There are about 700 million water meters installed in the world – half the number of electricity meters and double the number of gas meters. About 60% of all households have a water connection, and about two-thirds of these have a water meter. However, the incidence of both domestic water connections and domestic metering varies widely, from 0% to 100% between countries, even within regions such as the EU.
These are among the findings of the 5th Edition of the ABS World Water Meter Market Report, which was published in late 2006 and forms the main source of information for the following discussion. It is important to understand that the water meter market is different and distinct from the electricity and gas metering markets. There are obvious similarities, since all meters measure something, but the markets have developed separately for different users, with different practices, different standards and different suppliers.
World domestic meter market
The world domestic water meter market consists of two separate segments – high priced products with relatively long design lives operating to international standards, and cheap low quality meters with short design lives. The extremes range from an average contract price of about US$32 for a Class D domestic meter in the UK, the highest specification meter market in the world, to US$4-6 for Class B domestic meters in China and India.
Four international meter companies have a 52% share (value) of the water meter market globally: Sensus, Elster, Actaris and Neptune. Three companies come into a second tier in terms of size – Badger of the US, Hydrometer of Germany and Arad of Israel – with between them a 22% share. The rest of the meter market is highly fragmented, with a group of smaller companies in Europe, the US and several South American countries, mainly supplying meters within their own areas.
Some of these companies have regular long-standing contracts with local utilities. Into this category come the market leaders in China such as Ningbo Amei (established 1958 and with ISO 9000 certification) and Lianyungang Lianli, which has a partnership with Maddalena SPA of Italy and has ISO 9002 certification. These companies produce and export meters to international standards. Japan also has about 20 companies in this category, although they export very little.
The final group consists of meter manufacturers in developing countries producing cheap, low quality products for local markets, some of which conform to no standard at all. There is a trade in meters manufactured in these countries, mostly in China, and sold by companies in Europe under their own labels. Some of the business drivers for water metering are similar to those of metering for electricity and gas, but others are unrelated.
The provision of all three of these services has to be paid for somehow and most electricity and gas is paid for by metered charges. This is not always the case with water; sometimes it is metered but in other countries it is funded by central government or from municipal taxes. As in all markets, water meters are subject to the usual business drivers of price, market presence, brand and competition.
But underlying the business case other drivers depend on fundamental conditions of the market. Although electricity is regarded as a basic necessity in today’s world, providing it remains a business and the measurement of supply is indisputably required. Gas is similar. They are energy commodities supplied, bought and sold. Everyone agrees that water is essential and some people regard its provision as a fundamental human right, not to be bought and sold, but to be provided to people free of charge.
But however it is achieved, water services have to be paid for. In rich countries governments have the money to pay for these services, but in poor countries such as the developing nations of Africa, South America and South Asia, governments may not. Excluding China, there are about 600 million households in the developing countries, with 180 million water connections, of which 91 million are metered. In other words, half the water connections but only 15% of all households are metered. Quite high proportions of meters in many of these countries are not operational, or are so inaccurate as to be useless, and the number of effective meters is less than 91 million.
A number of studies have been conducted on the issue of funding for water in developing countries, especially in the slums of mega-cities, by major international institutions including the World Bank and UNEP (United Nations Environment Programme). It is well documented that the people dwelling in slum areas very often obtain their water from private, usually itinerant, vendors who sometimes deliver water in petrol cans strapped onto bicycles. These consumers often pay 20 times as much for their water as wealthy people in the same cities living in affluent areas with piped water supply.
This presents a paradox for water metering. Because no money is generated in slum areas, the water utilities cannot afford the expense of installing and operating pipelines to those areas and the governments have no surplus funds to pay for them. So the poor people do not receive cheap, clean and plentiful water. The large gap shown in Figure 2 between the number of households and the provision of water and metering in Sub-Saharan Africa demonstrates this.
That gap would start to close if water services could be funded by charges for metered water, and the poor would be immeasurably better off. No-one who has visited a slum, on foot, in the heat and filth of cities like Mumbai or Jakarta and seen impoverished people queue up to buy a small container of water, often contaminated, for a family of six or seven, would question how much better off these people would be if they had access to cheap, plentiful and clean piped water.
Metering and proper fiscal management could make a substantial contribution to achieving this. In the former Soviet Union and Eastern Europe other factors are important. Under the old regime water supply was funded by central government, but after the break-up of the Soviet Union central governments mostly devolved responsibility to municipalities, to save money. But the municipalities do not have the money either and the water systems have fallen into a further state of decay. In the USSR there was almost no domestic metering.
