Weekly Insider (Water Security & Recession's Impact on Nano)

Here are two great insights on water security in Israel and the recession’s impact on nanotech, both from Lux Research’s Lux Populi

1. Water Security Carries a High Cost for Israel’s Citizens:

Changes in Israel’s water industry are having a drastic effect on the nation’s water bills. At the start of the year, Israel’s national water company, Mekorot, which provides 80% of the nation’s water, increased water rates by 25%. Additionally, rates will increase by another 16% during this summer, and at least another 2% at the start of 2011. Currently, water rates range between $1.5 and $2 per cubic meter.

The additional money will help fund a rapid integration of desalination plants into Israel’s water infrastructure. Currently, Israel sources 80% of its drinking water from Lake Kinneret. However, recent water usage levels have caused the lake to drop 1.5 meters in the past two years, and created a total deficit of 2 billion cubic meters. In a report, Mekorot stated there is a 38% chance that the lake will drop to a level by the end of 2010 that prohibits further pumping.

Mekorot instituted a program in 2008 to drill relief wells, which reduced water sourcing from Lake Kinneret by nearly 50%. The company’s long-term water solution involves installing a series of desalination plants that draw from the Mediterranean Sea. Currently, three plants are fully operational, providing approximately 150 million cubic meters of water per year. A fourth plant in Hadera became operational in December 2009, and is expected to reach its full capacity of approximately 125 million cubic meters per year within a few months. Mekorot is planning on bringing two additional plants online by 2012, bringing the total production to 600 million cubic meters, or 80% of Israel’s residential demand. The Israel Water Authority predicts that the increased water production will end the country’s water shortage within three years.

Once completed, the company will invest an additional 5 billion ILS ($1.36 billion) to install a new east-to-west pipeline. The company will focus on reducing water loss with the new pipeline, but it has not made an estimate on the increase in yield at this time.

Even with such drastic rate increases, Mekorot’s CEO believes that the company will still endure heavy losses, and the company is already facing an $8 billion gap in the project’s funding. This indicates that the Israeli people can expect further increases over the coming years. The Israeli government has attempted to ease the impact on customers by temporarily suspending the national Drought Tax until April 2010. At this time, there are no additional plans for government funding or support of the project.

2. The Recession’s Impact on Nanotechnology

The economic downturn has hit key nano-enabled product segments hard, particularly automotive, construction, and electronics. The output of these three sectors is immense, accounting for 10% of the U.S. GDP in 2008, and 9% worldwide. Plus, because all are big end markets for nanomaterials and their intermediates, the disruption within them has rippled back up the value chain.

As a result, Lux Research has lowered its previous projections for nano-enabled product revenues by 21%: We now expect nanotechnology to generate $2.5 trillion in 2015. Hardest hit will be two nanomaterials and two types of nanointermediates.

Among materials, carbon nanotubes and ceramic nanoparticles will see the biggest impact from the recession, due largely to their out-sized applicability in the struggling automotive and construction sectors. The relatively diverse applications for ceramic nanoparticles will enable them to recover more quickly. Among nanointermediates, nanocomposites and coatings will take the biggest whack. However, both should return near previously projected revenue levels by 2015.

Weekly Insider (Water Tech & A School Grows in Brooklyn)

A big thank you to Vince Capri who earlier this week in Chicago on behalf of the Nanobusiness Alliance presented a check, made out to Coney Island Prep, to me after my opening keynote. What a class act.

I hold the deep belief that kids, especially inner-city kids, need two things: the right heroes and a deep desire to learn. Usually the former results in the latter. Nearly two years ago, I was recruited by passionate and visionary school founder, Jacob Mnookin, to become founding Chairman of Coney Island Prep--the first ever charter school in my native Coney Island Brooklyn. We opened our doors last week to 90 5th graders for our inaugural class of 2021 (their future college graduation date set in their minds now), adding a new class every year until we reach grades 5-12.

The governance, staffing, financials, marketing and strategic decisions are not so different from high-tech startup boards I sit on, but arguably the stakes are higher. Entrusted with children’s future and maximizing their (and their families’) chances of success in life is extraordinarily fulfilling.

A final reminder for Tuesday’s private invitation and chance to listen to Lux Research’s webinar: “Lux Research Water State of the Market: Global Energy - Unshackling Carbon from Water” on Tuesday, September 15, 2009 11:00 AM - 12:00 PM EDT Register by clicking here.

Weekly Insider (Dean Kamen, Water Invitation & A123 Battery IPO)

Here’s three things for your Labor Day weekend.

First, join me and Dean Kamen at the NanoBusiness Conference next week in Chicago at www.nanobusiness.org

Second is a private invitation to listen to a Lux Research webinar: “Lux Research Water State of the Market: Global Energy -- Unshackling Carbon from Water” on Tuesday, September 15, 2009 11:00 AM - 12:00 PM EDT Register here: https://www2.gotomeeting.com/register/269154627

The huge water footprint associated with energy production plays second fiddle to worries about carbon dioxide output in the popular imagination, but it is a vitally important consideration in our increasingly parched world. New energy technologies – from advanced methods of extracting fossil fuels to low-carbon renewable energy – may look appealing, but they exacerbate water worries, creating ugly trade-offs between carbon and water. As water stresses, multiply energy technologies’ water intensity will often play as great a role as their carbon footprint in determining the future makeup of the global energy mix.

