Climate change and demographic shifts are beginning to strain the world's supplies of fresh water in many regions, according to the U.N.'s second World Water Development Report, and if the issue is not addressed it will be a driver of humanitarian crisis in the 21st century. Recognizing this problem, there has been an groundswell in water technology innovation across the globe. Southern California, no stranger to water shortages due to many years of an extended drought, is a major center for this innovation. The March 8th Caltech/MIT Enterprise Forum focused on water innovation by bringing together representatives from water companies, VC and one of the L.A. area's biggest water technology customers, the Metropolitan Water District, to discuss the future of this industry and new opportunities. Over 80 entrepreneurs, VCs, academics and other people concerned with water issues attended the seminar.

Southern California's Water
Tim Brick, Chair of the Metropolitan Water District (MWD), set the context for the seminar by briefly discussing the impending global water crisis, and then going into detail on the water situation in Southern California. While the 20th c. was the story of oil, the 21st c. will be the story of water, according to Brick. Most agriculture still depends on inefficient irrigation systems and groundwater is often contaminated with pollution. The result is that there are over 1 billion people without access to clean water, a number that the U.N. has a goal of reducing by half. The MWD provides water to over 18 million people in Southern California, which is more than 50% of the state's population, and that number is rapidly growing. The area covered by MWD also represents an $800 billion economy.

"If there is a water problem, we have it in Southern California," Brick says. Water issues in the region range from shortages to contamination from run-off to environmental damage caused by water infrastructure to invasive species such as the zebra mussel. Recently, a national study found that pharmaceuticals found in human wastewater are starting to contaminate drinking water because standard methods of purification don't filter them out. Climate change will hit the Southwest particularly hard, causing the region to become drier. On top of all of these issues, Southern California's rapidly growing population is placing further strain on water resources. This has necessitated water importation, and currently the region imports 71% of its water.

Southern California has 2 primary sources of water: the Colorado River and water piped in from Northern California. The Colorado River has high salinity and water from Northern California is high in organic contamination, so neither source is perfect. It is also expensive to use water from these sources. California uses 19% of the electricity it generates for water consumption and that number is higher in Southern California because much of the cost comes from moving the water. This makes energy price volatility directly tied to water price volatility, and the supply of cheap imported water in Southern California less reliable.

Another issue, according to UCLA Department of Chemical Engineering professor Yoram Cohen, is the increasing salinity in the nearby San Juaquin Valley. Salts from irrigation water used in the Valley have been building up on farmland. Some places now have as much salt as the ocean and an estimated 20-25% of agricultural land will likely be lost.

Because of Southern California's myriad of water issues and the innovation around solving them, the region is a world-center for water technology, according to Cohen, and almost every agency abroad compares their studies and their successes to Southern California. This gives good exposure to companies that are part of an innovative solution to one of the issues in Los Angeles.

The Fixes
According to Brick, the lack of a reliable water supply has led MWD to focus on improving efficiency in water management and investigate ways of recycling water. Obviously efficiency is the best solution to the problem because reduced water consumption means MWD can avoid all of the expenses related to transporting and purifying the water. This includes action such as encourage native plant landscaping, low flush toilets and improved irrigation. MWD efforts have resulted in more water conservation than the total amount the area receives from the Colorado River, so the strategy has been highly effective.

The water issues in Southern California are complex, so solutions will cross multiple fields and have tremendous commercialization potential. Brick listed research needs of MWD, which they are interested in finding partners to collaborate on: evaluation of emerging contaminants, treatment for said contaminants and real-time monitoring; control of invasive species, particularly technology for detecting the rapidly spreading zebra mussel in its larval stage; energy management that uses renewables; desalinization membrane improvements that reduce energy used and cost; watershed science to manage ecosystems and reduce environmental impact for sustainable water supplies; industrial process improvements to reduce/eliminate commercial water usage, including onsite recycling and membrane technology; residential water conservation (currently California residents use two times more water than the world per capita average); and irrigation improvements.

Another opportunity, according to Cohen, is desalinization of local brackish water, which would also be cheaper than importing. Cohen also would like to see a push to lower the cost of desalinizing ocean water.

However, a company needs to be careful with its solutions, as pointed out by Cohen. Water agencies are conservative. They are very up-to-date on technology, but require extensive testing, health and environmental compliance and permits before any new technology can be implemented. Things companies should avoid are introducing "new" chemicals into the discharge stream during purification, they should not raise the cost above current processes and maintenance cost should be low. Also, companies need to recognize that water quality and components will vary by source and that their technology needs to be able to handle a range of waters. Another consideration is a centralized or a satellite system. Centralized systems are limited in how much they can expand, so a decentralized satellite system will be more flexible. Finally, energy costs should be low. All of these factors open the door for opportunities in a decentralized system that purifies water from local sources. Ideally such a system will be "smart" and self-correcting with low maintenance. If the system uses membranes for purification, problems can progress quickly, so it needs to be able to fix itself within seconds. Thus, devices for real-time monitoring will need to be integrated into such a system.

