Innovation Demand and the Water Industry

Transcription

1 Innovation Demand and the Water Industry Tomas Michel speech at the EIP on Water Conference 2014 Barcelona, November 2014

2 Innovation Demand and the Water Industry The World Economic Forum, in its 2014 Global Risks Report, ranks Water in third place (# 1 fiscal crises in key economies, # 2 structurally high unemployment) within the TOP TEN Global Risks of Main Concern, in a total list of 31 threats. Too little water available, or too much water at a specific moment in space and time, can shape economies, or produce devastating effects. Smart management of EU water sources, and the continued development and strengthening of European worldwide leadership and innovation in this field, should be of key importance to Europe and its governing bodies. This is further underlined by the central role of water in almost all human and industrial activities. Water is not only a natural resource to protect, drinking water for our citizens; and indispensable for crop irrigation (and thus for food production), To industry. WATER is also a raw material, WATER is industry s #1 solvent, and WATER remains today for industry the best and cheapest way for efficient heat exchange. More than SMEs are directly involved in the value chains of the water-related economy. A recent (recent as of September 2014) survey of the National Economic and Labor Impacts of the Water Utility sector, by WRF (Water Research Foundation) and WERF (Water, Environment Research Foundation), estimates that in the United States, Water, Wastewater and Stormwater Utilities will contribute 524 billion USD to the economy over the next decade, and support permanent jobs. The study further concludes that investments by this industry generate similar job impacts as those in clean energy, transportation or health care. The study further concludes, that 1M USD invested in this sector creates 16 jobs, This is more than equivalent investment in military spending, or personal income tax cuts! 2/8

3 Where is EUROPE going? The new Juncker Commission has set out 10 priorities for the next 5 years. The top 4 have a DIRECT relationship with water and innovation! 1. A 1 st priority, clearly calls for GROWTH, JOBS and INVESTMENT in Europe. i. The US example just mentioned, makes clear, that the European Water Industry is able to the same or larger extent, to generate jobs and investment, and participate intensively in implementing this strategy 2. A 2 nd priority calls for a connected Digital Single Market, with homogeneous rules, and data protection. i. This priority in turn, by incorporating existing infrastructures, should lead us to smart cities and smart Integrated Water Resource Management. 3. A 3 rd priority is a new resilient EU ENERGY UNION, in which a new circular economy and forward-looking Climate Change Policy will have to play a crucial role. i. The UN and IEA in two 2014 reports, have already identified access to water, even if we switch to renewables, as THE key limiting factor for energy production, in the future. 4. And in fourth place, Juncker sets a priority for a DEEPER and FAIRER INTERNAL MARKET with a STRENGTHENED INDUSTRIAL BASE. To today s audience, it might be surprising to hear, that with all the previous introductions made, the word WATER doesn t not appear directly or indirectly cited, within any of the texts describing, in any length, these 4 priorities. It is our responsibility to make the importance of water and the water sector heard, and to make sure the previously mentioned topics are duly taken account of when developing strategies for the mentioned priorities. INNOVATION is an absolutely essential component to drive all of these priorities. And the fact that we are all here at this EIP on Water Conference, probably is also proof of our conviction that WATER must play an essential and central role to achieve these goals. 3/8

4 So what is the role of the Water Industry? The Water Industry is a KEY DRIVER for INNOVATION acting both as a MARKET UPTAKER by investing to bring new products and solutions from academia, start-ups, and SMEs, as well as from other sectors, to the market, but also.., INNOVATING itself. In both cases the Water Industry is directly providing economic growth, jobs, new products and services, constant evolution, better quality of water, cost reduction WATER INDUSTRY holds also a CENTRAL POSITION allowing EUROPE to cope with both COMPETITION (from outside), but also to seize the huge OPPORTUNITY offered by one of the most stringent environmental regulations in the world, acting as a driver for more innovation in Water. The old model The water sector is highly fragmented and locally regulated. European wide regulations and standards are developing for water, if at all, very slowly. This fragmentation and many times heterogeneous regulation, together with inadequate water pricing, impede the development of a TRUE, STRONG (DEEP), and I might add, creating some controversy, FAIR water MARKET, as pointed out in President Juncker s 4 th priority. In the old model, following a conventional market model which actually does not exist for water, as we just have pointed out - the water industry, has been, to a large extent, investing in its own R&D and innovation, in a closed way, every water player acting more or less as an independent actor, looking for its own competitive advantages. Let me provide you with two examples, why a new model is needed. The German UF membrane manufacturer INGE, which in 2011 was fully taken over by BASF started only 11 years earlier, in They had their first reference in Germany in 2001, but then quickly moved to export into the US, Ukraine, and China, in spite of the fact that in Germany there is a huge market of a total of 4833 Water Utilities, and 6900 Water Companies. In this same old EU market model, it took ERI (delivering RO energy recovery systems) and the MBR manufacturer Zenon (today GE) over 10 years to penetrate into the EU market, despite offering highly innovative products. 4/8

