GE Water sustainability chief Jeff Fulgham: We need a price on water

Why doesn't water get more attention? We talk with GE Power and Water chief sustainability officer Jeff Fulgham, who explains why water needs a new business model for conservation to make sense.

Why doesn't water get more attention?

According to Jeff Fulgham, it's because it's available on demand virtually everywhere -- from taps to toilets to showers and sinks.

But as the newly-appointed chief sustainability officer of GE Power and Water -- as well as the division's Ecomagination leader -- Fulgham knows better. The reality is that the world is quickly running out of water -- and if we don't do anything about it, what was once ubiquitous will become scarce in some of the world's most populous areas.

I spoke to Fulgham from his office in Trevose, Penn. about why water needs more marketing, a new business model and a policy push to make conservation attractive.

SmartPlanet: How did you end up in the water business?

JF: I've been in the space my whole career, about 25 years. I was [first] a chemical engineer for Nalco Chemical. I grew up in the industrial boat. I've dealt a lot with the power industry, and spent a lot of time with power as it relates to water. I arrived to GE when it bought BetzDearborn. I worked my way up to chief marketing officer, and two months ago, my boss, our CEO, asked me to step into this role.

As a CMO, I felt like I was engaged a lot more with internal aspects. I had a large global marketing team focused on the people and the business. I had to free up a lot of time to get on the thought leadership trail.

SmartPlanet: You say that water is a major challenge going forward. What's going on?

JF: The path that we're on is a little scary right now. The challenges the world faces with water falls into three buckets: quantity, quality and the energy consumption related to it.

From a quantity standpoint, we've reached a point globally where the demand for [fresh] water is exceeding the global supply. By 2020, that imbalance could reach between 470 and 500 trillion gallons. The world can't provide enough water to meet our insatiable demand.

At GE, we're focused on reducing the demand and increasing supply.

Demand reduction falls into three buckets. [First] we work with our industrial partners to optimize water use. The industry uses 20 percent of the world's water supply; in the U.S., it's 46 percent; in China, it's 25 percent; India is only about 5 percent.

[Second,] we look at other sources of water: municipal wastewater reuse, lower-grade sources of water that we can clean up.

[Third,] at the discharge side, it's all about how we can reduce the amount of effluent going downstream.

It's the old Boy Scout thing: leave it better than you found it.

We have a lot of technologies around desalination that reduce the cost, take the energy cost out -- about 50 percent of the cost of running a desal plant is energy -- and make it more affordable to provide more supply. We also take on the toughest, nastiest wastewaters in the world and clean those up for reuse, instead of eliminating it from the hydrological cycle completely.

It's all related to rebalancing the supply-demand equation. As you extrapolate out with population growth, industrial demand -- all of those things are going to put more pressure on the water supply.

SmartPlanet: You said that wastewater is often eliminated from the hydrological cycle. What do you mean?

JF: Wastewater is, unfortunately, on the rise.

Some of the less conventional fuels used right now...take natural gas. In New York and Pennsylvania, we're sitting on one of the greatest shale gas reserves in the world. The extraction method was only developed in the last 10 years. They drive a lot of water into the ground, which breaks the shale and frees the gas bubbles up. What comes up is really nasty wastewater combined with gas. They separate the gas, and the wastewater is really nasty stuff.

The way to get rid of it is put it in a really giant evaporation pond, or put it in a disposal well -- states like Texas and Louisiana do this -- and remove it from the cycle completely.

Here we are in a water-stressed environment, and getting rid of our most precious resource.

Now, we're able to extract contaminants [from the wastewater] -- for example salt, which can then be used for road salt here in the Northeast.

Today, we want the natural gas because it meets the needs of global climate change, but it taints our water supply. Ideally, you take the wastewater stream, reuse it and fracture the next well. That's one way we can continue to conserve water.

The low-hanging fruit is, let's reduce the amount of consumption. The higher fruit is changing the ways you run your plant.

SmartPlanet: When we talk about the smart grid, we talk about the point where green starts to make business sense. When does water begin to make business sense?

JF: I think about these enablers to get the tailwinds to make things happen. Three things: technology, economics, policy.

From a technology perspective, it really comes down to, how are we able to take these really challenging waters and treat them for reuse instead of just dumping them? How do I reduce the cost of making [clean] water? It costs less every month, every year.

There's a lot of technology we're developing on our own -- we're up two to three times more in technology spend this year than the last -- and we're doing it through partners. AWRI in western Canada is a partner, and they have problems with extraction and the development of the oil sands. We have a joint development center with ConocoPhillips in Doha, UAE. Our largest membrane facility is a $100 million with National Singapore University. We do feel like technology is one of the major enablers to get us to the next level.

