i Preliminary Market Outlook for In- water Nutrient Sensors by Abstract This paper provides a preliminary assessment of potential U.S. markets for in-water nutrient sensor technologies being developed as part of the federally sponsored Nutrient Sensor Challenge (NSC). These NSC-based technologies are not yet fully developed, are not expected to reach markets until 2017, and will differ from one another in ways that will affect their suitability in various market segments. As a result, there is still significant uncertainty regarding potential market demand overall, in specific market segments, and for particular NSC-based technologies. Estimates presented in this paper regarding potential sizes of markets and the timing of market development are based on ongoing research. These estimates should be considered preliminary and useful for general planning purposes. Data will be refined during 2016 and throughout the course of the NSC as new information becomes available about how particular NSC-based nutrient sensor technologies match user needs in specific market segments, and about key market drivers that will determine how rapidly these market segments are likely to grow. Key market drivers are associated with changes in water-related research priorities and federal and state water quality regulations, competing research and monitoring funding demands, public awareness and sense of urgency regarding national and regional water quality problems, and the cost and availability of competing methods of providing in-water nutrient measurements. Preliminary assessments of existing markets related to Federal, state, university, industrial, agricultural, and non-profit research and monitoring needs suggest that overall demand for in- water nutrient sensors with characteristics specified in the NSC, over the next five years, will be 24,000 to 30,000 units. At an average market price of $5,000 per unit, this constitutes a potential U.S. market of $120 million to $150 million. These preliminary market predictions are based on the assumption that these technologies will be available in the market place in 2017 and achieve a five-year adoption rate of 25% among potential users across various market segments. They do not take into account global market potential or potential in U.S. market segments that are expected to develop as a result of the availability of NSC-based sensors. Interviews with nutrient measurement users and representatives of various market segments indicate that increasing awareness of nutrient problems and new federal and state regulations,
24
Embed
Preliminary Market Outlook for In water Nutrient Sensors€¦ · Nutrient Sensor Challenge Economic White Paper ACT MS-2015-01 i Preliminary Market Outlook for In-water Nutrient Sensors
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Table of Contents Abstract...........................................................................................................................................i
Format Afterthisintroductionthepaperhasfoursections.Section2providessomecontextforassessingnutrientsensormarketsbydescribingthetypicalstagesoftechnologyandtechnologymarketdevelopment,andwherenutrientsensorsfallalongatypicaltechnologymarketdevelopmentcurve.Section3describesgeneralmarkettypesandspecificmarketsegmentsanddriversthatwilldeterminepotentialU.S.marketsfornutrientsensors.Section4presentspreliminaryestimatesofthepotentialsizeofoverallnutrientsensormarketsandspecificmarketsegmentsandhowactualmarketpotentialwillbeaffectedbyvariousratesandlevelsofadoption.Section5presentsthepotentiallong-termoutlookfornutrientsensormarketsrelatedtowaterqualityresearch,industrialapplications,andestablishingandmeetingregulatoryrequirements.Section6summarizesresults,presentssomeconclusions,offerscaveatsregardingtheuseofpreliminarymarketestimatespresentedinSection4,andidentifiessomeleadingindicatorsofnutrientsensormarketsthatshouldbemonitoredfromthispointforwardtohelppredictdemandinvariousmarketsegments.
Section 2 Stages of Technology Market Development Mostnewtechnologies(e.g.,toolsandmethodsusedinheartsurgery,spaceexploration,micro-processing,andscientificinvestigation)tendtofollowasimilarsequenceofdevelopmentandadoption.Figure1showstentypicalstagesofdevelopmentfornewtechnologiesandtechnologymarketsdepictedalongatechnology/marketdevelopmentcurvewhichprovidesausefulwaytocharacterizeandtrackevolvingmarketsforNSC-basednutrientsensors.InFigure1newtechnologiesareshowntostartwithpreliminary“proofofconcept”research(Stage1)whichisfollowedbyresearchtoclarifytheunderlyingscientificandengineeringbasisofthetechnology(Stage2),andthenbysomeinitiallaboratory-basedexperimentationaimedatdeterminingifthetechnologycanmeetcertaintargets(Stage3).Ifthetechnologyseemscapableofmeetingcertaintargets,thisisfollowedbysomelimitedfieldtrials(Stage4)andthensomelimitedcommercialproduction(Stage5).Furtherrefinementsareoftenrequiredbasedontheexperiencesofearlyadopters(Stage6)whichisfollowedbythestandardizationofproductionmethods(Stage7)andthescalingupofcommercialproduction(Stage8).Thisallowsprimarymarketstodevelop(Stage9)andmayresultinfurtherrefinementsandadaptationstosupportthedevelopmentofsecondarymarkets(Stage10).
