Growth to significantly exceed that of worldwide water utility IT spending
IDC Energy Insights today announced the availability of a new report,Business Strategy: Worldwide Utility Industry Smart Water Spending Forecast, 2012-2016 (Doc #EI237276). According to the report, IDC Energy Insights forecasts that worldwide utility industry smart water technology spending will reach $3.3 billion by 2016, experiencing a compound annual growth rate (CAGR) of 18.7%. This is a significantly higher growth rate compared with worldwide water utility IT spending, which will grow at a CAGR of 5% during the same time period. Fueling this growth over the next five years, water utilities worldwide will ramp up their investments in smart water solutions in a pattern that is similar to the already established smart grid market in the electric utility industry.
"The smart water market includes many of the same technology components as the smart grid market and is aimed at addressing global issues like water stress and aging infrastructure," said Rick Nicholson, group vice president, IDC Energy Insights. "Water utilities and technology vendors alike must understand the specific dynamics of the smart water market to be successful in achieving their goals."
Water scarcity, a long-term imbalance between supply and demand, and water shortages such as droughts that are of shorter duration, are primary drivers for growth in the smart water market. Another primary driver for growth is aging infrastructure. According to the American Water Works Association (AWWA), much of the drinking water infrastructure in the United States, comprising more than 1 million miles of pipes, is nearing the end of its useful life and approaching the age at which it needs to be replaced.
Regulatory compliance is an additional driver for investment in smart water solutions. In some instances, regulators are mandating stricter environmental standards, although these regulations often have a larger impact on the wastewater segment of the industry.
Finally, an additional factor driving interest in smart water solutions is the relationship between water and energy — often referred to as the energy-water nexus. It takes a large amount of energy to extract, treat, store, and transport water. Indeed, approximately 15–30% of a typical water utility's operations and maintenance expenses are for energy. At the same time, a large amount of water is used in the production of energy — particularly as cooling water for power plants and for hydraulic fracturing or "fracking" in oil and gas drilling
Additional key findings from the report include:
- Spending on nontraditional hardware and associated nontraditional services will experience the highest rate of growth, driven by the deployment of smart water meters, remote terminal units (RTUs), and other sensors.
- Within the software category, spending growth will be driven in large part by investments in advanced analytics.
- Regional differences in spending are expected to be significant and will correlate with the top investment drivers for smart water solutions including water stress, aging infrastructure, regulatory compliance, and the energy-water nexus. For example, regions facing a water supply–demand imbalance will tend to invest in smart water solutions to enable conservation programs and other measures to reduce consumption, while regions with aging infrastructure will tend to focus their investments on leak detection and asset management.
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