Unacceptable Loss

As the Industry Turns to Digital Solutions, Addressing Physical Water Loss Remains Top of Mind for Utilities

By Will Maize

Water loss continues to plague water utilities. Lost water represents lost revenue, needed to ensure cost recovery and provide capital for network upgrades. Losses can also place pressure on the supply system, potentially triggering the need for capital intensive supply projects. From any way you look, water loss places the long-term sustainability — financial, operational and environmental — of the water supply network at risk.

According to the U.S. Environmental Protection Agency (EPA), the volume of water lost through distribution systems is 1.7 trillion gallons per year, at a cost of $2.6 billion (USD). Many of these wasted gallons are lost through the 240,000 water main breaks that take place annually across the United States.

As a result, leakage management has emerged as a major priority for water utilities looking to reduce the impacts of non-revenue water (NRW) on scaling capital and operating expenditures. Mitigating the problem, however, is proving to be a significant challenge. Water utilities are addressing leakage within the context of a difficult operating environment that features aging infrastructure, falling consumption, declining revenues, and increasing customer demands for improved services. Solutions for these issues begin with network-specific approaches unique to each utility in terms of business case and performance outcomes.

Let’s begin by reviewing the two categories of water loss commonly cited within the water sector. Real losses are physical water losses resulting from a leak, a burst or overflow. Real losses can be an indicator of inefficiency on a distribution network, or in under-invested, aging infrastructure. Apparent losses, on the other hand, are non-physical losses that are the result of inefficiencies in utility operations to collect consumption data, accurately bill customers, while also accounting for issues like theft. The two components are added together (along with unbilled authorized consumption) to form non-revenue water.

Generally, real losses remain the biggest hurdle for utilities, contributing 84 percent of total water lost across the 29 utilities that submitted validated water loss data to AWWA in 2016.

AWWA Water Loss Standards

Without a national standard to address water loss, states look to international guidelines adapted by the American Water Works Association (AWWA) for water audits.

Water-stressed states have emerged as standard bearers in adopting international methodologies for water audit reporting and target setting. Looking outwards for guidance, the International Water Association’s (IWA) first Water Loss Task Force published the IWA Best Practice Water Balance and Performance Indicators in 1999, providing a long overdue standard to calculate non- revenue water and its components. In 2003, AWWA incorporated IWA’s standard. The AWWA Water Loss Control Committee soon published its M36 Water Audits and Loss Control Programs, and subsequent free water audit software.

Defining the components of non-revenue water is often the first step to measurement and improvement, and water audits — utilizing the water balance methodology framework and definitions — ensures a common nomenclature for the industry.

States affected by acute water stress events, such as Georgia, Texas and California, have influenced early adoption of legislation aimed at quantifying and addressing real water losses. Let’s look at a couple of examples.

In the midst of a seven-year drought, California passed Senate Bill 555 in 2015, requiring the submission of validated (level 1) water loss reporting (IWA/AWWA standards) to the California Department of Water Resources, on an annual basis starting Oct. 1, 2017. The California Water Loss Technical Assistance Program, was set up to introduce water balance methodology to 410 utilities (with greater than 3,300 connections in size), and help them prepare for the first submittal. The bill also empowers the State Water Resources Control Board to apply performance standards for urban water suppliers regarding water loss, starting in 2019.

The move followed similar legislation enacted in Georgia in 2010 following water stress events in 2008 and 2009. The Georgia Water Stewardship Act requires all public water systems serving more than 3,300 individuals (more than 250 utilities) to conduct a water loss audit and submit for review on an annual basis.

Infrastructure Leakage Index

The Infrastructure Leakage Index (ILI) is also aimed at helping utilities track performance. Infrastructure Leakage Index is a measure of current real losses over a hypothetical minimum estimate and is increasingly being used as a performance metric to track leakage across the United States. Less sensitive to fluctuations in consumption than non-revenue water expressed in percentage, ILI can help utilities benchmark operating performance in a global context.

Of the 29 utilities that submitted validated water audit data to AWWA the 2016, the average ILI was 3.30, up slightly from 3.26 in 2015, but down from 3.61 in 2014. This places the participating utilities within Section B2, which suggests “potential for marked improvements; consider pressure management, better active leakage control practices, and better network maintenance.”

The highest ILIs come from areas of the country with the oldest buried infrastructure, such as the northeast. The median age of water mains at DC Water is 79 years old, and the utility has seen its reported ILI increase year-on-year since 2013, reaching 9.9 in 2015. Mandated capital commitments to large-scale projects — in this case an EPA consent decree to deal with combined-sewer overflows — has reduced investment designated for discretionary projects and pipe replacement programs. The City of Philadelphia also reported an ILI above 10, and deals with non-revenue water above 40 percent.

In contrast, dry climate utilities — often with considerably newer infrastructure — lead the U.S. in leakage index. The City of Albuquerque, N.M., has reduced ILI from 1.4 in 2013 to 1.1 in 2015. Austin Water reported a preliminary ILI of 3.3 in 2016, above its internal ILI target of 2.7 or less.