Status of Nutrient Sensor Development Whileexistinginstrumentationtomeasurenutrientcouldbeconsideredinstage7or8,nextgeneration,NSC-basedin-waternutrientsensingtechnologies,inlate2015,arejustmovingintoStage4,whichisseveralstagesbeforetheywillgeneratemarketsales(Stages8through10).OrganizersoftheNSChaveofferedbetatestingandareofferingverificationtestingtoquantifyinstrumentperformance(Stage4)inordertoreducethetimeandcostofmovingthesetechnologiesintoearlystagesofcommercialproduction(Stage5).Thisishopedtobeachievedin2017.RelatedeffortsbytheNSCteamandothersareaimedatimprovingmarketefficienciesandreducingtransactioncoststofurtherreducethetimerequiredforthesetechnologiestomovethroughStages6and7andachievescaledupcommercialproduction(Stage8),widespreadadoptioninprimarymarkets(Stage9),anddiffusionintosecondarymarkets(Stage10).However,beforetheinvestmentsinproductioncapacityarelikelytobemadetoreachStage8,thereneedstobesomebasisforexpectingthatpotentialratesandlevelsofadoptioninprimaryandsecondarymarketsinStages9and10aresignificantenoughtogeneratereasonableeconomicreturn.ThispreliminaryassessmentofpotentialmarketsforNSC-basedsensorsisaimedatprovidingNSC-participantswithatleastbasicinformationtheycanusetoassessthesizeandlikelydevelopmentofprimaryandsecondarymarketsforNSC-basedsensors.ThiscorrespondstoexaminingfactorsthatarelikelytodeterminetheslopeofthetechnologymarketdevelopmentcurveinStage8(markedBinFigure1)andwheremarketsmaybeexpectedtoleveloffinStage9and10(markedCinFigure1).
Market Types and Drivers Preliminaryinterviewsidentifiedseveraldifferenttypesofpotentialmarketsfornutrientsensorsthatcanbecategorizedgenerallyasbeingresearch-driven,regulation-driven,ordrivenbydemandtoimproveoperationalefficienciesandreducecostsinindustrialfacilities,suchaswaterresourcerecoveryfacilitiesordrinkingwatertreatmentplants.Forpurposesofcharacterizingthesemarketsandtheirlikelyadoptionrates,weassumed:
Survey of Government/University Users In2014,AmericanUniversity’sCenterforEnvironmentalPolicyconductedanindependentstudyofthepotentialnutrientsensormarket(Marsh2014).Toassessuserneedsandgainaninitialunderstandingofthepotentialresearchandmonitoringmarket,aquestionnairewasdistributedtoprofessionalsintheacademic,Federalandstategovernment,non-profit,andcorporatecommunities.Keyfindingsfromquestionnairerespondentsincludethefollowing:
Analysis of Potential Demand by Market Segment Thepotentialsizeofmarketsfornewtechnologiescanbeestimatedbydeterminingthenumbersofentitiesinvariousmarketsegmentsthatcouldbebuyers,andthenprojectinglevelsofadoptionineachmarketsegment(e.g.thepercentofpotentialbuyerswhowillactuallymakepurchases).Wheredataareavailable,ratesandlevelsofadoptionofatechnologycanoftenbebasedonestimatesofhowpotentialbuyersineachmarketsegmentcanusethetechnologytoreducecostsorrisks,orincreasesomemeasureofbenefits.ForuserswhoarerequiredtocollectandreportnutrientdataandcanuseNSC-basedtechnologiestolowercostresultingcostsavingscanprovideabasisforattachingamonetarymeasureofvaluetothesenewtechnologies.