5 A new model In the new model, both the water industry AND European institutions must realize the need for a real EU water market and understand the competitive threat which non-existence of such a strong and central market poses on EU growth and competitiveness. Within the new model, the Water Industry will continue to invest in own developments, but - will also share and incorporate external know how and results from R&D - will incorporate SMEs into the market uptake of new products and solutions - and will participate through VENTURE CAPITAL and other similar activities in the creation of new and stronger companies in the water sector. The distinct advantage of this, given an accompanying regulatory and financial support framework, will be a stronger EU water sector, capable not only to compete within Europe with external non-european players which are already trying to conquer our market, but to challenge these same players also outside of Europe in the global market. An example of this is Suez Environnement s Blue Orange Corporate Venture Capital Fund. The aim of this fund is to help develop the commercial and technological development of technology start-ups. Suez Environnement hopes to accelerate this way its OWN uptake of promising technologies and innovations. YES Corporate funds such as Blue Orange, help big industry players to benefit from the dynamism, creativity and insight from small organizations, BUT they also provide small organizations with a high visibility, with a business opportunity, and with market entry for their technology. Only this way, growth, jobs, and continued investment also in ageing infrastructures which is badly needed, can be assured. Only this way, will we be able to connect the water sector with the new society of knowledge, smart infrastructures, and smart cities, which the digital Single Market promotes. 5/8

6 Only this way, will we be able in Europe to arrive at a resilient Energy Union, continuing to make available water for energy production, and providing innovative solutions to implement forward looking climate change policies. Only this way will we be able to achieve universal access to water and sanitation services, as quickly, as possible and only this way will we be able to continue to lead the rest of the world in this sense. Thus in the new model the strategy of the Water Industry must be to assure continued organic growth, to continue and increment investment and subcontracting, to continue and increment spending on R&D, to invest in collaborations with Academia, Start-ups and SMEs, and to assure growth also through acquisitions and taking shares in other companies. Last but not least, the Water Industry must continue to lead and be instrumental in the internationalization of EU water technologies and solutions, and should be a key actor promoting best practices, and standards. The Water Industry is also ideally suited to provide large scale demonstration sites, and/or to incorporate innovative technologies into their operations. At these large demonstration sites or testing facilities, integral management and professional excellence allow for best control, evaluation and visibility of piloted results, providing trust and large scale visibility for new solutions. The utmost expressions of this new model - and a very desirable final outcome - are PPPs: small (starting with a consortium, or showcase site) to large size (like f.e. SPIRE in the chemical industry), which need to be led and participated by the Water Industry, which can act as a catalyst for the rest of the water sector. To show its compromise and share the costs, the water industry can only switch, and adapt, to this new model. Yet, it must do so, while keeping within the rules of a free market: it has to create a profit, and return value to shareholders. The Water industry is, and must continue to be, a central piece of a SINGLE (DEEP) EU water market. A water market which can adopt, and pay for, continued innovation, as defined above. Innovation which can develop strongly in Europe, and compete successfully outside Europe. How should the institutions (EU Commission, Parliament) act? 6/8

7 Do we need more regulation and red tape? The answer is clearly, NO. Should we continue indefinitely with the model of public AND private separate investment efforts, or should we rather, construct a model where maximal synergy of both efforts can take us quicker to market development to innovation uptake by the market, and to overall European competitiveness I believe the institutions have the responsibility to create a fair and functional regulatory environment which enables and favors the creation of a SINGLE DEEP European water market. They have further the responsibility to create an enabling environment AND opportunities where the different actors and stakeholders involved, can have optimal chances for cooperation and co-construction of better solutions for tomorrow. To achieve all this, the new Commission should continue to build on the achievements of the EIP on Water In particular. Strengthen the capabilities of EIPs to drive large scale systemic changes with long term impacts Secure committed high-level leadership of the EIP on Water, adequately resource it, and adopt an effective governance model Ensure closer coordination of actions of EIPs with existing, and new, financial mechanisms such as Horizon 2020, with calls oriented towards demonstration activities, with structural funds, and by fostering more public/private collaboration and partnership (PPPs) The new Commission should finally be instrumental, and helpful, in the creation of new and imaginative financial mechanisms for a truly innovative and competitive water sector 7/8

8 In line with this, the EIP on Water Task Force and High-Level Steering Group, but also the European Technology Platform, WssTP, which I have the honor to preside, will continue to feed the Commission with: - valuable broad stakeholder input, - wide consensus approaches, - and with imaginative proposals, All to help this Commission, and Europe, to achieve fast results, in line with the priorities defined. Thank you very much. Tomas Michel, WssTP President 8/8