Lack of District Metering

The growing interest in tackling network leakage is reflected in the lack of network district metering configurations, commonplace in mature leak detection markets such as the United Kingdom. Since U.K. water utilities began subdividing their distribution networks into sectors in the 1980s, the practice of setting up district metering areas (DMAs) has become synonymous with good management. And while this methodology has been exported globally, it has not seen rapid uptake in the United States.

As such, technology vendors that have developed hardware or algorithms based on the DMA approach have seen slower uptake in the U.S. market. However, localized efforts by leakage specialists and engineering consultants are starting to change the conversation around DMAs in the United States.

Propagation of smart water metering in the United States could drive new a paradigm for leakage management. Subdividing networks into volume-controlled areas can require costly district valves and meters. However, with increasing deployments of fixed-network advanced metering infrastructure (AMI) systems for water meters, consumption data in (near) real-time could create alternative data points to triangulate area-specific flow volumes that can be analyzed in nighttime low-flow methodologies.

Austin Water is moving toward implementing smart water meters, which it views as a leapfrog of traditional district meter areas to provide nighttime low-flow leakage analysis. The utility has also piloted innovations such as satellite leak detection to detect unsurfaced leaks. Overall, Bluefield forecasts U.S. municipal water utilities will invest $17.1 billion in smart water meter systems by 2026.

U.K. Regulatory Environment Foreshadowing U.S.?

In setting out its guidance document for the next five years, Ofwat, the regulatory body of the U.K. municipal water sector, has outlined it will increase the importance of leakage management with its outcome delivery incentives (ODI), and has stressed the need for ambitious leakage reduction target setting. These developments follow the strong signals it sent to the market in 2017 when Ofwat fined Thames Water for missing a leakage target. The London utility was slapped with an £8.6 million (~$12 million USD) penalty.

While similar regulatory bite is not likely to materialize in the United States in the near-term, the development of SB 555 in California, which enables the State Water Control Board to implement performance standards for urban water suppliers regarding water loss starting in 2019, could be a signal of a market moving toward a performance-based structure.

Smart Water Solutions

Bluefield Research’s analysis of municipal water utilities signals a crossroads for network owners and operators to balance minimal compliance for leakage levels with the need to develop proactive management strategies. These strategies must integrate legacy, lower tech solutions such as pipe replacement or tri-annual network sweeping, with more sophisticated, smart solutions involving connected sensors and data analytics.

A diverse landscape of solutions providers are positioning innovative technical solutions to the four main approaches to real losses: active leakage control, pressure management, asset management and repair optimization.

While all four segments are experiencing disruption, developments in active leakage control are particularly notable. Technologies such as satellite leak detection and market uptake of large-scale deployments of permanent, fixed-network acoustic sensors should continue to disrupt conventional active leak control spending, offering utilities new tools to detect and pinpoint leaks more efficiently. Bluefield estimates the leakage management segment will command total operational expenditures of more than $1 billion by 2026, with smart water technologies continuing to grow in market share.

In a related infrastructure segment of asset condition assessment and pipeline monitoring, Bluefield anticipates the market for these technologies to double by 2026. As financially constrained utilities seek to extend asset service life and defer capital intensive pipe replacements, asset data is increasingly used to make informed, data-driven replacement and proactive maintenance decisions. The shift in mindset will drive cumulative investment of $2.7 billion between 2017 and 2026.

Smart Water M&A

While still a fragmented competitive landscape, the leakage category within smart water has experienced an uptick in merger and acquisition (M&A) activity in recent years. For example, Xylem’s announced acquisition of Pure Technologies in December 2017 adds to its 2016 acquisitions of Sensus and Visenti, and demonstrates a growing importance that larger water companies are placing on water data and analytics management. The move gives Xylem a portfolio of complimentary solutions addressing aging infrastructure, from water main assessment and monitoring to smart metering, sensor hardware and advanced data and analytics platforms.

Looking forward, consolidation is expected to accelerate in the next three to five years as technology firms strengthen utility track records, and larger industrial players find synergies within their product portfolios that can complement hardware solutions with software and data analytics.

Municipal water utilities have never had such a wide commercial offering of solutions to improve how they plan, monitor and manage their critical water infrastructure. In combination with the gradual uptake of water auditing processes, the U.S. water sector stands to gain substantial improvements in water loss in the years to come.

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Will Maize
Research Director | Bluefield Research

Will Maize focuses on municipal water infrastructure projects and trends, including smart water technology applications and emerging technologies. Prior to joining Bluefield Research, he worked with SNC-Lavalin on the development of a $1.4 billion tolled highway facility in Toronto, Ontario. Maize is a licensed P.Eng., in Ontario and has a MBA from IESE Business School in Barcelona and a B.Eng. from Dalhousie University in Halifax, Nova Scotia.