Another opportunity, said Cohen, is in membrane field servicing. Any technology that uses membranes to filter water has the problem of buildup on the membrane and servicing the membranes can become a big opportunity as Los Angeles moves to importing less water.

The Academic Side
Cohen, as a professor at the UCLA Department of Chemical Engineering, also spoke on academia's contribution to water solutions. UCLA has been a hotbed of innovation when it comes to water problems. The reverse osmosis process for purifying water by pushing it through a membrane was actually developed at UCLA by Sid Lowe and Suri Rajam. Membrane technology has the Achilles heel of films building up on the membrane, however, and UCLA has continued to innovate in that regard. Currently, membrane desalinization recovers only 50% of the water run through the system and this needs to be higher. In UCLA's labs, they now have 95-98% recovery rates by nanostructuring the surface of the membrane to reduce build-up, so the future of this technology looks even brighter. Clearly the world-class academic institutions in Los Angeles will play a large role in solving the world's water crisis.

The Companies
Two water companies presented at the seminar. James Harris, CEO of Crystal Clear Technologies, spoke first on his company, followed by Jim Simmons, and investor and board member of Sylvan Source with experience on both the entrepreneurial and investment sides.

Crystal Clear Technologies got its funding from a National Science Foundation solicitation for a low-cost water purifier. Crystal Clear's goal is to create a water purification system that can provide one person with water for one year for $1, and to be the lowest cost system for all classes of organic and inorganic contaminates with better than EPA quality regardless fo the source of the water. They use proprietary ligand technology developed with the University of Oregon to remove inorganic contaminants. This causes heavy metals to bunch up in the filtration media, expanding the filtration capacity. Once the technology allows them to have a high enough concentration of heavy metals in their filters (about 8X capacity), it will become economically interesting to recover the metals from the filters. In addition to the filtration tech, they use UV light to get rid of organic contaminants. The system can be powered by solar panels, so it can be used in areas lacking infrastructure and places hit by major disasters, such as New Orleans after Hurricane Katrina.

Crystal Clear has partnered with many universities and research institutes to gain access to best-in-class technology. In addition to the U of O, they have worked with Texas A&M, Naval Lab Research, Sandia National Laboratory, Georgia Tech and National University in Singapore. The company also has its own IP covering a water purifier with UV and an adsorbent, and for an adsorbent with multiple layers.

Surprisingly, Chrystal Clear has not needed to raise equity yet. Their funding has come from an SBIR from the NSF, money from the 2006 Cal Clean Tech Open, and ONAMI Gap Funding, which is an Oregon grant they were able to receive because of their lab in Portland. They are a good example of government money available for companies developing financially high-risk technologies.

The company's product strategy has three stages. In the first stage, they are focusing on chemistry, selling their proprietary ligands. The next stage will be services in the form of heavy metal reduction. The military is very interested in removing heavy metals post reverse osmosis. Finally they will build their own purification systems. The company doesn't want to create a new distribution system, so they are in discussions with Dow, Siemens and Culligan in order to form partnerships with established players.

Sylvan Source was founded in 2003. Their product, the M-600, is now shipping and it's a broad-spectrum purification system that doesn't use filtration, membranes or cartridges. Instead, the system uses a degasser that strips out volatile chemicals and reduces gases by steam, distillation, a demister that separates heavy and light droplets, and a condenser. The unit is self-cleaning and has less wastewater than reverse osmosis. Furthermore, they are the only company that has passed NSF 62 for perchlorate reduction.

Over $40 billion will be spent in 2011 on residential water treatment, so this is the market Sylvan Source is pursuing first. They are targeting new construction in North American and China. The cost of their system is $20-$30/month over 30 years, so it doesn't add much onto the cost of the mortgage. The next phase will be to retrofit existing homes with an under the counter system. Finally, they will scale up to provide their system to centralized water treatment facilities and for industrial applications.

The Panel
The seminar concluded with a panel discussion that featured all of the speakers as well as Charles "Chubb" Michaud, CEO of Sytematix. The panel kicked around several ideas, notably focusing around energy use and water recycling. Naturally in a world with rising energy costs, the less energy intensive a process is, the better. One of the least costly ways of recovering water is by recycling it from the sewer system, but this method is not commonly practiced in the U.S. due to what Michaud calls the "yuck factor". California only recycles 1-2% of its water. Cohen noted that in places like Singapore and Israel upwards of 70% of their water is recycled. In Singapore, they call recycled water "new water" and children are taught in elementary school the value of water. Cohen and Michaud agreed that we will need recycle more water in the future and that a PR campaign is needed to overcome consumer resistance. Michaud suggested renaming it "previously experienced water".

Finally, the panel agreed that there are many business opportunities in the field. Simmons, as an investor, noted that while there are many players in water, it's not overcrowded like it is in energy so it's a great market for both investments and startups.

For people interested in clean technology, a resource recommended by the Forum is the Clean Technology and Sustainable Industries Organization, which does education, advocacy, PR, technology acceleration and community development around sustainability. Their website is: www.ct-si.org