01. Top level design - systematization from "water treatment" to "water ecology"

 

Through the development of the past stage, top-level design has basically realized that many problems in the field of water treatment cannot be solved without taking solutions on high-dimensional systems.

 

Taking the treatment of black and odorous water bodies as an example, the idea of treating headaches has already failed. We can only look at the problem and propose solutions from a higher dimension, namely, coordinating the onshore and pipeline networks.

 

In China, significant progress has been made in the management of physical and chemical indicators of the water environment, but there are significant shortcomings in the protection of water ecology, and the issue of imbalance and disharmony remains prominent. For example, non-point source pollution is becoming increasingly prominent, water ecological imbalances are causing unreasonable utilization of water resources, lack of initiative in ecological environmental protection, and lack of integrity and systematicness in ecological environmental governance.

 

Since entering the "14th Five Year Plan", the top-level design planning in the field of water treatment has increasingly emphasized systematization, and "water treatment" has been upgraded to "water environment" and "water ecology". In the report of the 20th National Congress of the Communist Party of China last year, it was clearly stated that "overall planning of water resources, water environment, and water ecological governance" would be encouraged and guided by the state to take the lead in localities where conditions permit.

 

Water pollution is the most common form of environmental pollution, closely related to other fields such as gas, solid, and soil in various aspects such as the source, pollution process, and prevention process. This determines two top-level thinking in the field of water treatment:

 

First, water pollution control needs to fully consider the transfer process of pollution from the four major sectors of water, gas, solid, and soil, deepen the extension and systematic treatment of each sector, and carry out comprehensive management across multiple sectors.

 

The second is that water environment governance can serve as a core solution to some major ecological and environmental issues, such as the protection of the Yangtze River.

 

Water treatment is the first field to develop in the environmental protection industry, and has been extended to deep water areas after years of development. For some difficult problems involving multiple fields and departments, it is necessary to upgrade the dimension of solutions.

 

The governance of a river or an ecological region is difficult to achieve results at a local or single level. It is necessary to coordinate governance at a higher level. Taking the Yangtze River Protection as an example, the solution needs to coordinate upstream and downstream, various provinces and cities, various industries, engineering and supervision, technology and financing. The leading unit also needs the participation of central enterprises such as the Three Gorges.

 

At the market level, in recent years, comprehensive governance projects such as the integration of factories, networks, rivers, lakes, parks, and water ecological governance have frequently emerged, and the systematization trend of top-level planning is becoming increasingly prominent. Take Suzhou to build "the Taihu Lake Lake Ecological Island" as an example:

 

In November 2020, the CPC Suzhou Municipal Committee and the Suzhou Municipal Government proposed to build the "the Taihu Lake Lake Ecological Island" to a high standard and create a "Chinese sample of the global sustainable development ecological island".

 

In February 2021, the Development Planning Ideas of the Taihu Lake Lake Ecological Island was officially released, covering water environment improvement, biodiversity, green agriculture, etc.

 

In August 2021, the Regulations of the Taihu Lake Lake Ecological Island in Suzhou will be officially implemented, which is the first time in Suzhou and the first time in Jiangsu to legislate specifically for the Taihu Lake Lake Island. Article 12 of the Regulations provides for strengthening the prevention and control of soil pollution, reducing agricultural non-point source pollution, reducing the amount of chemical fertilizers and pesticides, increasing efficiency, and recycling organic waste.

 

In September 2021, the the Taihu Lake Lake Ecological Island Development Plan (2021-2035) led by the Nanjing Institute of Geography and Lakes, Chinese Academy of Sciences, was officially released.

 

In September 2021, the Suzhou the Taihu Lake Lake Ecological Island Construction Promotion Conference was held in Xishan Island, the Taihu Lake Lake. 22 projects with a total investment of 38.7 billion yuan were collectively signed, and a green financial credit line of 30 billion yuan was reached, which means that the construction of the Taihu Lake Lake Ecological Island, the first protected by legislation in Jiangsu, has entered a new stage of overall acceleration.

 

The systematization trend in the field of water treatment can be understood as follows: what the industry did in the past can be seen as driving many piles, but now the systematization is to build houses on piles.

 

Correspondingly, enterprises only needed the ability to pile in the past, but in the future, they also need the ability to build houses with higher dimensions. Water environment governance enterprises face the challenges of multi professional cooperation, integration of various professional technologies, and the formation of integrated technologies suitable for water environment governance.

