Oasys Loves That Dirty Water From Fracking and Now, Coal Plants

9/3/14Follow @mlamonica

Everyone knows there’s a need for technologies to make fresh water safe for drinking. But Oasys Water has found the strongest demand for its technology comes from treating some of the nastiest water around, particularly wastewater associated with fossil fuels.

On Tuesday, the Boston-based company said its forward-osmosis water purification system will be used at a coal power plant in China to remove the sulfur from polluted water. It’s the first of what could be hundreds of similar deals for Oasys in the coming years in China, where coal plant operators face regulations to treat water used to remove sulfur from coal plant gases, says Oasys CEO Jim Matheson.

Oasys Water’s purification technology is already being used to clean water produced by oil and gas drillers during hydraulic fracturing, or fracking. With this deal in China, Oasys Water is taking the next step in expanding into industrial water treatment. It’s not the most glamorous market, but one that’s seeing rapid growth. In oil and gas alone, PacWest Consulting estimates the market for treating water is over $700 million and will grow at over 20 percent annually through 2016.

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Oasys CEO Jim Matheson

In the 1990s and 2000s, there was a great deal of spending on techniques to treat drinking water. But U.S. municipalities, many of which are cash-strapped, tend to make decisions about new technology slowly and have trouble recuperating their investments because of the relatively low price of water. Also, established technologies, such as reverse osmosis, already treat municipal water effectively, so a startup with novel technology may have difficulty differentiating itself, notes Matheson.

By contrast, industrial water users are being pressured by regulators to treat water before discharging it or are seeking ways to recycle water because they have concerns over securing enough of it. “This whole idea of wastewater reuse is becoming interesting to industrial customers around the world and if you can show them a strong return on investment, they tend to be very pragmatic,” Matheson says.

In general, entrepreneurs and investors say it’s tough for startups to compete in the industry because a few large incumbents dominate the water treatment market and buyers tend to be conservative. But a number of water companies are focusing on industrial wastewater. In the Boston area, there is Cambrian Innovation, which has a biological method for treating wastewater from food and beverage manufacturing, and Clean Membranes, which is initially targeting the oil and gas market.

For Oasys, its focus on industrial markets marks a shift from the original plan to use its forward-osmosis technology, which has its roots at Yale University, to desalinate municipal water. In the near term, the company is treating water with a lot of pollutants that needs to be brought up to a high level of purity, says Matheson, an investor in Oasys Water (from Flagship Ventures) who joined as chief executive in 2012.

In the China deal, Oasys Water has a partnership with a local construction and engineering firm to treat the water that removes sulfur and other pollutants from the smokestack gases from the Changxing Power Plant, located in China’s northern Zhejiang province. Its method is cheaper than the alternative of evaporating the water and removing the pollutants before releasing it into the environment or reusing it, Matheson says.

Martin LaMonica is a national correspondent for Xconomy covering energy and technology. You can reach him at mlamonica@xconomy.com or @mlamonica. Follow @mlamonica

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  • BostonBizPerson

    Let’s hope they have taken steps to prevent IP theft in China…