Technology's promised land / Industry, investment thrive in Israel despite violence
Water wizards of the desert
HERZLIYA, Israel--Etyan Levy builds apartment complexes for bacteria.
His company, AqWise, is one of this country's breakout start-ups in the expanding market for water technology. It has devised an intricate polymer cylinder that, when placed in wastewater treatment ponds, clusters microbes that consume contaminants. The water can then be safely discarded or used to irrigate fields.
"They grow naturally. We just provide the microbes with the right environment," CEO Levy said of the system, which obviates the need for the supplemental ponds used in traditional water treatment. "Our cost is about half the cost of an additional basin, depending on the cost of the land."
Although it hasn't attracted as much attention as alternative energy, water has emerged as one of the more promising opportunities in the. The water infrastructure is several decades old in many parts of Europe and the United States, where new regulations are forcing municipalities to remove higher levels of ammonia and nitrogen compounds from their supplies than in the past.
Upgrading the municipal water systems in the United States could cost $1 trillion over the next several decades, according to Ira Ehrenpreis, a partner at venture capital firm Technology Partners. But situations are far more dire in other parts of the world where fresh water is in short supply.
One-third of the African population has no drinking water, a crisis that could lead to severe shortages in 17 countries by 2010, according to the African Water Association. Roughly half of the world's hospital beds are filled with patients suffering from water-borne diseases, said Kevin McGovern, chairman of venture firm McGovern Capital, quoting U.N. statistics. Groundwater supplies are sinking in parts of China, Bangladesh and even the Midwestern United States, according to various studies.
"From a supply standpoint, 20 percent of the people in the world lack access to potable water," Ehrenpreis said. "There has been a threefold increase in the global population in last 100 years and a sevenfold increase in water consumption."
Much of the activity in this field is taking place in Israel, where water has long been closely linked to national security, economic livelihood and, more recently, technology. In November, Ben Gurion University will host a U.N. conference on desertification.
"Water is a sacred cow in Israel. It is like a gem," said Shlomo Waser, an Israel native who has worked for Philips, Advanced Micro Devices and other companies in Silicon Valley and now advises start-ups.
For reasons of concern or capitalism, investors, start-ups and multinational corporations have intensified their exploration of the water market in recent years. One of the defining moments for the water industry came nearly two years ago when General Electric bought Ionics, a U.S.-based desalination company, for $1.1 billion.
GE's rival, Siemens, quickly followed with its own acquisitions in purification, and in June it signed a research and development pact with Mekorot, Israel's national water company. Siemens estimates that the $40 billion water recycling technology market will double in the next eight to 10 years.
All the major engineering colleges offer water programs, which often cross over into nanotechnology. Much of the current research revolves around developing materials and membranes that can filter out individual molecules and prevent bacteria and other organic solids from building up on the water's surface.
At , professor Carlos Dosoretz is devising a water purification system that can take sewage water and purify it for human consumption. The key to his system is a combination of sensor networks, purificiation filters and desalination.
Typical purification systems don't filter out salts. As a result, Israel and other countries that have been using treated wastewater for irrigation are inadvertently salting their soils.
Dosoretz also plans on filtering out medicine molecules from human waste that are only a few nanometers long. A few years ago, he said, medicines weren't recognized as a problem because the tools to monitor them didn't exist.
"The quality of water is deteriorating decade by decade," Dosoretz said. "It is a worldwide problem. There are concerted actions in most developed countries."
The water market can effectively be divided three ways: agricultural systems, desalination and purification. At present, purification seems to be the most active for start-ups, partly because of demand but also because of the novel ideas that are percolating.
, for instance, has installed ultraviolet water purification systems in Israel's Coca-Cola plant and a local dairy. A couple of large dairies in Europe are now considering the technology.
In Atlantium's disinfecting system, water passes through a specialized quartz tube that bounces beams of ultraviolet light through it, a process that kills billions of microbes more than conventional techniques. The 3-year-old company has raised $15 million so far.
In addition to food processing, Wilf said, the system can be used in fish farms and to transform wastewater into "gray" water for irrigating golf courses. "Gray water is probably the highest growth market," he said.
Projects are plentiful but aren't completed overnight. AqWise, based here, spent five years in the lab and only last year began selling its products, cylinders adapted from an earlier project to develop a time-release capsule for fertilizer. In 2005, the company booked $13 million in orders and installed systems in Italy, Spain, Mexico, Chile and the United States.
Desalination is growing as well. A $250 million plant that will ultimately churn out 100 million cubic meters of water annually for human consumption opened in Ashkelon in southern Israel in August. It's the largest facility of its kind in the world. By 2020, the country expects to desalinate 750 million cubic meters annually.
As part of a joint project, Israel Desalination Enterprises built the facility and has since landed deals to construct desalination plants in Europe and India. The technology is being studied by companies in Australia, China, Namibia, the states of California and Texas, as well as other parts of the Middle East.
Technology's promised land / Industry, investment thrive in Israel despite violence
"It costs about 50 cents per cubic meter to desalinate water," said Amit Mor, chief executive of Eco Energy, an energy and environmental engineering consulting firm here in Herzliya. In the early 1990s, it cost $1 or more. "Most of the market opportunity is export," he added.
The agricultural market is fairly mature but still growing steadily. Netafim, which invented drip irrigation in 1965, does about $350 million in sales annually. The company, like many of its competitors, started on a kibbutz.
Technologies are being developed in the field as well as in the laboratory. Researchers at Ben-Gurion University are looking at ways to use irrigation systems to cultivate fish, edible and tropical, in the desert. Technion's Dosoretz is looking at ways to port his filtration systems to drip agricultural spouts to prevent them from getting clogged.
To ensure that Israeli companies can stand out globally, government agencies and other locals have created a support network. Mekorot and private investors last year formed Waterfront, an organization dedicated to promoting the industry and providing seed funding. Local investors also have formed water-themed incubators, said Ian Taylor, director of business development at Utilitech Solutions, which installs water systems.
Most cities and nations are moving slowly in rebuilding their water infrastructure, a pace that can be both good and bad: On one hand, it can mean long waiting periods to get a single system installed; on the other, it prevents an investment bubble that could form because the market is so attractive.
In some smaller nations, the adoption of water technologies is taking place more rapidly or at least more visibly. At the metropolis ofin the United Arab Emirates, city block-long flower beds and golf courses are irrigated with processed wastewater and desalinated seawater as the city tries to transform itself into a tourist destination for Europeans and Indians.
Although the United Arab Emirates refused to recognize Israel, Israeli technology gets there anyway through European subsidiaries that of the products, industry sources say.
Some of the toughest competition in the water industry resides outside the Middle East. Under Singapore's NEWater program, begun in 1998 to expand the nation's water supplies, two plants treat about 20 million gallons of wastewater. Some of it returns through the taps after stringent treatment, but NEWater will constitute 2.5 percent of the country's water by 2011.
"They don't advertise it, but they've been doing it for about five years," said Atlantium's Wilf.
But many executives are confident that Israel's water industry will continue to thrive, especially with modest but nimble companies. AqWise, for example, turned profitable in the fourth quarter and eventually aims to capture 10 percent of its $1 billion-plus market.
"We tripled the number of employees to 18 from six," said CEO Levy, whose company was funded with $4 million in venture money. "The major driver is the need to upgrade the quality of water."