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Wednesday, July 15, 2009

The Business of Water

Milwaukee positions itself as a freshwater leader

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Water is the stuff of life, but in Milwaukee it’s also big business.

In southeastern Wisconsin, more than 120 businesses with 20,000 employees are involved in the water industry. They generate revenues in excess of $10 billion a year—about 2.5% of the world’s $425 billion water sector. Five of the 11 largest water companies in the world have a presence here, including Veolia North America, ITT Corp., Pentair, General Electric and Siemens Water Technologies. Homegrown water-based companies, such as Badger Meter, A.O. Smith and Kohler, are industry leaders. The UW System, private universities and the state’s technical colleges are producing cutting-edge research on products that could make it to market and generate even more revenue.

That appreciation for Milwaukee’s strength in the water industry led to the formation of the Milwaukee 7’s Water Council, which is spreading the word about the area’s advantages in order to lure businesses to utilize our resources or even locate here.

“We already have a lot of things going in terms of being a water hub,” said Claus Dunkelberg, water industry specialist for the Water Council. “What we haven’t done is to wave the flag and say that we are a water hub.”

However, the United Nations recently did just that.

Milwaukee as a Water Hub

Milwaukee’s proximity to abundant fresh water placed it on the map, literally. German settlers who set up breweries, food processing companies and tanneries—industries that rely on a steady stream of water—provided the city with its economic base. Those original industries have shrunk in size, but the ancillary businesses that supported them have remained. Components that make up the nuts and bolts of the water industry— pipes, water heaters and meters, controls, sensors and filters—are still manufactured in the area.

A well-known, homegrown water company is the Brown Deer-based Badger Meter, headed by Richard Meeusen, a co-chair of the Milwaukee 7’s Water Council. His company creates water meters, the “cash register” for utilities and municipalities.

Meeusen helped to launch the Water Council in 2007 with A.O. Smith President and CEO Paul Jones. Both men saw the need to raise the profile of Milwaukee’s water industry at the same time that access to clean, plentiful water has become a critical global issue.

The business community, academic institutions and a handful of environmental groups have rallied around the Water Council to promote Milwaukee as the Silicon Valley of the water industry.

“When people compare Milwaukee’s water industry with Silicon Valley, that’s not just some sales pitch,” said A.O. Smith’s Paul Jones. “In Silicon Valley there’s a high level of interconnectedness between firms and between higher education and industry. Will Milwaukee’s water economy ever reach the size of Silicon Valley’s computing economy? I’m not sure, but what I am sure of is that we’re following the same formula for innovative success.”

Michael Strigel, executive director of the Gathering Waters Conservancy, said his organization got involved in the Water Council because clean water is important to member businesses as well as environmental groups.

“I think businesses are more often listening to environmental leaders about ways that they can improve their practices and save them money that they might not have been willing to listen to a few years ago,” Strigel said. “There are times when environmental groups need to confront these businesses, but it would be better to cooperate on the problems.”

As a result of the combined efforts of businesses, academics and environmental advocates, Milwaukee has been named a member of the U.N. Global Compact Cities Program—just the second American city to become a member, and the only one to focus on fresh water.

As part of the U.N. program, the city has committed to addressing seven issues concerning fresh water: aquaculture, which is raising aquatic organisms for consumption, plus cleaning and reusing water; removing phosphorus from sewage and reducing algae in Lake Michigan; disinfecting storm-water runoff; improving wastewater treatment; urging municipalities to adopt new technologies; improving drinking water quality by removing radium from groundwater, distributing sensors to detect life forms in water and developing gray water systems for homes; and creating integrated solutions for water problems.

“The U.N. Global Compact is a pretty big deal because it will draw new attention to Milwaukee,” said UW-Milwaukee professor of urban planning Sammis White, who has been studying the region’s water industry. “We made a commitment to solve these problems, although we didn’t promise that we’d be able to solve all of them. But it will provide a double win: a cleaner environment and better water quality, plus more jobs.”