In this webinar, Lux Research will examine conventional and alternative fuels and electricity generation and investigate the myriad of technologies – including water reuse and recycling, increases in energy production efficiency, and large-scale distribution – and answer the following questions: How much water is used today to produce electricity and fuels through conventional means? What is the relationship between water intensity, carbon intensity, costs and reliability for alternate energy sources? How does the water relationship affect the viability of biofuels and alternative methods of extractive fossil fuel? What technologies and approaches are available to reduce energy related water intensity while allowing for a reduced carbon footprint? What are the implications of water intensity on the future roll-out of energy technologies? Which companies stand to win or lose and how will this affect investors?

Third, here’s fellow Forbes columnist Mark Mills citing Lux Research’s battery team in his newest piece: “Battery IPO Could Recharge New Issue Market”

“Confidence, the Rorschach of economic indicators, is a weird thing. Easier to recognize than define or measure. We may soon learn something about confidence in our economic future via the market's reaction to the forthcoming IPO of A123, a Boston-based energy green-tech company just over half a dozen years old with cool new MIT-derived battery technology.

The Conference Board's Consumer Confidence Index (CCI), benchmarked as 100 in 1985, dropped to 65 in 2008 and plummeted to 25 earlier this year, even lower than post 9/11. We're a long way from the heady days of confidence exhibited during tech mania when the CCI approached 200, but the index has been tracking up recently, hitting 47 in July and 54 by late August.

For calibration; the index was 100 in 1985, the year Nintendo came out; one year earlier Apple had launched the Mac at a time when only 40,000 people in America used cell phones.

Confidence both reflects and creates the economic future we want more than any single characteristic of the human enterprise. Of course confidence is what drives people to create new companies, and jobs, to compete with big established guys, and, apropos of emerging from our Great Recession, let us not forget that small businesses with one to 499 employees account for nearly two-thirds of job creation..."

The full article can be found on Forbes.com, to be linked to the article click here.

Weekly Insider (Water, water, everywhere)

You must find and edge in information. You must find a contrarian view and the variant perception from conventional wisdom. Thus if you’re interested in breakthroughs in water you should run, not walk to the team at Lux Research. I can now share publicly some exclusive data points with you from Lux Research’s “Hydrocosm”. It blew me away with its level of detail--by far the deepest and most comprehensive dive done by anyone, rifling into untapped markets and dispelling conventional wisdom where investment will be wasted. My own venture firm Lux Capital is actively using this to map our investment thesis and avoid the water traps. Here are a few excerpts:

A RISING TIDE FOR NEW DESALINATED WATER TECHNOLOGIES:
Lux Research sees a wave of new technologies challenging incumbent reverse osmosis

The global desalinated water supply will grow at a CAGR of 9.5% over the next decade, reaching 54 billion m3/year (cubic meters per year) in 2020 – 54 trillion liters/year – or triple what it had been in 2008, according to a new report from Lux Research entitled “Desalination’s Future Champions.” According to Lux’s analysis, the demand for desalinated water will foster a rising wave of new water treatment technologies, all aiming to challenge the incumbent reverse osmosis (RO) in desalination’s three market segments – seawater desalination, inland brackish water, and water recycling.
RO dominated the desalination equipment market with a 54% revenue share as of 2008, and the relative success of its challengers will vary by market segment. “The bottom line is that there are growth opportunities in brackish water and recycling,” said Michael LoCascio, a senior analyst at Lux Research and the report’s lead author. “But RO is so entrenched that its variations will dominate for 20 years, with new technologies coming to market only through RO hybridization.”

The report offers the first commercial analysis of emerging water treatment technologies, offering strategic insight to corporations, utilities, bulge-bracket banks and early stage investors looking to tap growth opportunities enabled by emerging desalination technologies. To determine which technologies will succeed, the report establishes a benchmark with 13 criteria across two axes measuring each contender by its value and maturity. Because the factors for success differ so by market segment, Lux Research’s report weighted the criteria to come up with separate rankings for each segment. It then scored 18 current and future desalination technologies in this framework, learning that:

1. Forward osmosis (FO) and RO variants will win in the seawater segment. Set to grow from 10.9 billion m3/year in 2008 to 38.4 billion m3/year (or 71% of total supply) in 2020, the seawater segment could see simpler technologies, like cloud-point and ammonium carbonate FO, beat RO on energy and cost.

2. The brackish water segment will fragment with nine successful technologies. Increasing comparatively slowly from 6.4 billion m3/year (35% of total) in 2008 to 7.2 billion m3/year (13% of total supply) in 2020, brackish water’s widely varying operating conditions combined with the water market’s hyper-locality will foster nine sustainable technologies.

3. RO will go unchallenged in recycling. The fastest-growing segment – increasing from 0.9 billion m3/year in 2008 to 8.4 billion m3/year in 2020 (16% of total supply) – the recycling market’s low energy needs and levels of brine waste minimize RO’s weaknesses, securing its dominance in the segment for decades.

“Of particular interest are firms that build, own, and/or operate desalination facilities,” said LoCascio. “Since they are technologically agnostic, these firms stand to benefit as the value of desalinated water continues to increase over the next 20 years, while the cost to produce it declines.” “Desalination’s Future Champions” is part of the Lux Water Intelligence service. Clients subscribing to this service receive continuous research on water industry market trends and forecasts, ongoing technology scouting reports and proprietary data points in the weekly Lux Research Water Journal and on-demand inquiry with Lux Research analysts.