By YULIYA CHERNOVA

 Joe Duty
BY THE TRUCKLOAD With fracking’s growth, tankers unloading wastewater keep a Texas recycling site busy

The growing volume of dirty water produced in shale-gas drilling has triggered a gold rush among water-treatment companies.

Energy companies increasingly are drilling for natural gas using hydraulic fracturing, or fracking. In this process, water mixed with sand and chemicals is pumped into a well under high pressure; the mixture fractures the rock, allowing the gas to escape. Huge amounts of water are used, and about 10% to 40% of it emerges after a frack job, laced with a variety of contaminants.

Even as the volume of dirty water grows, the traditional methods of disposal are narrowing. Several states are considering or have recently imposed limits on wastewater disposal underground or in streams. Meanwhile, record drought in some drilling areas is making access to fresh water for drilling more difficult, costly and unpopular.

The net result: “For the first time there’s a strong driver for technology” to clean up the wastewater from mines so it can be reused, says Laura Shenkar, founder of  Artemis Water Strategy, a water-technology consulting firm. Dozens of water-treatment companies have started up in the past year or so, and many of the more established companies are adapting their techniques for use in the shale-gas industry. How many of those companies the market can support remains to be seen.

Plenty of Options

Companies are using several different approaches to shale-gas wastewater treatment.

Ecosphere Technologies Inc., based in Stuart, Fla., is one of the dominant providers of water treatment for the shale-gas industry, according to Lux Research, a technology research and consulting firm. The company’s technology avoids the use of chemicals typically employed to treat wastewater.

Ecosphere’s process forces dirty water through pipes where ozone breaks down contaminants with the help of sound waves, electrically charged particles and changes in pressure. No waste is created in the process, because while the technology renders contaminants harmless it doesn’t filter anything out.

Another strong competitor for new business, according to Lux analyst Brent Giles, is WaterTectonics Inc., based in Everett, Wash. The company uses a process called electric coagulation, in which an electric charge forces contaminant particles into clumps that can be removed after they either rise to the surface of the water or sink to the bottom. The process avoids the use of chemicals, but it does produce waste that has to be disposed of.

Another company, Altela Inc., based in Albuquerque, N.M., earned a spot on Artemis Project’s 2011 list of the 50 most innovative water-technology companies in the U.S. Its technology mimics rainmaking. Wastewater is heated to the point of evaporation, which produces clean water in the form of vapor, leaving contaminant particles behind. The vapor is then condensed back into liquid form.

The basic process, called thermal distillation, isn’t new, but Altela has found a way to make it more efficient, by capturing the heat generated by condensation and using it for evaporation. Ned Godshall, the company’s chief executive, says Altela’s method uses a third of the energy typically required for conventional thermal distillation.

Do It Yourself

One potential drag on the use of all these technologies: Some drillers have started to simply reuse their wastewater without fully treating it. But it isn’t clear how much of a factor that will be. Many technology companies and some researchers argue that there is a limit to such recycling because it doesn’t clean the water enough for it to be used repeatedly and still be effective. The particles in dirty water can damage equipment and block the release of gas from the shale.

“When I learned in early 2010 that they were going to recycle, I thought they were going to do a real heavy-duty treatment” before reusing the water, says John Veil, who analyzed water treatment for the oil and gas industry for many years at the Argonne National Laboratory, and now does so at his own consulting firm. “They are not. All they are doing is getting out the big sand grains in a [filtering] process as simple as pouring the water through pantyhose.”

Ms. Chernova is a special writer for Dow Jones VentureWire in New York. She can be reached at yuliya.chernova@dowjones.com.

But early-stage investments in water technology start-ups to date have not reflected that promise.  Recent analysis by Bessemer Venture Partners showed that of 183 firms that had invested in water, all but 31 did not make an additional investment, and only seven made more than two investments.  Historically, water has accounted for only 2-5% of overall cleantech investments. The few water tech investments that have been made have yet to yield venture quality returns.

The best venture investments were made when technology markets have looked as water does today.  Water services are highly regulated.  The business of water is dominated by a few behemoths.  Major customers choose the most well proven solutions and work with the same service firms that they have worked with for decades.

Similarly, twenty years ago telephony meant a landline, not a diverse industry of wide-ranging options, from cellular and Voice Over IP to satellite.  Before the communications revolution, “messaging” was done by fax or the US Postal Service.

The trick for early-stage investors is to identify the moment in which technology can bring about a new era of water management.