Insomecases,thesecostsavingscanbeusedtopredictadoptionratesandmarketdevelopmentfornewtechnologiesbyprojectingpaybackperiodsorreturnsoninvestmentthatusersinvariousmarketsegmentscanexpectwhentheypurchasethenewtechnology.Currently,however,nutrientsensorsprovideinformationthatisusedmostlytomakedecisionsthatgeneratepublicbenefits(e.g.,improvedwaterquality)thatcannotbetranslatedeasilyintomonetarymeasuresofvalueandcannotbeusedeffectivelytopredicthowmanybuyersexistinvariousmarketsegmentsandtheir“willingnesstopay”.Afterusinggenerallyavailablestatisticstoidentifythenumberofentitiesineachmarketsegment(e.g.,businesses,governmentagencies,researchinstitutions),weaskedintervieweesfamiliarwiththesemarketsegmentsgeneralquestionsabouthowtheuseofsensorsmightreducecostsand/orrisksorincreasesomemeasureofbenefitsfromtheperspectiveofdecision-makersineachmarketsegment.Answerstothesegeneralquestionsandsomequantitativeestimatesofmarketpotentialofferedbyintervieweesformedthebasisofourpreliminaryestimatesofpotentiallevelsofadoptioninvariousmarketsegments(seeAppendixforsummaryofinterviews).
Overview of Interview Results Preliminaryinterviewswithmorethan30representativesofdifferentmarketsegmentsindicatedthatlikelyratesandultimatelevelsofadoptionineachmarketsegmentaredifficulttoprojectatthepresenttimeforthefollowingreasons:
Agricultural markets – A special case The2012CensusofAgricultureestimatedatotalof1,011,896farmsoperatingintheU.S.withfertilizer-relatedexpenses,andthat,nationwide,fertilizer-relatedexpensesmakeup8.7%ofoverallfarmexpenses(USDA2014).Morethan327,000operations(32.3%)spend$10,000ormoreonfertilizerannually(withalmost72,000operationsspending$100,000ormore).Byallowingthemonitoringoftheamountofnutrientsthatrunofffarmfieldsintoadjacentwaterbodies,theuseofaffordable,accuratein-waternutrientsensorshasthepotentialtohelpfarmersapplyfertilizersmoreefficientlyandresultincost-savingsaswellaswaterqualityimprovements.However,manymethodsotherthanin-waternutrientsensorscanbeusedtogenerateinformationaboutin-soilnutrients,nutrientuptakebycrops,andnutrientrunoffinordertoadjustfertilizerapplications,optimizecropgrowth,managefertilizercosts,andreduceedge-of-fieldnutrientrunoff.Asaresult,itisnotpossibleatthistimetopredicthowmanyfarmsmaybesituatedinwaysthatmakein-waternutrientmonitoringuseful,ortopredicthowmanyfarmersmightpurchaselow-costin-waternutrientsensorsiftheywereavailable.However,itisreasonabletoexpectthatatleastasmallportionofU.S.agriculturaloperationswithfertilizerexpensesmaypurchaseorfinancethepurchaseofoneormoreNSC-basednutrientsensorsoncetheybecomeavailable,especiallyifthesensorswereabletobeusedtodocument“creditable”nutrientdischargereductionsaspartofnutrientcredittradingprograms.Forsakeofillustration,assumethat1%ofoperationswithgreaterthan$10,000inannualfertilizerexpenseswillpurchaseoneortwosensorstoimprovefertilizerapplicationdecisions.Thislevelofadoptionwouldresultinthesaleof3,272to6,543unitswhich,ataunitpriceof$5,000,wouldrepresentamarketsegmentworth$16.4millionto$32.7million.