While Milwaukee is positioning itself as a leader in freshwater issues, cities around the country and the globe are trying to make the most of what’s been called the oil of the 21st century.

“More and more competitors are seeing water as we do,” White said. “Unless we can move things speedily forward, we will lose our slight advantage. We need significant investment in R&D [research and development] in the next few years.”

Regulation Spurring the Water Industry

Contrary to common complaints about government regulation hampering business growth, “the water industry is regulation driven,” Dunkelberg said.

Federal laws such as the Clean Water Act, which protects surface water, and the Safe Drinking Water Act, which regulates the nation’s public drinking water supply, have spurred innovations in testing, monitoring and treating water.

UWM’s White said that Wisconsin’s historically high standards for water quality have been exceeded by other states’ regulations. For example, Virginia has more stringent standards on phosphate discharge in wastewater. High phosphorus levels lead to more weeds and algae that harm lakes, rivers and streams.

“The industry would be helped more at this point if the state were to tighten standards and enforce them,” White wrote in a 2008 study of the regional water industry. “That would add to the demand for solutions.”

The public’s concern about water quality will also propel the water industry to take action. Consider the uproar over findings that pharmaceuticals like contraceptives, anti-anxiety medications and animal growth hormones can be found in water; detecting, measuring and eliminating them require new technologies that can then be sold to water utilities around the globe. Even Milwaukee’s cryptosporidium outbreak of 1993 led to new tests and treatments, which have been reproduced in other utilities.

Looking ahead, the Great Lakes Water Compact will likely play a role in further developing the water industry.

“There are water quality issues and water quantity issues created by the compact,” Dunkelberg said.

Since the compact requires a community outside of the Great Lakes basin to implement a conservation program before applying for water outside of its watershed, communities must find ways to measure and lessen their water usage. What’s more, if a water diversion is granted to a community, water must be returned to the Great Lakes basin as clean as it was originally. That means additional treatment and measurement technologies. Not only that, but administrative procedures must be created to allow all of this to happen, which will provide employment for policy-makers, legal experts and scientists. Since the city of Waukesha will likely be the first community in the county to ask for Great Lakes water, Wisconsin will be at the forefront of these new opportunities.

Next-Generation Opportunities

Although the Milwaukee region seems to have a head start on solving water problems, there’s still much that needs to be done to ensure that people around the globe have an adequate supply of clean water. Next-generation research is being done on making the industry more energy efficient; improving treatment systems; desalinating salt water; and managing storm-water runoff. [See “Water Problems, Water Opportunities” for more information.]

That’s why the partnerships with educational institutions are so important. UW-Milwaukee, building on the success of its Great Lakes WATER Institute, is developing a graduate-level School of Freshwater Sciences, the first of its kind in the nation. Marquette University’s law school will launch a new curriculum in water law in the coming academic year. UW- Whitewater is cross-pollinating courses in business and science, with an emphasis on startup business ventures related to water technologies. The area’s technical colleges and the UW extension program also offer hands-on courses that will train workers in the water industry.

Dunkelberg said the appreciation for water should start earlier. “We have to start with young kids,” Dunkelberg said. “They have to understand that the water we have is what we have, and we’re not going to make any more, so we need to take care of it.”

Discovery World at Pier Wisconsin, the brainchild of entrepreneur Michael Cudahy, offers a public hub for exchanging knowledge about Milwaukee’s history with water and what the city can do with it in the future. “What’s important is what you do with what you know,” said Paul Krajniak, Discovery World’s executive director.

But White said that the local water industry must still overcome barriers. Although the country’s water infrastructure is aging and much of its 700,000 miles of pipes need to be replaced, low profit margins mean that businesses don’t have much money left for research and development. And municipalities and utilities, which are under tremendous fiscal strains, are often slow to adopt new technologies developed by researchers. “They may want to stay with the tried and true and may not want to make wholesale changes,” White said.

But Dunkelberg said the Water Council’s attempt to link academia and industry would result in more products that make it to market. “That will generate additional business for some of our existing companies and will generate incubator companies that will grow into larger companies,” Dunkelberg said.