What Happens When the Well Runs Dry?

To the relief of many South Africans, Day Zero has been pushed back to 2019. Day Zero is the date on which Cape Town will run out of water, and its four million residents will begin to collect daily water rations of about seven gallons per person per day from specific collection points. Day Zero will make complying with current water restrictions, which limit use to 13 gallons per person per day, seem positively extravagant.¹

Thirteen gallons isn’t much water. “That’s enough for a 90-second shower, a half-gallon of drinking water, a sinkful to handwash dishes or laundry, one cooked meal, two hand washings, two teeth brushings, and one toilet flush. I figured I could save an extra couple of gallons by forgoing the daily flush in favor of a dry composting toilet,” wrote a Cape Town resident in an article for Time.²

By way of comparison, the U.S. Department of Interior estimates the average person in the United States uses 80 to 100 gallons of water each day.³

How much is enough?
Fresh water is rapidly becoming a scarce resource. During the past 50 years, as populations have expanded and economies have grown, water consumption has tripled globally. Experts say the demand shows no signs of slowing.⁴

Most of the fresh water on our planet is not on the surface. Icecaps and glaciers hold about 68 percent of our fresh water supply, ground water accounts for about 30 percent, and surface water – found in lakes, rivers, and swamps – is just 0.3 percent.⁵

While personal conservation efforts can help, individuals don’t consume most of the water used in the world. They are, however, beneficiaries of many of the processes and products that require water. In the United States, 77 percent of fresh water is used for crop irrigation and electric power generation. Cities and businesses account for another 20 percent of water demand, while livestock and aquaculture account for 3 percent.⁶

The journal Nature recently published research showing the world is depleting groundwater at an alarming rate. “A vast majority of the world’s population lives in countries sourcing nearly all their staple crop imports from partners who deplete groundwater to produce these crops, highlighting risks for global food and water security. Some countries, such as the USA, Mexico, Iran, and China, are particularly exposed to these risks.”⁷

A side effect: sinking
One of the side effects of pumping too much groundwater from aquifers is places are sinking. It’s a condition is known as subsidence. For example, the Central Valley in California, which produces more than one-third of our country’s vegetables and two-thirds of its fruit and nuts,⁸ pulls a lot of groundwater to grow crops. As a result, the area has been sinking.⁹

The Central Valley area suffered a five-year drought through 2016. Farmers addressed the lack of water by drilling deeper wells, up to 2,000 feet deep, and tapping into previously untouched aquifers. As groundwater has been extracted, the region has been sinking by about two feet per year. These changes are affecting the integrity of roads, bridges, canals, and other infrastructure, reported BBC, creating expensive issues for residents.⁹

Island countries and cities near coastlines that pull too much groundwater suffer a rather ironic side effect: flooding. The city of Jakarta, Indonesia, is sinking about seven inches a year. At the same time, sea levels have been rising. At high tide the ocean pours over seawalls flooding the city.⁹

Tokyo had a similar problem. In 1968, it was sinking by nine inches a year. The government solved the problem by passing laws limiting groundwater pumping and subsidence slowed. In early 2000, the city was sinking less than one-half inch a year, reported BBC^.9

Investing in solutions
McKinsey & Company estimates water supplies will meet just 60 percent of global demand by 2030. While there will be significant differences in supply and demand profiles by region, companies that deliver innovative technologies and processes for resolving issues related to water scarcity and sustainability could perform well. McKinsey wrote:⁴

“Many solutions that will help companies use water more efficiently in their operations – from farms to semiconductor fabs, bottling plants to nuclear ones, steel mills to oil rigs – will be new products and services under development today…the broadest range of opportunities for new products and services falls into three areas: improving the productivity of water treatment and distribution, of water-intensive industrial and power processes, or of water usage in agriculture.”

Governments will also have an important role to play by establishing regulations that shape the market and adopting practices that limit water waste. For instance, the Hampton Roads Sanitation District in Virginia is testing a new process designed to replenish aquifers. It treats 150 million gallons of wastewater each day so the water meets drinking water standards and has the same profile as groundwater. The treated wastewater is then pumped back into the aquifer.⁹

The supply and demand profile for water is changing. This creates risks and opportunities investors may want to keep an eye on.

_{Sources:
1 https://www.theverge.com/2018/5/11/17346276/day-zero-cape-town-south-africa-water-shortage-reservoirs-dams-climate-change
2 http://time.com/cape-town-south-africa-water-crisis/
3 https://water.usgs.gov/edu/qa-home-percapita.html
4 https://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/the-business-opportunity-in-water-conservation
5 https://www.nationalgeographic.org/media/earths-fresh-water/
6 https://www.neefusa.org/nature/water/increasing-demand-and-decreasing-supply-water
7 https://www.nature.com/articles/nature21403#affil-auth
8 https://cenic.org/blog/item/grow-food-grow-jobs-how-broadband-can-boost-farming-in-californias-central
9 http://www.bbc.com/future/story/20171130-the-ambitious-plan-to-stop-the-ground-from-sinking
This material was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.}