Section 5 Long-term Market Outlook Theprevioussectionfocusedonpotentialmarketsforin-waternutrientsensorsbasedontheirexpectedcapacitytooutcompeteothermethodsofmeasuringnutrientsinexistingU.S.markets,andthelikelihoodthattheirreliabilityandlowcostwillcausethoseexistingU.S.marketstogrow.Inconventionaleconomicterms,thesereflectbothoutwardmovementsalongthedemandcurveinexistingmarkets(demandincreasingbecauseofdeclinesinprice)aswellasanexpectedupwardshiftinthedemandcurveinthosemarkets(moredemandatanygivenprice).However,manyintervieweesindicatedthattheybelievedtheavailabilityofreliable,lowcostin-waternutrientsensorswillresultinthedevelopmentoftotallynewandpotentiallylargemarkets.Forexample,undersection303(d)oftheCleanWaterAct,allstatesmustdeveloplistsofimpairedwaterbodies(i.e.,thosethatdonotmeettheirdesignatedusecriteriaduetooneormorepollutants),anddevelopTMDLs(TotalMaximumDailyLoads)forrelevantpollutantsbeingdischargedintothesewaterbodies.Ofthe68,496TMDLscurrentlybeingdevelopednationwide,6,047specifylimitsonnutrientdischarges(USEPA2015b).Asaresult,manystatesandcountiesarebeingrequiredtodescribewhatchangesinlandandwateruseandother
Industry Market Segments Apotentiallysignificantmarketsegmentfornutrientsensorsincludesindustrialwatertreatmentfacilities,includingwaterresourcerecoveryfacilities(WRRFs)treatingsewage;drinkingwatertreatmentplants;andothersourcesofnutrientdischargesthatarecoveredbyNPDESpermits.Waterresourcerecoveryfacilitiesrepresentperhapsthelargestmarketfornutrientsensorswithdemandbasedonbothpermitcomplianceandreportingrequirementsandinternalprocesscontrolpurposes.TheestimatesprovidedinTable1shouldbeusedwithcaution,however,becauseourinitialinterviewswithWWRFrepresentativesrevealedarangeofopinionsaboutpotentialusesand/oreffectivenessofin-waternutrientsensorsintheseoperations.OneseniormanagerofamajorWRRF(treatingmorethan10milliongallonsperday)suggestedthatnutrientsensorsmeetingchallengerequirementswouldhavehugepotentialnotonlyforregulatorycompliance,butalsoforinternalprocesscontrol.Currently,theWRRFthisindividualmanagesconductson-siteanalysisofnutrientdatacollectedusingprobesthatcostabout$60,000andrequireexpensivemaintenance.IfChallenge-basedsensorsprovetohavethelinearrangeandanti-biofoulingmechanismsrequiredbytheseapplications,theywouldnotonlyreduceup-frontandmaintenancecosts,butwouldsavesignificantoperatortime,freeingupthatstafftimetofocusmoreeffectivelyonprocesscontrol.SeveralcontactsandintervieweesassociatedwithWRRFnotedthattherewillbearangeofpotentiallevelsofadoptionbasedongeography,withsomeareasofthecountry,suchastheGreatLakesandChesapeakeBaywatersheds,likelytohavemoreregulatorydriversofdemandthanotherpartsofthecountry.Onemanagernotedthatnon-coastalorGreatLakesareasofthecountrywithWRRFsreleasingdischargesintosmaller,moresensitivebodiesofwatermighthavehigherincentivetogathermoretimelyinformationforprocesscontrolpurposesthanWRRFsoperatinginotherareaswherereceivingwaterbodiesarelarger,havestrongtidalflushes,orcontainhabitatsandecosystemsthataregenerallylesssensitivetonutrientdischarges
Drinking Water Faci l it ies Thedrinkingwatertreatmentsectorisdifficulttocharacterize,foranumberofreasons.Nitrateisabigconcernformanydrinkingwaterfacilitiesinvariousareasofthecountry,includingonesusinggroundwaterorsurfacewatersources,aselevatedlevelsofnitratehavebeenlinkedtoblue-babysyndrome.Inotherareas,elevatedphosphoruslevelshaveresultedinharmfulalgalbloomsaffectingdrinkingwatersupply.Whilerelativelylargesystemsthatprovidewatertopopulationsof100,000ormore(morethan400systemsnationwide)aretypicallytreating
Federal Research and Monitoring Programs Federalresearchandmonitoringprograms,suchasthoseconductedbyUSGS,EPA,andNOAA,representasignificantsourceofpotentialdemandforNSC-basedsensors.Oneintervieweenotedinparticularthatthelowerpricepointtargetedbythechallengeiscritical,notonlyforFederalprograms,butforacademicandnon-profitinstitutionsaswell.Manypotentialusesofthesesensorsforresearchandmonitoringbyuniversities,non-profitsandfor-profitcompanieswillalsobefundedbyfederalgrantsandcontracts.
