Hard Water

For entrepreneur Jeff Green and partner Bob Burk, the business opportunity was as clear as water from a spring. “We recognized the increasing challenges of water scarcity in the world,” Green recalls. They identified desalination as the most important technology for creating clean water and decided to start a company. “We saw that reverse osmosis is driving the desalination space,” he says. “If you had an improved reverse osmosis membrane—that would be even better, right?”

Green and Burk founded NanoH₂O in late 2005. In 2008, the company received $15 million in venture capital backing from leading technology investors Khosla Ventures and Oak Investment Partners. It plans to move into its first commercial-scale manufacturing plant this fall.

NanoH₂O is joined by many other start-ups targeting the water market, including evocatively named firms such as Oasys Water, AquaPure Technologies, and Neohydro. According to the data and research provider Cleantech Group, water and wastewater firms have attracted 10–15% of all cleantech venture funding in the past two years. Water firms soaked up approximately $160 million in capital in the third quarter of 2009 alone.

In contrast to pricey clean technologies such as renewable energy, executives insist that new water treatment technology will deliver clean water inexpensively. But some experts caution that the water industry is extremely conservative and that the new businesses will have to sustain years-long pilot programs to prove out their ideas. In addition, the products they develop must be easy for facilities to use with current equipment.

“The problems are on the adoption side; there is no shortage of technology,” says Michael LoCascio, water intelligence practice leader at Lux Research. “Metropolitan areas are conservative by nature. They don’t have the capital budget to innovate.”

As a target customer, Mark LeChevallier, director of innovation and environmental stewardship at American Water, agrees that his is not a risk-taking industry. American Water is a corporate owner and operator of water facilities in the U.S. and Ontario. “There are huge barriers in this industry. Anyone that has innovative technology may hear, ‘Go away, do not disturb.’ No one wants to be the guinea pig for a manufacturer to learn upon,” LeChevallier says.

The last big technology to hit the water industry—in 1960—was the reverse osmosis membrane. Reverse osmosis is now behind 54% of the desalination equipment that treats seawater, brackish water, and recycled water, according to Lux. The polymeric membranes have small pores that trap salt ions and other impurities when water is forced through under pressure. Creating the pressure takes energy; 44% of the cost of running reverse osmosis systems is, in fact, energy.

NanoH₂O has zeroed in on reducing the energy cost of reverse osmosis, according to Green, now the firm’s chief executive officer. To find a better membrane, he and Burk looked at university research and saw promise in the work of Eric M. V. Hoek, a professor in the department of civil and environmental engineering at the University of California, Los Angeles. Hoek was experimenting with making nanocomposite membranes by adding zeolite nanoparticles to polyamide films. He found that the zeolites significantly enhanced the permeability of the membranes.

Hoek’s membranes “seemed to have the most promise in terms of a quick path to commercialization,” Green says. Green licensed the technology from UCLA, and his team spent a year in the lab to further develop it. In 2006, NanoH₂O moved next door to the just-completed facilities of UCLA’s California NanoSystems Institute. The high-tech start-up incubator “came complete with a wet lab to synthesize and manipulate nanoparticles as well as core facilities for all the characterization work for nanoscale membranes,” Green says.

Although zeolites were part of the original research, Green will confirm only that NanoH₂O’s product now relies on nanoparticles added to a thin-film polyamide layer. He says the technology boosts permeability without allowing salt ions to slip through. Green asserts that the company’s membrane technology will enable a facility to use up to 20% less energy—or produce 70% more water with the same size plant.

Green acknowledges that the water industry customers his firm is targeting are not eager for brand-new technologies. Part of his commercialization strategy has been to select materials similar to what are now used. The nanomembranes will be manufactured in 40-inch sheets and formed into a spiral-wound element encased in an 8-inch-diameter fiber glass tube—the same dimensions used in current equipment.

Green’s goal is to convince water treatment facilities to retrofit their plants with NanoH₂O’s membranes. Even though they are drop-in replacements, “most potential customers will want to see us working in the field for some number of years before they’ll want to come on-line,” he acknowledges. Green says NanoH₂O plans to start selling into markets where desalination volumes are largest: the Middle East, the Mediterranean, Australia, India, and China.

Danish start-up Danfoss AquaZ is also targeting emerging markets with a membrane that has its roots at UCLA, according to Christian Neve, the firm’s vice president for business development.