 

Regarding the development direction of the water treatment industry, Li Li, CEO of Beikong Water, recently spoke in a media interview:

 

The field of water treatment is undergoing a "partial to overall" transformation. It used to extend from "end" to "upstream", but now it extends from "local" to "overall". "Plant Network River Lake Coastal" extends from "single water medium governance" to "water solid gas multi medium co governance", from "single infrastructure construction" to "multiple infrastructure co construction", and from "energy conservation and consumption reduction" to "emission reduction and carbon reduction co construction".

 

In recent years, based on market trends, Beikong Water has established a new model for the coordinated development of plant network integration, reclaimed water, and sludge businesses, while focusing on the development of four new track businesses, namely, environmental sanitation, equipment, industrial water, and new solid waste, to form a benign interaction and coordinated development of the business portfolio.

 

Note: Since entering the "14th Five Year Plan" period, the entire environmental protection industry has been undergoing the restructuring of top-level design, which is a core variable determining the development trend of the industry. In the second half of 2022, the industry's first "China Environmental Protection Industry Trend Insight Report" focusing on the "14th Five Year Plan" was released, which is a systematic review of the "transitional China environmental protection industry", and is intended to provide decision-making reference for environmental protection enterprises' strategic research and judgment. If you are considering relevant issues, I hope I can help you with this subscription report.

 

02. Industrial development - emphasis on balanced pipe network, sludge, and operation

 

There has always been an imbalance in the development of the water treatment field. The industry focuses on terminal treatment, treatment standards, and engineering construction, while lacking in balanced planning, operation management, and high-quality development.

 

With the saturation of the construction of terminal facilities in the first half, the development of the water treatment field has entered a stage of comprehensive and balanced development.

 

(1) Infrastructure dimension: supplementing the short board of pipe network

 

According to the "14th Five Year Plan" and the relevant directions of the 20th National Congress of the Communist Party of China, the construction and upgrading of infrastructure is still a key issue in the field of water treatment, but the focus is on the pipeline network and other fields.

 

For a long time, the development of the water treatment field has been characterized by "surplus terminals and insufficient pipe networks", and the focus of the industry has always been on the construction of plants and stations.

 

The lagging construction and transformation of pipe networks is a major pain point that restricts the development of the industry. Compared to visible sewage treatment plants, invisible pipe network construction is easily ignored and more difficult.

 

Since entering the 14th Five Year Plan, the battle for tackling this painful point has officially begun.

 

In January 2022, the National Development and Reform Commission and other four departments issued the "Guiding Opinions on Accelerating the Construction of Urban Environmental Infrastructure", which called for accelerating the filling of weaknesses and weaknesses in key areas and areas, promoting the full coverage of urban sewage pipe networks, promoting the "integration of plants and networks" of domestic sewage collection and treatment facilities, adding 20 million cubic meters of sewage treatment capacity per day, and adding and transforming 80000 kilometers of sewage collection pipe networks.

 

In this trend, many giants have begun to lay out the direction of pipe networks in the past two years. On December 28, 2022, Yangtze River Ecological and Environmental Protection Group established Yangtze River Pipe Network Co., Ltd. with a registered capital of 10 billion yuan.

 

Three Gorges Group stated, "Four years of water control practice has proven that pipe network is a key link and prominent issue that restricts the improvement of quality and efficiency in urban sewage treatment, and is an important starting point for further promoting water pollution prevention. Urban pipe networks along the river have obvious weaknesses and lack long-term mechanisms in terms of fund raising, operation and maintenance, and system management. During the" 14th Five Year Plan "period, water pollution prevention and control needs to focus on solving pipe network problems to prevent the rebound of black and odor phenomenon, "Realize the long-term rule of Qing Dynasty."

 

"Establish the Yangtze River Pipe Network Co., Ltd., cooperate deeply with local governments to help solve the problem of weak pipe network infrastructure, and explore a collaborative path of self owned capital investment, central special fund point to point allocations, and local fund matching use."

 

As the main body of the Yangtze River Environmental Protection Group, which is affiliated to the Three Gorges Group, in implementing the pipeline network battle in the Yangtze River Economic Belt, the establishment of the Yangtze River Pipeline Network Co., Ltd. is of great significance for the Three Gorges Group to further promote pollution prevention in the Yangtze River Economic Belt, marking the comprehensive launch of the pipeline network battle.

