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9 industries most likely to profit from California's drought


9 industries most likely to profit from the California drought - Fortune

There will be businesses, new and old, that find water shortages can produce profits. As droughts become more common throughout the world, these 9 industries may thrive.

It’s crunch time for water, with shortages presenting one of the top global risks over the next decade, according to the World Economic Forum.

This is a problem that is current, not only future. Look beyond California’s multi-year punishing drought. The U.S. and Brazil face historic water crises, even though between them the two have a fifth of the planet’s freshwater reserves. And China faces a huge potential crisis within 15 years, according to a report by The National Intelligence Council (NIC), the federal agency that provides analysis to America’s intelligence community.

You can’t live without water, and doing business is pretty tough as well. “Water is fundamentally mispriced around the world,” Clinton Moloney, a managing director of PwC’s sustainable business solutions practice told Fortune. “The social cost is not built into the price that companies pay.” There’s always something else that can be done with water, and when there’s concern about having enough to drink and grow necessary food, what has been a cheap resource could quickly get far more expensive.

But just as there are examples of industries being hurt by drought, as California’s case shows, there will be businesses, new and old, that find shortages can produce profits. Fortune interviewed experts and reviewed the latest studies to identify the nine business areas most likely to make money as water supplies get tight.

Solar power

Energy production often depends on water. “The loss of hydro power between October 2011 and October 2014 cost Californians about $1.4 billion,” Heather Cooley, director of the water program at non-profit research group Pacific Institute, told Fortune. Many other types of energy production depend on heating water to generate steam that turns turbines. But solar PVC panels can transform light from the sun into electricity, while other technology uses solar energy to heat and cool building. A need for water-independent energy generation could make solar look far more economically attractive.

Water management technology

When water is scarce, you don’t want to waste it. But most cities do. “A lot of times the actual leakage rate for municipal water rate can be as high as 25% or 30 percent%,” said Seth Cutler, a senior industry analyst with Frost & Sullivan. “That’s going to have a huge effect with trying to investigate leakage and drive up efficiency and optimization.” Some companies are already developing technology to monitor water systems and pinpoint leaks of pipes, even if underground, so repairs can happen more quickly and effectively.

Engineering and construction companies

Getting new sources of water could translate into major engineering and construction projects, whether desalination plants or pipelines to bring in additional water from remote locations. In addition to major projects, new building construction as well as retrofitting of homes and businesses will bring water-saving technologies, including channeling and using rain water, long used in other parts of the world.

Plumbing

One of the specialty trades that will do well is the plumbing industry. Many companies and individuals will have to move toward low-flow toilets and showers, to say nothing of fixing dripping faucets, when water rates jump.

Landscaping

People love lush lawns, but their charm can wither when the price of keeping them green skyrockets. In arid areas, landscapers and landscape architects will find their phones ringing as people and businesses want attractive surroundings that can thrive under dry conditions.

Plant genetic engineering

The major use of water in agriculture is one that is difficult to ignore. And yet, if you cut back on growing, you also reduce the amount of food available that people need to survive. Expect genetically-modified crops and plants to suddenly look a lot more appetizing to millions who have been wary.

Manufacturing engineering

Many types of manufacturing — including food processing and semiconductors — use significant amounts of water. There will be a premium for technologies that can reduce the use of liquid in operations. When prices are high, even a slight decrease can translate into major savings for a large company.

Consultancies

As executives worry about the impact of water shortages over complex global operations and supply chains, large consultancies will be there with existing, or new, practice areas and suggestions of how to approach a new type of sustainability.

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I choose to think of this as a helpful guideline of what we should invest in, rather than a list of potential profiteers who are enjoying making money off the drought.

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