State and Local Research and Monitoring Programs Withmorethan6,000nutrientTMDLsnationwide,thereisanincreasingneedforstateandlocaljurisdictionsinareassubjecttoTMDLs,suchasthoseintheChesapeakeBaywatershed,togainabetterunderstandingofnutrientsources.OneexpertintheChesapeakeBayregionemphasizedthatfindingandremovingorreducingsourcesofnutrientdischargesmayhaveTMDL-creditbenefitsforregulatedcommunities.Anexampleofhownutrientmeasurementsareusedtomakedeterminationsaboutlevelsofnutrientremovalsandthe“creditworthiness”associatedwithparticulartypesofprojectsisanOctober2014recommendationoftheChesapeakeBayProgram’s“ExpertPaneltoDefineRemovalRatesfortheEliminationofDiscoveredNutrientDischargesfromGreyInfrastructure”.(Schueleretal.2014).TheChesapeakeBaywatershedisoneofthemostactiveregionsofthecountryintermsofTMDLdevelopment,andcanbeviewedasamodelforotherregions,andforhowChallenge-basedsensorsmighthelpinformongoingrefinementofwatershedcleanupmodelsandbestmanagementpractices(BMPs).TheChesapeakeBayProgram(CBP)WaterQualityGoalImplementationTeam(WQGIT)isresponsibleforapprovingloadingestimatestoquantifyexpectedamountsofnutrients(nitrogenandphosphorus)orsedimentloadstowaterfromspecificlandusesorpointsources.TheCBPhasdevelopedaprotocol(CBP2015)thatoutlinesspecificproceduresforitsbest-management-practiceExpertPanelstofollowsotheprocessisconsistent,transparent,andscientificallydefensible.
Other Market Segments Academicresearchersinterviewedforthisprojectwere,ingeneral,excitedbytheprospectofNSC-basedproductsandhowtheycouldbeusedtoidentifythesourcesandimpactsofwaterqualityproblemsandfindcost-effectivesolutions.Morethanoneacademicresearcherwasoptimisticthatthemarketamongtheirpeerswouldbestrong,indicatingthatataunitpriceoflessthan$5,000eachofthemmightpurchaseasmanyas10NSC-basedsensorsaspartoftheresearchgrantstheycurrentlymanage.However,withoutdoingsomeresearchtheywerenotwillingtoprovideestimatesabouthowlargetheoverallresearchmarketwaslikelytobe.AresearcherintheChesapeakeBaywatershedindicatedthattheavailabilityofsensorsthatcantakesamples,regardlessofweatherconditions,willgreatlyreduceuncertaintyabouthowprojectsaffectnutrientdischargesandimprovegeneralunderstandingofhowwatershedsystemswork.Forexample,inlargestormevents,itisgenerallyunderstoodthatnutrientconcentrationschangerapidly.However,becauseresearcherscannotsafelytakewatersamplesatsomelocationsexceptbeforeandafteraseverestormthe“snapshots”ofconditionstheyareabletocollecttellonlypartofthestory.AlthoughthisresearcherbelievedthepotentialresearchmarketforNSC-basesensorswouldbelarge,hewas,understandably,unwillingtopredicthowlarge.