 

(2) Industrial chain dimension: strengthening sludge disposal

 

Water treatment is a relatively mature field in the environmental protection industry, but it is not thorough. One of the prominent links that is not thorough is the non-standard and uneconomic disposal of sludge.

 

For a long time, due to the limited processing capacity of sludge disposal units, some sewage plant sludge cannot be transported out in time, resulting in abnormal sludge concentration in production and treatment units, which to some extent restricts the normal production and operation of sewage treatment plants.

 

In the process of gradually shifting the focus of industry development towards "high quality and heavy operation", the country has further strengthened its attention and supervision on sludge disposal.

 

In November 2020, the Ministry of Ecology and Environment issued the "Notice on Strengthening the Prevention and Control of Sludge Pollution in Urban Sewage Treatment Plants", which mentioned:

 

"Encourage the recovery and utilization of energy and resources from sludge on the premise of safety, environmental protection, and economy." "Sewage treatment plants should be responsible for the environmental impact of sludge farming; if they cause soil and groundwater pollution, they should be repaired and treated." "It is prohibited for sludge treatment and disposal units to receive sludge beyond their disposal capacity."

 

Under this trend, solutions and related technologies such as sludge in situ treatment are beginning to emerge in the industry.

 

(3) Operation management dimension: upgrade operation capability

 

In the previous article, we have basically clarified the significant transformation of the water treatment industry from the era of incremental engineering to the era of inventory operations.

 

Many friends mistakenly believe that this is the end of the fierce battle in the industry in the first half, but in fact, it is not. This is the beginning of another battle.

 

In the first half of the industry, there were many players who were equally capable of competing in the market, but there was a huge gap in the level of asset operation.

 

Some enterprises' operational capabilities are completely unqualified, and they are facing a huge test during the transition process from engineering to operation.

 

With the end of the engineering era, the competition between water treatment enterprises around operations has truly begun, and leading players in the industry will be involved in operations. Enterprises with poor operational capabilities will face challenges, while enterprises with strong operational capabilities may face another wave of opportunities.

 

03. Governance Concept - Redefining the Value of Water Treatment Industry through Resource Utilization

 

Regardless of international advanced experience or domestic actual situation, resource utilization is the trend in the field of water treatment.

 

However, China is a country with a shortage of water resources, and the level of wastewater utilization is low.

 

In 2019, the total water consumption in China was 602.1 billion cubic meters, a year-on-year increase of 0.09%, including 498.2 billion cubic meters from surface water sources, 93.4 billion cubic meters from underground water sources, and 10.4 billion cubic meters from other water sources. China's water supply source is still mainly surface water. According to internationally recognized standards, China is in a state of slight water shortage (per capita water resources are less than 3000 cubic meters).

 

With the development of the industry, resource utilization has become an important trend in the water treatment industry.

 

Since 2020, China's sewage recycling policies have been intensively released:

 

In January 2021, 10 ministries and commissions, including the National Development and Reform Commission, the Ministry of Science and Technology, the Ministry of Industry and Information Technology, and the Ministry of Finance, issued the Guiding Opinions on Promoting the Utilization of Wastewater as Resources. According to the opinion, by 2025, the utilization rate of renewable water resources in water deficient cities at or above the prefecture level nationwide will reach over 25%, and that in the Beijing Tianjin Hebei region will reach over 35%; The level of reuse of industrial water, livestock and poultry manure, and the resource utilization of aquaculture tail water has significantly improved; The policy system and market mechanism for wastewater resource utilization have been basically established. By 2035, a systematic, safe, environmentally friendly, and economic pattern of wastewater resource utilization will be formed.

 

In May 2021, the National Development and Reform Commission and the Ministry of Natural Resources issued the Action Plan for the Development of Seawater Desalination Utilization (2021-2025). The action plan clearly states that by 2025, the total scale of seawater desalination in the country will reach 2.9 million tons/day or more, and the new scale of seawater desalination will reach 1.25 million tons/day or more, including 1.05 million tons/day in coastal cities and 200000 tons/day in island areas. The key core technology and equipment for seawater desalination are independently controllable, and the modernization level of the industrial chain supply chain has been further improved. The standard system for seawater desalination utilization is basically sound, and the policy mechanism is more perfect.