In five years, venture capital history will tell of a few visionary investors who identified the right technology at the right time in the market.  The best investors are asking two questions to define whether now is the time for the future water tech leaders to emerge, and where the critical opportunities lie to drive start-up success.

1)    What recent scientific or engineering breakthroughs have redefined how well a technology solution can tackle critical problems?

Some examples are new polymers for selective absorption of pathogens, hydro fracturing, which has made significant domestic shale gas reserves economical for drilling, new chemical/pathogen detection capabilities that are driving to new regulation.

2) What market forces are changing to raise the value of a tech solution?  

In the past few months, water scarcity, pollution and infrastructure breakdown have been forcing the most conservative water users to seek out innovative approaches.

Even Texas is limiting the amount of water for drilling for oil, or “Texas Tea” so that it provide water for its citizens.

This year, 800 companies from 20 countries applied for the Artemis Review, and 125 were selected for full examination.

Through this analysis, we get an early view of the tech companies that will emerge in the next few years.  The Artemis Review has not missed any of the companies that have emerged in water tech.  Several of the most promising companies have won major projects with influential municipal and industrial customers and have been generating results for months or even years.  Over the next few months, we expect that the 2012 companies will be publicizing successes that will position them as the early leaders in water tech.

Here is a view of the market that is just emerging from under the radar.

What we are seeing
Let’s start with what we are not seeing.  During the 2012 Artemis Top 50, we didn’t see membranes or nanotechnology, with the exception of one of the shining stars of water tech, NanoH2O.  Innovation in these areas seems to require so much research and development that only the large corporations can support them.

Emerging Trends
Waste water mining:  In this first wave of IP-intensive solutions from independent companies, start-ups offering resource recovery solutions take the forefront.

It’s becoming more expensive to dispose of the “garbage” of water treatment.  Many places, like China or Switzerland, are down to a small amount of precious space to dispose of waste. Harvesting useful products from waste cuts the cost of disposal, generates valuable materials, and makes water treatment cheaper. The early leaders are extracting phosphorus, energy, lithium and hydrochloric acid (HCl).  (See a future post for more detail.)

These technologies are valuable for a diverse group of industries.  The Artemis Review shows the value of deep understanding of different industries. If the leading water executives on the Artemis jury look at one of these solutions in depth, they often identify situations where they can provide dramatic benefits.

Alternatives to filtering and chemicals
Today, filtering and chemical treatment are the dominant approaches to water treatment around the world.  Rather than making small improvements to these processes, some of the most promising start-ups have developed approaches that replace or complement filtering and chemicals.

For example,

• New Sky Energy’s selective ion recovery system isolates and solidifies the salts in water treatment waste streams to harvest useful chemicals and simplify water treatment.
• Atlantis’ capacitive deionization removes salts and minerals by applying an electric field between two electrodes.
• Saltworks—concentrates the salts in waste water and uses their chemistry to drive an electrochemical device to treat the water

Energy Efficiency
Saving energy is another sweet spot for innovation.  Water treatment accounts for a large chunk of industrial operations.  As saving energy has gained focus, big water users are looking to new, but proven approaches to change the picture.

Some sweet spots are

• Desalination: Desalitech– a continuous, closed-circuit desalination process that operates on the basis of relatively low average feed pressures
• Water treatment facilities: Derceto in optimizing the overall management of water treatment plants

Smart Grid
As our centralized water system breaks down, making the system smarter with sensors and network management tools provides dramatic benefits:

• Takadu—predicting pipe break down to drive pipe and pump repair
• Hydropoint—water use management in the built environment
• Aquacue–wirelessly linked cloud-based information management of water throughout the delivery system

The Artemis Top 50 Review goes beyond looking at technologies to gauge the potential for the start-up companies behind them.  The structure of each market segment is also critical for the success of a young water company.

The tech trends above reflect the future of the water business.  Watch for these companies, and the rest on the 2012 Artemis Top 50, to emerge as the leaders in a new wave of tech success stories.

For the last 30 years, the Pacific Institute has been developing new approaches to water policy in the face of scarcity and infrastructure breakdown. Existing water delivery has focused upon building the awe-inspiring infrastructure that has marked great feats of engineering like the Hoover Dam.  “Hard” water infrastructure has laid a byzantine network of pipes to supply water for every need. Historically, water management has meant finding water supplies to match those needs.

