Investing in Water Desalination

It’s not hard to see that water is the next big market.

Like energy, demand for water is surging along with population growth and a massive trend toward city migration.

Unlike energy, we have a very limited amount of the stuff to work with.

If we need more energy, we can build more solar panels, wind farms, and nuclear plants. We can’t just make more water.

This leaves a couple of options, not all of which are profitable for investors. . .

Solutions to the Water Problem

First off, we need to conserve. Showers instead of baths. Water off when brushing your teeth. No needless irrigation. Waterless toilets. . . you get the idea.

This is the least profitable solution to our water woes. Some makers of water conservation equipment might see an uptick and business, but it’s not the windfall we’re after. Mostly humanitarian stuff here.

The second option is increased treatment and transportation. This is a more viable solution and a more viable profit catalyst. It consists of significantly ramping up our use of wastewater through building an expanded network treatment facilities and pipelines.

This is already underway, and you’ve probably seen evidence of it in your local paper, most likely with a corny headline that reads something like “Podunk Gets Splash of Federal Funding,” or “Flood of Money for New Treatment Plant.”

Headlines like that have been popping up ever since the stimulus allocated billions for clean water projects.

And unlike conservation, this approach is already generating investor profits. That’s because building new treatment plants and laying new pipelines can cost millions or billions of dollars. And there are only a handful of companies getting the contracts.

Clean Energy Hunter, our paid advisory, has already taken profits on one such player. (You can join the service at any time.)

But keep an eye on Tetra Tech (NASDAQ: TTEK) and Layne Christensen (NASDAQ: LAYN), they each provide extensive wastewater engineering services. And they’ve each been on a tear lately as government water funding begins to be doled out.

In addition to ramping up our use of wastewater, one other technology offers a near-silver bullet solution to the world’s water woes.

Investing in Water Desalination

It seems obvious, but taking the salt out of our vast ocean water resources is one of the best water solutions we have.

To date, desalination has been cost-prohibitive thanks to its exorbitant energy inputs. But as water shortages become more and more acute, and happen in wealthier and wealthier regions, the use of desalination is expected to surge.

The best part for investors: this is the most profitable solution to our water problems.

Take just two recent examples. . .

In the water-scarce Middle East, Jordan recently announced they’re building a $10 billion desalination plant.

$10 billion. That’s the size of some entire markets. . . but it’s the cost of just one desalination plant.

The expensive project was necessitated by Jordan’s constant parched state and the perpetual decline of the Red Sea, which has plunged more than 30 meters in the past 20 years.

Expect multi-billion projects like this to be commonplace going forward.

Water Desalination in the U.S.

Even here in The State we’re increasingly turning to desalination.

Just last week, the San Diego Regional Water Control board announced plans to build the largest desalination plant in the Western Hemisphere. . . for only $300 million.

It’s only a matter of time until the $10 billion plants start being built here.

According to Peter Gleick of the Pacific Institute, one of the preeminent minds in the water business, “If they build it well and it operates well and the price is right, we will see more.”

But investing in desalination can be tougher than other aspects of the water industry, if only for the fact that the companies involved are a bit more clandestine.

GE (NYSE: GE) and Dow Chemical (NYSE: DOW) are two glaring bets, as they provide a good portion of the membrane technology for desalination.

To green energy, and green profits,

Chris