 

In June 2021, the National Development and Reform Commission and the Ministry of Housing and Urban-Rural Development issued the "14th Five Year Plan" for the Development of Urban Sewage Treatment and Resource Utilization. The plan clearly states that by 2025, the direct discharge outlets and blank areas of collection and treatment facilities for domestic sewage in urban built-up areas will be basically eliminated, and the centralized collection rate of urban domestic sewage nationwide will strive to reach over 70%; The sewage treatment capacity of cities and counties basically meets the needs of economic and social development, and the sewage treatment rate of counties reaches over 95%; Wastewater treatment in water environment sensitive areas basically meets the Class I A discharge standard; The utilization rate of renewable water resources in cities with water shortage at or above the prefecture level nationwide will reach over 25%, and in Beijing, Tianjin, and Hebei regions will reach over 35%. Cities with water shortage at or above the prefecture level in the middle and lower reaches of the Yellow River basin will strive to reach 30%; The harmless disposal rate of urban sludge reaches over 90%.

 

In December 2021, the Ministry of Industry and Information Technology, the National Development and Reform Commission, the Ministry of Science and Technology, the Ministry of Ecological Environment, the Ministry of Housing and Construction, and the Ministry of Water Resources issued the Implementation Plan for the Recycling and Utilization of Industrial Wastewater. The plan points out that by 2025, we will strive to achieve a reuse rate of about 94% for industrial water above designated size, further improve the reuse rate of industrial water above designated size in industries such as steel, petrochemical and chemical industries, and nonferrous metals. The reuse rate of industrial water above designated size in industries such as textile, paper, and food will increase by more than 5 percentage points compared to 2020, significantly increase municipal reclaimed water for industrial use, and decrease the water consumption for industrial added value per 10000 yuan by 16% compared to 2020, A new pattern of efficient recycling and utilization of wastewater from major water consuming industries has basically taken shape.

 

Combined with the situation of water resource protection, water ecological restoration, water pollution prevention and control, and the sustainable development of the future economy and society, the utilization of sewage resources may be further upgraded into a national strategy, which will have a significant impact on the water industry and environmental protection industry, and is likely to spawn a new subdivision of the field.

 

With the target of 35% renewable water utilization rate in 2025, the investment space for wastewater resource utilization during the "14th Five Year Plan" period is expected to reach nearly 100 billion yuan.

 

 

 

The above municipal, industrial, and rural wastewater treatment and recycling markets will accelerate their release.

 

In addition, at present, domestic membrane technology is an important process for advanced water treatment and wastewater recycling. With the trend of recycling, the market share of domestic membrane equipment is expected to increase, and the membrane market leader will take the lead in benefiting.

 

04. Service Capability - Specialization from "Barefoot Doctor" to "Specialized Hospital"

 

The issue of professionalism is worth exploring forever. Fortunately, the trend of emphasizing professionalism and emphasizing professionalism in the field of water treatment is approaching.

 

The extensive development in the past has caused the industry to despise technology and even profession, which is consistent with the past development process of the industry, but contrary to the future development trend.

 

The first priority in the context of high-quality development is to enhance industry professionalism.

 

In the future, it may not be realistic for enterprises to rely solely on technological innovation as a driving force, but it is a pragmatic and good suggestion to improve their professional level and enhance their competitiveness.

 

It can be said that there are no unique secrets in the domestic water treatment field, but it cannot be said that water treatment enterprises can not have a professional level.

 

Two events that have occurred in the environmental protection industry over the past decade point directly to the trend of specialization in the field of water treatment:

 

First, the construction and improvement of relevant laws and regulations have truly suspended the sword of punishment; The second is the establishment of a regulatory mechanism focusing on environmental supervision.

 

Although it is not yet possible to fully implement supervision and punishment at this stage, the previous two rounds of environmental supervision are enough to deter people.

 

A huge shift here is that the risk of pollution subjects getting lucky and faking is becoming higher and higher, and they are becoming more and more afraid to fool and delegate the task of pollution control to unprofessional enterprises.

 

In this trend, the professional ability to solve problems is increasingly needed by owners, not only to be effective, but also to be easy to use (stable, energy-saving).

