastructure and adopts water technologies.

Companies which reported gains from the announcement included Wuhan Sanzhen Industrial Holding Co. and Jiangxi Hongcheng Waterworks Co., hinting at big investment opportunities ahead for water technology and infrastructure in China.

According to the Research on Sustainable Utilization of China Urban Water Resources, China's total investment in sewage treatment industry is expected to reach CNY200 billion in the period 2008-2010, indicating China's sewage treatment industry with huge market potential will be able to have a rapid and sustainable development.

Last week the Shantou municipal government in Guangdong, China said it will invest 920 million RMB (134.70 million USD) to build a new sewage treatment plant that will process 0.12 million tons of waste once the project is completed.

“China is one of the regions of the country that’s experiencing drought, and it’s investing heavily in water infrastructure,” said Richard Stover, Chief Technology Officer for Energy Recovery, a provider of ultra-high efficiency desalination technology that recently went public. “We identify China as one of our largest markets,” he told the Cleantech Group.

To place the water problem in context, one has to understand the inequity of water resources in China. Today, China has 20 percent of the world’s population but only 7 percent of the water supply, according to Summit Global Management Inc, a consulting company.

China is expected to more than double the global rate of water infrastructure investment spending as much as $250 billion by the end of this year, the consultancy said in a recent research report.

“It doesn’t surprise me that water prices are going up in China because of the direct link between water supply and energy prices,” Stover said. With rising oil prices in the market, so too has the cost of transporting and purifying water increased, said Energy Recovery (see Energy Recovery in China desal contract). And China, like other parts of the world, will have to deal with those changing economics.

According to Sandia National Labs, the energy required for treatment and delivery of water accounts for as much as 80 percent of its cost. That has big implications especially when energy costs rise, the result is a negative impact both on the price and availability of water.

The problem is there are few if any modeling tools available for businesses and governments to better understand the effects of water and energy, according to consultants and analysts.

Energy Recovery’s Stover said that his company sees more big water project investment underway overseas than in the United States. He says there are four key areas impacting the water supply side in China: widespread drought, increased population, and increased urbanization as more people move to big cities.

Stover quoted a statistic from International Water Management to underline the scope of the water scarcity problems ahead. By 2025, some 33 percent of the world’s population will live in countries with water scarcity issues.

This past June, the fourth Strategic Economic Dialogue between China and the U.S. was convened in Annapolis, MD. The meeting involved Treasury Secretary Henry Paulson and PRC vice premier Wang Oishan.

One of the top priorities for China outlined at that gathering focused on water issues. The PRC delegation pointed out that prevention and control of pollution from agriculture and rural areas, as well as evaluation and analysis of clean water policies, assessment and promotion of transfer of clean water technologies were of high importance and priority to the country.

Water experts say a variety of new water technologies for purifying drinking water are critical for China’s future (see The Wild West of water in China). Among the list of technologies are ultra violet light, ozonization and other purification processes.