There was a limited amount in several countries of what was Eastern Europe, which have old established meter manufacturing industries, such as Poland. Today this is changing. Water is metered in over 90% of households in the three Baltic republics (Estonia, Latvia and Lithuania) and is being introduced elsewhere. Nearly 60% of households in Georgia now have meters, but only 5% in Kyrgyzstan, while the rest of the CIS lies somewhere between these levels. Alex Elder, managing director of Severn Trent Metering Services Ltd, kindly supplied the following unusual report.
A manager of St Petersburg Vodokanal claimed to him that Russia is the largest market in the world for privately purchased domestic water meters. Water is delivered to apartment blocks through a 2" pipe, which is metered at point of entry and the Vodokanal then has no further interest in it.
In Russia, unlike other countries, the household bill is not calculated based on the number of households per building but on the numbers of occupants in each household at a rate of 220 litres per head. This can result in very large bills. Householders now have recourse, however, as they can purchase water meters from stores and install them personally. The Vodokanal accepts these metered readings, which are much lower than bills calculated from norms.
Rich industrialised countries present yet different cases. Historically, in many European countries householders have paid for water through local taxes. The United Kingdom was such a case, but metering is now being introduced there. The British Isles have a reputation for being a wet and foggy place anchored somewhere in the Atlantic Ocean off the coast of Europe, but droughts do happen there.
There is wide variation in rainfall from the wet areas of western Scotland to the dry areas of southeast England. For the last few years domestic users have been under restrictions in some areas, with hosepipe bans for watering gardens and other measures. There have even been times in the past when stand pipes were operated in London for a few hours per day. In 2006 Thames Water applied, unsuccessfully, for a licence to build a water desalination plant in London.
It is well established that the introduction of metering reduces water consumption and there is a movement to introduce more meters in the UK. The current domestic incidence is 26% and it is growing, but not as fast as originally predicted. The UK is unique in the world in that the standard requirement for domestic meters is Class D. The water utilities have a dilemma; they want metering in order to conserve water, but the regulator allows them only a certain amount to pay for the installation of meters out of the annual charge and meters over that limit are installed at their own cost.
At the same time, when metering reduces the consumption of water, their revenue is reduced, which has happened by an average of about 10% in recent years in Britain. So, on the one hand they want to save water, but that makes them less profitable. A new factor has arisen in the EU. A directive on building efficiency enacted early in 2006 will change the situation for submetering, but so far little is known about this. Submetering is also a big issue in the CIS, where pilot installations of household submeters have been tested. In Soviet times, apartment blocks were not built with this in mind, so the installation is tricky, and some utilities are questioning whether the commercial benefits justify the cost. Some meter manufacturers are addressing this with new compact water meters for use in cramped conditions.
Not every market can be covered in this space, but nor can the Chinese market – which is unique and now accounts for almost one third of all water meters installed in the world and over half of annual demand – be ignored. The main driver is water scarcity.
The State Council has identified water shortage as one of the most critical problems facing the country and, in collaboration with the World Bank and the UK Department for International Development (DFID) has launched the Analytical and Advisory Assistance (AAA) programme to address the danger.
The climatological conditions are changing and desertification is proceeding from the north southwards. There are arid, desert cities in north China which 30 years ago were centres of arable cultivation. The main consumer of water in China is agriculture, which uses 66% of the national total, followed by industry using 24% and domestic households only 11%. The National Development and Reform Commission of the PRC has demanded more extensive and more accurate water measurement in all three sectors.
Water demand is escalating
Industry is growing at 10-20% a year and industrial consumption of water is escalating. China is in the midst of a housing construction boom on a massive scale. By 2010, each urban household will have one residence with complete utilities. Although domestic consumption is a small proportion of the total, it is growing, and conservation measures are necessary. Out of 668 cities nationally at least 260 cities face water shortages, with 24 in acute distress.
Several years ago the government determined a policy of ‘One household: One meter’ with extraordinary consequences, creating the largest single water meter market in the world in a short time, currently accounting for over 50% of global consumption annually. Eighty-five percent of meters installed are DN 15-40 (NPS ½-1½"), costing $4-6 each and almost all are velocimetric. The meter market of 40 million units annually is currently growing at 10% a year and 5% of the installed meters are replaced annually. China has approximately 400 companies manufacturing water meters: 300 licensed and 100 unlicensed.
A relatively small number of companies produce good quality water meters to international standards, but the bulk produce cheap, low quality meters with design lives of 5 to 6 years. With the market growing at 10% a year, the short design life will have a knock-on effect of increasing the rate of replacement.
The Chinese government is demanding more sophisticated management of water, requiring more advanced meters, and the industry is developing to supply intelligent meters. In conclusion, the research shows that any water metering company wanting to improve its market position must look beyond the immediate dynamics of the meter market to fundamental drivers.
China is a good example. A large water meter manufacturing industry has been created and it is addressing demand in the largest market in the world. But that demand was created by an external factor, a central government decision to respond to a potential water crisis.