Can Water Infrastructure Absorb Price Hikes of Ongoing Inflation?

By Emily Newton

Water infrastructure professionals face increasing challenges due to inflation, making it more difficult to budget for repairs, maintenance, upgrades and other cost-related necessities. Whether you’re experiencing the same difficulties now or believe you may in the future, it’s important to have plans for conquering them.

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Creating a New Construction Crew

Officials associated with Florida’s Tampa Water Department believe they can tackle rising costs by relying on a specially formed construction crew. The nine-person Engineering Construction Crew has 90 years of experience between them. They assist with critical infrastructure work — from extending water mains to installing new meters — so it happens more efficiently.

Besides the time saved with this approach, this team allows the water authority to complete more of its work internally, resulting in lower overall costs and better visibility. This specially formed team will also give department officials improved oversight into which tasks to complete and when, allowing decision-makers to spend their budgets more confidently. The crew began working in late 2023, saving the department more than $400,000 in construction-related costs.

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If you’re considering taking a similar approach, think about the skills people currently working at your company possess. If applicable, it’s also wise to take a closer look at why your company typically depends on third-party contractors. What benefits does outsourcing bring and could you replicate or exceed them by creating a dedicated team?

Creating a new team may require hiring more people to fill the former duties of those who now work within the special group. Hiring and onboarding people can take longer than expected, so you may need to be particularly flexible about when and how the members of the dedicated team begin their work. One way to potentially avoid a labor shortage is to have those people gradually move to the new team so they don’t immediately cease the duties their old roles required.

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Spending Money Now to Save Money Later

Water infrastructure professionals know eliminating costs is an unrealistic and dangerous prospect. However, it’s easier to justify spending money in an inflation-driven economy when leaders understand the expenses incurred now will eventually pay off in sustained savings.

One example comes from Singapore’s Public Utilities Board, the national water agency. When officials gave a September 2023 update about work associated with the Tuas Water Reclamation Plant, they detailed how inflation was causing significant cost increases and delays. The parties explained how the second phase of the Deep Tunnel Sewerage System project would cost nearly twice the first phase, primarily due to increasing construction and labor costs.

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Those commenting on the rising costs said running water infrastructure projects in urbanized areas is particularly expensive. Such efforts usually require building smaller structures and using less-invasive methods. The officials gave pipe jacking as an example. While it’s not as disruptive to the surrounding infrastructure as other options, it costs 70% more to do now than in 2017.

However, once completed, the Tuas Water Reclamation Plant will generate 80% of the energy required for treatment processes — or 55% more than the energy made by similar industrial water facilities. Plus, those involved determined they could offset some of the increased construction costs by discharging treated effluent directly into the sea. That option will eliminate the need for a long and deep discharge pipe that would have cost $650 million or more.

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Additionally, the plant will utilize biological processes for odor control and the treatment of used water, reducing the chemicals needed. This is another reason people can rest assured that the plant will save money in the long run, even though costs are higher than expected now.

When inflation pushes up costs, one common tactic is for affected parties to transfer the expenses to customers. The United Kingdom’s Thames Water is in particularly severe financial trouble, some exacerbated by inflation. Estimates suggest the company’s debts account for approximately 80% of its value. Additionally, the interest paid on the debt relates to the retail prices index measure of inflation.

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The company’s owners want to raise customer costs by 40% to start reducing debt.

Many people are understandably upset about that possibility. However, the outrage would undoubtedly increase if more customers dealt with service outages on top of the higher bills.

Investing in Measures to Increase Service Reliability

Numerous things can cause such disruptions, but clean energy has begun impacting more of them. As more water company leaders transition to solar and wind energy to power their facilities, they must consider how to keep operations running despite fluctuations in that output.

Microgrids make the energy supply more reliable by allowing users to switch between sources. These assets generally serve specific areas rather than single customers. They can also enhance overall sustainability by reducing peak-load congestion. Even if a water company primarily uses solar energy, a microgrid would allow it to occasionally switch to getting power from the main grid. Such flexibility significantly reduces the likelihood of outages.

In one real-life example, water infrastructure professionals from AEP Ohio have contracted with a power management company to have a microgrid installed at a Columbus facility. This project is the first renewable energy microgrid in the city. It will improve access by keeping the water flowing when outages happen. The system includes a 440-kilowatt-hour battery backup system and a 100-kilowatt solar power system.

City authorities are also excited about how the microgrid will increase resilience in the face of climate change complications. The mayor said they’re already affecting the quality of life for area residents. He and other officials recognize their obligation to meet the challenges by increasing infrastructural resilience.

Relying on Funding Programs

Decision-makers overseeing water infrastructure must remain aware of initiatives that could enable them to upgrade water infrastructure despite inflation-related budgetary constraints. In the United States, the Biden administration’s Bipartisan Infrastructure Law (BIL) provided more than $5.8 billion for stormwater, drinking water and wastewater upgrades.

One example of the possibilities comes from Pennsylvania, which received $240.2 million in BIL funds. State authorities will use approximately $160 million of the amount to upgrade water facilities and replace approximately 19 miles of lead pipes with safer options.

These improvements will make the infrastructure more resilient against future challenges and significantly reduce the adverse health effects associated with water access and lead pipes. Unfortunately, Pennsylvania is not the only state that needs lead-free infrastructure.

A March 2024 study analyzed the water supplies of almost 40,000 households in the Chicago area. The results showed nearly 70% of city residents under six may have lead-contaminated tap water. The study examined water supplies containing lead levels of at least one part per billion.

However, 9% of the samples had at least 15 parts per billion. Federal regulators require municipalities to take urgent action to reduce those levels. Inflation could make such upgrades harder, but specific funding measures lessen the challenges.

Inflation Can Complicate Water Infrastructure Upgrades

Ongoing inflation means water infrastructure professionals must be creative and open-minded about how and when to handle necessary upgrades. However, these examples show possibilities for people who explore all their options and look for ways to save money through the planned improvements.

Emily Newton is a construction and industrial journalist. She is also the Editor-in-Chief for Revolutionized Magazine. Keep up with Emily by subscribing to Revolutionized’s Newsletter.