NanoH2O Turns Sea Water Into Fresh Water

A website called Water.org lists some interesting facts about water that most people are unaware of. For example, 780 million people lack access to clean water, a number that exceeds the population of the U.S.A by over 2.5 times. While more than 3.4 million people die each year from water, sanitation, and hygiene-related causes, nearly all of these deaths, 99 percent, occur in the developing world. Access to clean water is a growing problem and one which can be addressed by turning to 97% of the water on planet earth; the sea. Desalination is the process of turning seawater into fresh water. China is one of the fastest growing markets in desalination and plans to double its capacity by 2015. One company that stands to benefit from the growing trend of desalination is NanoH2O.

Nanoh2o_Logo

Founded in 2005 and based in Los Angeles California, NanoH2O launched their first commercial product in the second quarter of 2011. With backing from the likes of BASF, Total, Khosla, Capital Dynamics, and Oak Investment Parters, NanoH2O claims to be one of the most “highly funded water technology companies in the industry.” The company’s latest round of funding in April 2012 of $60 million brought their total amount of funding to just over $95 million.

The Desalination Process

In order to turn seawater into fresh drinking water, a method commonly used is that of reverse osmosis. While the terminology and technological details can get confusing, the process can quite simply be explained as forcing salt water through one side of a purification membrane after which fresh water comes out the other side. The below chart shows the costs involved with running a standard reverse-osmosis desalination plant:

Source: Pacific Institute
Source: Pacific Institute

NanoH2O’s value proposition is the creation of nanotechnology-enabled membranes that are 50-100% more permeable than competitive membranes and therefore require around 20% less electricity to pump water through them. With electricity being the largest cost of operating a desalination plant and the cost of membranes being one of the smallest, NanoH2O’s membranes reduce the cost of running such a plant by around 8.8%.

Looking Towards China

NanoH2O recently announced that it plans to invest $45 million to build a membrane manufacturing plant in eastern China. The plant is expected to be operational by the end of 2014. In a Wall Street Journal article this month, NanoH2O Chairman and CEO Jeff Green told the WSJ that China could see more than $6 billion worth of membrane sales over the 2014-2020 period. The move to manufacture membranes in China is a strategic one considering that Beijing has stated that 70% of the equipment for desalination needs to be locally supplied.

NanoH2O is not the only player in the desalination membrane space but given the significant amount of investments they have received, their commitment to the growth market in China, and the competitive advantage of their nanotechnology-enabled membranes, the company merits watching going forward.

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