Has Ceramic Membranes Missed its Window of Opportunity?

 

Some ceramic membrane advocates may not like what I am saying here, but I believe the window of opportunity in the U.S. for ceramic membranes is closed… Ten to fifteen years ago when many of the polymeric membranes on the market had significant integrity issues, there was a lot of interest in ceramic membranes offering warranties of 20 years or more and virtually no breakages over this period. At that time the leading manufacturer of ceramic membranes for large municipal systems was Metawater (know as NGK up to 2008) with a large installed base in Japan. Originally Metawater had an exclusive arrangement in the US to sell through Kruger and a contract for a 5 MGD system was secured with Parker CO around 2009. At this time, Memcor and Zenon, two of the largest membrane system suppliers at the time, had experienced a lot of membrane integrity issues at many installations helping to create a lot of interest in ceramic membranes. Despite this interest, high costs of ceramic membranes and the systems prevented adoption for drinking water applications at any other large-scale installations (see my 2011 post). Around 2015, when Metawater had started selling their ceramic system directly rather than through Kruger, a 7 MGD system was installed at Butte MT. I wonder if selling through Kruger was not the best strategy, where Kruger was not well known as a membrane system supplier and had a large suit of established water treatment technologies (such as Actiflo) that would have diluted the sales and marketing effort towards its ceramic membrane systems. I think the opportunity was missed to sell a lot more ceramic membrane systems 15 years ago.

Membrane Integrity Advantage over Polymeric has diminished the Past 10 years

At the time that Memcor and Zenon were having their membrane integrity issues, Pall with the Asahi membrane was quickly establishing a reputation of having a very robust membrane with minimal fiber breakages and was quickly gaining market share. Riding on the back of Pall’s success, around 2010, companies such as Toray and Dow (now Dupont) brought membranes to market that had similar fiber thicknesses, same material (PVDF) and were outside-in pressurized modules as were Asahi’s. As OEMs such as Wigen Water Technologies and H2O Innovation installed systems with these membranes it was found that these membranes did have significantly improved integrity compared to the earlier Memcor and Zenon submerged membranes. I do have to mention that as the early pioneers of large-scale MF and UF membranes, Memcor and Zenon were learning on the run about membrane materials, module construction and cleaning regimes. The later entrants to the market have capitalized on these developments to produce very good membrane modules the past ten years.

With much improved polymeric membranes available now, plus the ability to have Open Platform/Universal MF/UF racks, I do believe the opportunity for wide adoption of ceramic membranes for standard municipal applications has passed. I discussed this with some ceramic membrane veterans (ex Metawater, PWNT and Nanostone) at AWWA's ACE in San Antonio last month and they said there are still good opportunities in Europe for replacing some of the older, poor performing UF membranes (I assume these are inside-out PES membranes), none of which really gained traction in the U.S., with the exception of the Inge/Dupont multibore membrane which is a lot stronger than its predecessors. But I have to say it looks like ceramic membranes will remain to a niche product in the U.S. in the foreseeable future as I predicted in my post back in 2011.

The comments and opinions in this post are my own and not those of my employer.

Equipment Supply Contracts Should be Thrown Out and Started Again

 It is time for OEMs and Contractors to make a stand!

Ever since I have been involved in the capital supply business in North America, equipment procurement contracts in the water treatment industry have treated suppliers as banks for contractors and owners, with ridiculously long price validation periods, crippling liquidated damages for delays and uncapped liabilities. Well maybe the times are finally a-changin’!

In times of low inflation, stable government, no pandemics, reliable supply chains, no conflicts in regions with critical raw materials and a competitive contractor bidding market, perhaps the contracts of the past presented less risk to OEMs. How long ago has it been since we were in that situation??

Contracts that require the OEM to hold a bid price for 90 days before award and then when awarded, hold the price for 1-year before delivery (and I have seen up to 3 years) can’t be accepted anymore. That is being a bank for the contractor and owner where the OEM is financing the project, having to pay material suppliers well in advance of shipping the equipment (where delivery is often the major payment milestone) and absorb any price increases from the original quote from a vendor (which could be provided weeks before the bid) through submittal preparation and approval and notice to commence manufacturing which is often at least 6 months and longer for major process equipment. And that was a concern before the current supply chain issues! Not to mention preselection or direct bids as is often used for membrane systems, where following submittal approval the owner then goes to bid to contractors to install the equipment – the lead time from original quotes to actually getting the notice to commence manufacturing is often a year or longer. Engineers and owners are in for a rude awakening to OEM responses to contract terms for preselection or direct bids in the future…

Here are a few examples of how current market conditions have brought OEMs to the tipping point of outright rejection of traditional contract terms:

Following the concern with nickel supply because of the Ukrainian war, suppliers of stainless steel are only holding quoted prices for 24 hours. How can you bid a project with stainless vessels and piping without significant risk of margin erosion or even losing money? After the pandemonium in the nickel market a well-known manufacturer of stainless steel cartridge filter housings voided all quotes given before March 4. So what about the bids you used their pricing for prior to that date? Is that a case of Force Majeure?