While he was a professor at UCLA, Carlo Montemagno developed the idea of using water-transport membrane proteins from living cells for large-scale water treatment. The proteins, called aquaporins, span the lipid bilayer of living cells and act as gates for ushering water inside. Montemagno discovered that aquaporins act as precise and efficient water filters, transporting only pure water into cells. He also found out it was possible to manufacture the proteins and incorporate them into an artificial membrane.

Montemagno got the chance to commercialize the technology after meeting Jørgen Mads Clausen, chairman of the industrial equipment company Danfoss, at a conference in Denmark. Danfoss is now the major investor in the firm, and Montemagno is dean of engineering at the University of Cincinnati and part-time chief technology officer of Danfoss AquaZ.

Neve explains that aquaporins are incorporated into an artificial membrane, which “forms a vesicle more or less on its own by self-assembly. We add a multitude of vesicles on the surface.” The resulting membrane is very thin because a thousand of the vesicles combined are only the thickness of a human hair. “Just by entering one of these vesicles, the water will be 100% pure. And we have a sturdy membrane that will last for five years or so in the harsh environment of seawater desalination,” Neve contends.

The resulting membrane, Neve claims, has five times the throughput rate of current membranes of the same size. “The aquaporins are able to recognize a water molecule and let it alone pass. We simply leverage what nature has been evolving for millions of years,” he says.

Lofty claims aside, LoCascio of Lux Research has doubts about how easily new membranes will enter the industry. He points out that traditional reverse osmosis suppliers such as General Electric and Dow Chemical have promised savings of 30% over the next 5–10 years. Costs continue to come down, LoCascio says, even as current technologies get closer to theoretical limits on membrane performance.

To reduce costs, American Water’s LeChevallier says he is focusing primarily on preventing membrane fouling. Over time, membranes become clogged with microbes and minerals, increasing the energy needed to process water. “We already have membranes installed,” he notes. “Technologies that can make them more effective have immediate benefit rather than a promise of improvement down the road.”

American Water invests in basic research on its own technology to keep membranes clean. But the company keeps the door open to next-generation technologies as well. “We want to create a process and engage in productive discussion with innovators,” LeChevallier says. “We think we can provide a benefit to innovators: to ensure their ideas are useful to the end user.”

Green and Neve both say their companies are researching ways to alter the surface properties of their membranes to make them inherently less subject to fouling. In the meantime, their companies have put the North American municipal market on the back burner. They figure it would be too costly to satisfy state-specific regulations and long budget timelines.

One firm that is not shying away from North America is British Columbia-based Ostara Nutrient Recovery Technologies. Ostara has developed a process to recover phosphorus from municipal wastewater and turn it into slow-release fertilizer pellets for turf, flowers, and trees. The company is targeting nutrient-sensitive watersheds such as the Chesapeake Bay, the Great Lakes, the Mississippi River, and the Gulf of Mexico, where strict regulations keep nutrients out of discharge water. Europe is also a fertile area for Ostara: Germany, the Netherlands, and Sweden have recycling initiatives that encourage recovery of phosphorus.

The fertilizer emerged as a bonus for researchers at the University of British Columbia who were studying ways to eliminate a concretelike buildup in pipes called struvite. This material is a precipitate that forms in recycled plant water wherever concentrated phosphorus mixes with ammonia and magnesium. Struvite clogs pipes and must be chipped away or dissolved with chemicals.

“We wanted to not just get rid of it but also turn it into something useful,” Ostara CEO F. Phillip Abrary says. “Phosphorus is a dwindling resource. It just gets flushed away to our rivers, oceans, or landfills.” Ostara’s process recovers phosphate and ammonia from water by precipitating it in a fluidized bed reactor. The company has reactors in commercial-scale wastewater treatment plants in Edmonton, Alberta, and York, Pa., and is running four pilot projects. In 2008, Ostara raised $10.5 million in venture capital.

LoCascio suggests technologies such as Ostara’s that help plants run more effectively may be less risky than new types of reverse osmosis membranes. But generally speaking, venture capitalists are enthusiastic about water. “This field will get a lot more attention and is really taking off,” LoCascio says.

Abrary believes that companies with long-term, productive pilot projects will find success. “Now that we have working facilities, it’s like night and day,” he says. “As customers see other people using it, the perception of risk goes down dramatically.”