We are running out—of water and money for that monumental  “hard” infrastructure.  Year by year, the soft path is emerging as the key to the future of water.

Soft paths look at how we can readjust the demand for water rather than the supply. “The key is to look at the goal for each way that we use water.” Gleick explains, “If we look at what we want (demand) from different uses of water (supply), we can redefine how much water we need.”

Hard Core Soft Path
Centralized water management has been a major force for improved health over the last century.  Water officials have stuck to centralized water because they can supervise treatment directly.

Advanced water technology unlocks the potential for soft path.  Smart, onsite devices can tailor water treatment to the needs of each site.

The Artemis Top 50 competition is bringing together a host of solutions that provide safety with the massive efficiencies that soft path brings us.

With precise onsite disinfection and monitoring solutions ensure that water is safe.  Advanced water tech provides ways for water utilities to continue to monitor water safety and water use from remote control centers.

The Pacific Institute has just published “A Twenty-First Century US Water Policy,” which brings forward recommendations for a new federal water policy to confront national and global challenges.  More information is available at http://www.pacinst.org/us_water_policy/index.htm.

Final applications for the 2012 Top 50 will be sent out to the jury this week, who will soon begin to evaluate water tech companies based on their technology, application of that technology and business viability.  Last year’s winners have achieved much success since the awards- let’s take a look at what kind of crowd this year’s applicants are hoping to join.

Epuramat was named a 2012 TiE50Energy/Cleantech Winner and a 2011 GoingGreen Global 200 Top Private Company.  They secured a number of new contracts and released a new model of their containerized wastewater treatment plant, Box4Water.

Hydrovolts is on its way to becoming a go-to technology in international development; it was named a Top 10 Innovator by Launch and has been nominated as a 2013 World Economic Forum Technology Pioneer.

NovaThermal Energy LLC, marketing a sewage geothermal system, was selected as a Global Top 30 semifinalist by Global Cleantech Cluster Association.  This spring, NovaThermal was awarded its first contract in the United States, a story that was covered by Erica Gies in Forbes’s Green Tech.

Read this blog for more success stories or view a complete list of 2011 Top 50 winners.

Chris is the Chairman of the team of judges assessing the business viability of the companies contending for the Artemis Project’s Top 50 Water Tech Awards.  He led a discussion on what it takes for promising water tech start-ups to grow and lead the industry.

To assess and predict business viability, Chris explained that he examines how companies articulate how they go to the market, the market analysis, the sales force, the team, and a company’s potential to differentiate their product line.

Many start-ups that have had successful initial product sales are not able to maintain momentum and grow from “emerging” to “succeeding” if their business plan and marketing are not executed properly.

Chris, like many others, is also dubious of companies stuck in the “valley of death” before hitting the market; ones that have not moved forward from pilot testing after many years may not be good at making money.

Instead, Chris used Nalco as an example of how new investments and product introduction to market should look.  At Nalco, everyone with an idea is invited to present a product proposal, of which a few are given money for bench-work testing.  After proven pilots and a complete market analysis, more financing is provided for a full-scale pilot.  If successful, they identify every potential customer in order to anticipate production details and profitability.  Chris emphasized that all of this moves very fast.  Although there is a big difference in Nalco, a large company constantly looking to invest in R&D, and a startup with one great new idea they are attempting to bring to the market, the same principles for success are necessary.

Chris will be evaluating the business viability of Top 50 applicants, along with Peleg Chevion of Syngenta, Reinhard Hübner from Skion, and HP Michelet of ERI.  Other experts in the field will assess companies based on their technology and their application, and a list of the Top 50 Water Tech companies will be compiled from their analyses.  The Top 50 winners will be announced in September.

Last week Laura Shenkar led the first-ever boot-camp for water-technology start-ups from Singapore at the Singapore International Water Week.  As a densely populated island-city-state, careful management of water resources is especially necessitated- a factor that may make it a hot-spot for water technology development.  And while they have some great technologies to show for it, what they are lacking perhaps is the business experience to fully develop as entrepreneurial tech companies.  This is where Laura and David Henderson came in for the boot-camp.  View an article on the event published in the Straits Times.

Some of the companies they worked with went on to pitch their businesses to investors at the tech exchange, and many are applying to the Artemis Top 50 competition this year.  Stay tuned for the jury’s responses to these new water tech businesses from Singapore.