 

Unlike manufacturing and construction industries, the formulation of solutions in the water treatment industry is highly personalized and difficult to standardize. Even in the very mature municipal field, the situation of two water plants varies, and the benefits of operating the same water plant by different people also vary.

 

In such an industry, the core competitiveness is professionalism and experience. In fact, water treatment enterprises and hospitals are the same, and the core asset or ability is people, experienced and professional engineers/doctors.

 

There has always been a reference to "specialized hospitals" in the industry, which is essentially aimed at the professionalism of the industry. As the industry shifts from being driven by "investment+engineering" to being driven by "operation+service", more and more "specialized hospitals" will be needed in the field of water treatment.

 

During the research, it can be found that many specialized and specialized new water treatment enterprises are moving towards the model of "specialized hospitals".

 

It is true that everyone can participate in the water treatment industry, but not everyone can be skilled and specialized.

 

In general, the field of water treatment is transforming from the era of "barefoot doctors" to the era of "specialized hospitals", and it will become increasingly difficult for enterprises without professional standards in the future.

 

In addition, in the context of dual carbon, the professional service capabilities of water treatment enterprises are facing two aspects of upgrading:

 

One is the ability to save energy and reduce consumption. Water treatment enterprises not only need to have the basic ability to meet standards, but also need to be able to achieve low carbon and low energy consumption.

 

The second is the ability to operate intelligently. For large heavy asset enterprises, optimizing asset operation efficiency through intelligentization has been applied in the industry. In the era of high quality and dual carbon, the existence of intelligence is no longer a decoration, but a sharp tool for "energy conservation, consumption reduction, compliance and risk avoidance".

 

05. Industry Pattern - Centralized Merger and Integration Promotes Scale Development

 

Based on the above analysis, the overall transformation of the water treatment field has shifted from an engineering era of emphasizing construction over operation to an era of improving quality, efficiency, and high-quality operation.

 

Specifically, the dimensions of pipeline network upgrading, operation and maintenance, sewage collection rate, pollutant reduction rate, resource utilization, energy conservation and low-carbon, and intelligence are receiving increasing attention.

 

In the trend of increasing competition in the industry, the pattern of the water treatment industry is also changing, mainly manifested in the increased concentration of the industry.

 

On the one hand, in the era of operation, the situation of assets in the hands of different enterprises will vary greatly. Enterprises with ordinary capabilities will struggle, while enterprises with strong capabilities are reaping their stocks.

 

On the other hand, mergers and acquisitions (M&A) integration is originally the driving mode of leading enterprises. After experiencing the previous round of chaos and chaos, there will be a cyclical wave of integration.

 

Referring to the situation in the international water treatment field, there is still considerable room for improvement in the market concentration in this field in China.

 

Intra-industry mergers and acquisitions can achieve geographical expansion, broaden regional and business layout, and achieve scale effects for enterprises. In recent years, major water treatment companies in the industry have further expanded their business footprint through mergers and acquisitions, especially after various state-owned enterprises have entered the market. This trend is even more evident.

 

According to the statistics of billion level projects in the environmental protection industry in 2022, 64.19% of the winning companies are state-owned enterprises, 35.35% of the winning companies are private enterprises, with state-owned enterprises taking the advantage; Based on the total amount of projects, the total amount of projects won by state-owned enterprises accounts for 90.18%, while the total amount of projects won by private enterprises accounts for 9.72%. The advantages of state-owned enterprises are even greater.

 

Some local state-owned enterprises are even promoting mergers and acquisitions in a systematic manner. 2023 may usher in a major year of mergers and acquisitions, and the concentration of the industry will further increase.

 

06. Conclusion: Water industry reform, introducing the old and bringing forth the new

 

The water treatment industry in China is a complex, huge, and volatile field, and the development of the industry naturally requires the introduction of new ideas through the old.

 

In the process of maturing the industry, there will inevitably be policy upgrades, industry iterations, and enterprise integration.

 

"The 14th Five Year Plan" is a turning point in the first and second half of the water treatment field. During this period, there will be significant changes in top-level planning and policy guidance, and water treatment enterprises also need to adjust their strategic layout accordingly.

 

It is not difficult to find that there are obvious bottlenecks in the development of many enterprises, which corresponds to the situation of the industry.

 

In an era of great changes, we must keep pace with the times, not be eliminated by the tide of the times, but also seize opportunities in the future trends.