There are a couple of big levers for economics. The technology, you've just got to make it cheaper. [The price of] desal has dropped 80 percent since the early '90s.

The other challenge is that water is thought of as free. It's incredibly cheap. Water has to be priced relative to its value, and we are not there. In many places in the world where water is most scarce, there are strong subsidies to make it inexpensive.

In the city of New York, water commissioner Kathryn Garcia has reduced consumption by 16 percent. Unfortunately, her revenues then dropped 16 percent. Many cities have a tiered pricing structure where it actually gets cheaper as it gets used.

One of the things that works against us is that with water being essentially free or cheap, it's hard to justify on reduction alone. Some municipalities are actually paying industrial partners to take that water so they don't have to pump and treat it. The biggest headwind we see is just this wacky pricing of water. There's a change underway, and a lot of industrial companies see that change.

One thing that helps to offset this is a lot of forward-thinking companies. I've seen that in the food and beverage industry. Folks like Coca-Cola, PepsiCo, InBev, Nestle, Heineken. But they're also folks like GE. We've set a goal of 25 percent reduction across our company.

SmartPlanet: Who are the worst culprits of water usage?

JF: Of the big volume users, the power industry is by far the biggest volume user. In the U.S., 49 percent of the water used in the industrial market goes to generate power for thermal power plants: coal, nuclear, gas. A big power plant uses a boatload of water. The primary use is to cool those processes -- the big hyperbolic cooling towers.

It takes about 5 million gallons a day of water for a 1,000 megawatt power plant.

It gives you some perspective. You can use river water, certainly well water, but when you start getting into lower grade water, it becomes a bit of a challenge. The power industry has become the most aggressive in [innovative] applications of water, because they use so much.

SmartPlanet: Why is there such water demand from power plants? Can't they reuse it?

JF: Often what happens is the water that leaves the plant is less than what's brought in -- a lot evaporates into the air -- so there isn't as much at the end of the plant as there is at the beginning of the plant, so they're taking new freshwater instead. So we're saying, let's take discharge from another plant and use it here.

If there are 100 gallons of water in the world, 20 goes to industry, 70 goes to agriculture, and 10 goes to you. What we need to look at is those first two markets and how they can be more efficient in using water.

With agriculture, if you think about a farmer today, typically they're getting their water free or highly subsidized. With 70 percent of the world's water supply going to irrigation, the cheapest source of water is going to our farmers. They have the lion's share of water rights. With low-flow irrigation and other off-the-shelf devices, we're reducing it by 50 to 70 percent.

You could reduce the world's water consumption by 50 percent [by addressing these markets]. It's phenomenal. But there's no incentive to doing that. Why would I spend more money for something that's already free?

A lot of what we're starting to see is pickup of much more efficient irrigation. They need the financial incentive. It's tough being a farmer right now. As we go from 6-plus billion to 9 billion people, that backs right into that. There's a lot of interesting work going on right now in the ag space -- part of it is the shift to low-flow and part of it is growing crops in the right places. Israel has been very proactive in this area -- in the areas of olives and dates, they can irrigate them with brackish or partial saltwater.

SmartPlanet: Why can't we use brackish water for cooling purposes?

JF: Well it's really tough on metal. If you bring diluted saltwater in, you start corroding everything. There are systems designed for seawater, but...

SmartPlanet: Shouldn't we mandate using such systems?

JF: Where it's possible, sure. For island nations, absolutely. And there are a lot of plants in the U.S. on the sea taking advantage of that. But there's also the environmental concern in putting warmer water back into the ocean -- the long-term fate of the ecology of the ocean. That's an issue.

SmartPlanet: Let's get back to your three points: technology, economics, policy. What can we do on Capitol Hill?

JF: The economics are getting close, and one of the things we're getting to in the House [of Representatives] is a potential tax-credit for water reuse. Right now, prices make it just a little out of reach. The conversation right now is for a 30 percent tax credit, a little extra incentive to bring it across the finish line.

It's kind of like [how] wind was in the last decade. Wind technology is green and renewable, but a lot more expensive than a coal power plant. Early on, it needed incentives to get started.

Similarly, we see water reuse [incentives].

SmartPlanet: Does water need higher visibility and awareness?

JF: It's a lot of ground-level effort. We see interest where it's a problem: Brazil isn't very interested; California is very interested. If you go to where water is scarce and a problem, [there's interest].

One thing needed is incentives; the other is to eliminate some old policy that is inhibiting new thinking. There exists a state-level policy that prohibits the reuse of wastewater for agriculture -- but we didn't have the technology then to do so [safely]. We need to bring those things up to 2010, so that even a state like New Mexico can reuse water.

The policies were put in place for good reason, because we didn't want untreated municipal wastewater in our lettuce. Now we have technologies to ensure those things don't happen.