Clean water and energy are limited resources under increasing demand, but waste is in high supply.  Necessary for the health of people and ecosystems, wastewater treatment has also been very energy-intensive.  Though most are looking to reduce energy use, power still accounts for 25%-40% of the operating costs of treatment plants.  Indeed, wastewater treatment uses an estimated 1.5% of the total energy consumed in the United States.  Most of this energy is used during the secondary treatment, activated sludge, but new tech companies are using innovations that take advantage of the “waste” in wastewater to reduce energy consumption and to produce renewable energy, while making a profit in the process.

Some technologies use microbial fuel cells in the sludge to actually generate electricity.  The Electrogenic Bioreactor developed by the three-time Artemis Top 50 winner, Emefcy, harvests electrons released by the oxidation of dissolved organic chemicals.  This technology produces less volume of waste than activated sludge and generates electricity.

Gasification is a process by which the latent energy in biosolids is harvested upon applying heat to wastewater sludge and creating a synthetic gas or fuel.  BlackGold Biofuels harvests wastewater from grease traps, separates out the dry fats, oils and greases (FOG) from the water, and converts it to biofuel that is then processed into glycerin, biobunker fuel, and biodiesel.  2011 Top 50 winner BlackGold states, “Conversion to biodiesel is the highest and best use for FOG. With energy recovery at close to 80%, the economic trajectory and fungibility of a liquid transportation fuel, the ability to meet EPA’s Sulfur limits for on-road and stationary applications, and a federal renewable fuel standard providing insulation against market dips, biodiesel is the only beneficial reuse with the long-term stability that the pumping and food service industries require to reliably conduct business”.  Another company, M2Renewables has developed a Solids Separator that collects cellulose from paper, imbedded organic material and FOG from sewers or point-of-entry to wastewater treatment plants and offers gasifiers specialized to create hot air, hot water, steam, electricity or hydrogen, depending upon the local needs.  In addition to producing energy, M2R reports reductions in energy use of up to 85% from conventional wastewater treatment.

A final innovation in wastewater treatment uses supercritical water oxidation, a process by which water, oxygen, and high temperatures and pressure convert wastewater to a phase similar to both liquid and gas known as the supercritical phase.  Another three-time Top 50 Winner, SCFI is a leader in this technology, having marketed their AquaCritox® product.  At the supercritical phase the organic material in sludge can be broken down with no harmful emissions to the air or water and the process can generate more energy than it consumes because oxidation is much quicker than traditional sludge activation and the steam produced can be used to generate electricity.

These new technologies are highly efficient solutions to problems we face in wastewater management, but they are also underused.  The Artemis Project’s Top 50 Water Technology Competition aims to promote companies offering sustainable innovations and demonstrating good business practices.  The judges look forward to reading this year’s applications from start-ups in water tech- and we all look forward to their impressions and insight.

The 2011 Artemis Top 50 are showing leadership in the water tech industry with some significant gains to announce. Now that the applications for this year’s Top 50 are currently rolling in, we can take a look back at what those named as the most promising water tech start-up companies have been up to this past year. Here are five examples of the successes earned since being named to the Artemis Top 50:

Altela  is opening two new treatment plants this year. These facilities will have the ability to not only clean the produced and frac flow-back water to distilled water quality but also to deliver “recycled” frac water.

Derceto , a New Zealand water utility software company has earned new contracts across the globe from the UK, to Korea and Texas, saving its partners money by reducing waste in energy.

Emefcy, having developed an Electrogenic Bioreactor to treat wastewater while harvesting green energy, was named  Cleantech 100 Early Stage Company of the Year in October and Bloomberg New Energy Pioneer in March

NanoH20, a company that has developed and marketed a membrane used to filter saltwater in desalination and is developing products for purifying drinking and industrial water and treating wastewater, announced in April that it raised $60.5 M and was covered by Forbes’s Green Tech.

Ostara, a tech company that harvests phosphorus and nitrogen from wastewater to produce Crystal Green slow-release fertilizer, revealed in May that they had raised $14.5M for further expansion into industrial markets.

The above examples are just a sample of the achievements these companies and others on the Top 50 list have made this year. The Artemis Project looks forward to updates on how Top 50 winners have progressed and to seeing what new companies and technologies will be seen during this year’s competition. Companies that have completed a pilot and earn less than $25M in revenues per year are eligible to apply. Applying to the competition is free and contestants are judged on their technology, application and business viability.

Interested applicants may email info@theartemisproject.com, using the subject: “REQUEST FOR APPLICATION: TOP 50” ASAP.