SmartPlanet: How bad is the U.S. water infrastructure?

JF: Today, on average, roughly 44 percent of municipality's water is considered non-revenue generating. They produce it but don't get paid for it. Twenty-five percent is from leaks, breaks -- it just doesn't get to the end. Or people are tapping into the line, but not paying for it. Or there's poor metering.

In the U.S., leaking pipes are a big concern. New York, Philadelphia, Chicago, London -- old, aging infrastructure. GE is engaged in monitoring -- with our intelligent platforms, hardware and software. One in four municipalities in the world are using our products.

The first stage is to understand the problem, that Pareto -- what's my focus? What's the low-hanging fruit?

Then there's the technology to do it. Then it's repairing stuff in place -- companies like InSituForm -- how do you repair that pipe without digging it up? How does the city of New York repair a pipe under Broadway? Right now at GE, we dabble. We're at each end of the pipe: purification and wastewater treatment. Today, we don't play a lot there [in the middle], in the pipe business.

SmartPlanet: Why is that? Why not take the whole business, nose to tail?

JF: It's a high-tech play: our infrastructure play in the power business is the big turbines. In rail, it's the locomotive itself, it's switching devices, it's diagnostics. I liken it to rail -- we make the switches, not the rails or railroad ties. We don't want to necessarily be in the pipe business. How do you inject high technology into that whole play?

Distributed systems: like the grid, we will see a rise into smaller distributed wastewater systems, serving 1,500 homes instead of pumping the water out into big plants to be treated.

People underestimate the amount of energy that it takes to make and pump water. California's the highest -- 19 percent of their energy bill goes to that. There are a lot of things you can do to reduce the amount of energy you consume. With this next wave of megacities being built, there's a great opportunity to rethink how we do things.

The smart grid and energy, there's a parallel, probably five to 10 years behind. There's a smart grid out there for water, somewhere.

A perfect example is the Solaire building in the Battery Park area [of New York City]. That building has a wastewater treatment plant in the basement, and they reuse 98 percent of their water. There are two sets of pipes -- a small one brings water to the building's occupants, and a big one brings wastewater from laundry and all that. It's very difficult to retrofit an existing building. One of the challenges we face is the retrofit component.

SmartPlanet: Let's talk about your job as chief sustainability officer for GE Water. What's on your desk right now?

JF: My responsibility is for the water and process technologies business. And I expand into our broader power business. I'm kind of a test case -- the one chief sustainability guy within GE to see if this makes sense. Water is less visible as a sustainable resource. We wanted one person to be out there.

It comes in concentric circles. The inner circle is what are we doing within the business itself -- reduce our consumption, treat our wastewater. At a couple of our sites, we're paying to dispose our wastewater off-site. Now we're looking at a project to treat our own waste -- we're working on using our own membrane technology. Our benefit is not just reduce our cost there but recover a couple million dollars of a raw material out of the waste stream. So you've got a gain there.

Expanding that, we have 7,000 rooftops across our portfolio. I work broadly across all of our sites and work with the top 100 water consumers and we're deploying our GE Water technology into other GE sites. At our nuclear plant in Wilmington, North Carolina we're doing water treatment there. Our aircraft engines plant in Cincinnati. A healthcare facility in Europe.

Now we have a cool in-house system where we track and monitor water consumption across the portfolio. It's been used for energy for a number of years, but now it's been expanded for water.

SmartPlanet: That's huge. One location to see water consumption for all your facilities?

JF: [Laughs] Yeah, I kind of take it for granted when I'm traveling around the world.

The outer circle where I spend a lot of time is with our customers. The food and beverage industry is very proactive, and I spend time with my counterparts, chief sustainability officers at other companies, and what we're doing to help them meet their goals.

A final component is our Water for Humanity project, which isn't quite philanthropy. From a CSR standpoint, our GE Foundation donates hundreds of million of dollars. But I want to get beyond that. Philanthropy will help to some degree, but it's not going to have the ripple effect. I'd rather see us create sustainable business models within a community. Such as water kiosks, a clean water system for a local village rather than the contaminated water supply they use today. How do you create this sustainable piece? It's hard for us to do that as a big company, but through partners, we can pull that off.

Sometimes it's hard for us to de-feature things and make it very effective and incredibly inexpensive.

I have to find a way to make it economically make sense. We're used to selling 100 systems at $1,000 dollars; I'm interested in selling 1,000 systems at $100. It's two ways to get to a million dollars. Ultimately, you get to the same endpoint -- a profitable business model.

Healthcare is doing the same thing. How do we create these models that work? If not us, then who? There are 25,000 NGOs dabbling in the water business. We've got an opportunity because of our scale to make an impact.

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