Allen Bradley components, the predominantly specified controls for water treatment systems, already had stretched lead times from 8 weeks to 24 weeks earlier this year. Then there was a Corona Virus outbreak in Shenzen, China’s silicone valley, where some AB components are made – now AB is not committing to any delivery schedule… How then can you sign a contract with LDs when you don’t know when you can get a critical component required to operate the system? And what about contracts you signed in 2020/21 before there were these delays – that is certainly Force Majeure! I feel that controls components have become the toilet paper of the water industry with end users and equipment manufacturers hoarding them where they can, increasing leads times further...

Some may say that OEMs should just build in contingency to prices when it is known how long the price is to be held for. So when we bid a project in January where the price is to be held for 90 days before award, how do we know there is to be a war between Ukraine and Russia that starts in late February resulting in nickel prices skyrocketing in early March and stainless steel prices doubling in days? And that is only 40 days after the bid? And then ten vendors are listed on the bid, some you have never heard of, and you have to hope all ten will have same concerns as you and object to the same contract terms or put in the same contingency…

Some may say why not order materials as soon as submittals are approved to reduce the risk of price increases. This is the bank situation again. Then the OEM must pay for these materials often well before they are delivered, creating a cash flow problem, and what if the project is delayed? Will the owner accept and store the equipment when built and pay for it? Most likely not, but that is an option that should be seriously considered. Contractors on the other hand keep time sheets for work conducted and are paid for labor and materials received on site on a monthly basis. OEMs are not paid a penny for factory labor used in building the equipment each month and rarely paid for materials received in the factory.

Contractors and sometimes engineers often respond to OEM exceptions to LDs and unreasonable liability limits saying they are passing down what they have in their prime contract with the owner. Well, contractors and engineers need to show some guts and take exception to the contracts being passed to them by owners. In these times, nobody can guarantee meeting a schedule. Owners have to face reality and think of a different way to ensure contractors make their best effort to meet schedule and budget.

Currently, OEMs and contractors have a unique opportunity to change the draconian contract terms they have begrudgingly accepted for decades to terms that are fairer for all parties involved. If contractors and OEMs unite and show some gumption in objecting to these traditional one-sided contracts, OEMs may not need to be financing projects anymore and with better cash flows on projects, prices may actually come down, where lower margins are more feasible. That would be a win-win-win for OEMs, contractors and owners!

The comments and opinions in this post are my own and not those of my employer.

Why Membrane Module Manufacturers should not use Independent Sales Reps

 

In recent years a few of the membrane module manufacturers have been using independent sales representatives which I believe is a bad idea and a case of biting the hand that feeds you. Typically, module manufacturers’ internal salespeople, and I am referring to MF/UF modules here, have directly sold to OEMs/System Integrators as well as marketing to end users and consulting engineers so that their products get specified. I am perfectly OK with that. What I am not OK with is the module manufacturers signing up independent sales reps to sell their products which opens up a can of conflicts. Let me clarify that I am talking about new MF/UF systems and not replacement modules at existing systems. I get that some new module suppliers on the market want to find opportunities ASAP and see independent reps as a way to get directly to engineers and end users rather than have to go through OEMs, but this is going to do more harm than good for the following reasons:

The module manufacturers don’t build the MF/UF systems and won’t be bidding the projects, so they still need OEMs to bid with their modules. The rep may also represent one of the OEMs bidding a project who may or may not want (or be able) to bid a system using that module and that likely will prevent competitor OEMs from bidding with that module. So now there is possible conflict created between the rep, his OEM and the module manufacturer as well as conflict between the module manufacturer and other OEMs. At best you may get the rep’s membrane system OEM bidding with the module, assuming that OEM isn’t a proprietary system supplier (Pall, Suez, Memcor/Dupont) and is willing to bid with the module. You also have to understand the dynamics between reps – the module rep will expect a commission for a sale whether his OEM or a competitor’s OEM wins the job as long as the module is selected. Competing reps that win the job don’t want to see commissions going to their competitor for the membranes and will therefore encourage another membrane to be used. This is a very messy arrangement (and difficult to explain) and is going to steer many reps and OEMs away from using the module.

I understand that the objective of using a rep who may be close to the specifying engineers, is to get the membrane listed in the specs and ideally flat spec’d so all OEMs have to use it. It is a very rare situation where you will get a module flat spec’d so in the case where it is listed with other modules, at best only the module manufacturer rep’s OEM will bid the job with that module. I had a project a few years ago where one such module was listed for a project and our sales rep represented that module as well as another OEM who was also listed for the project (not an ideal situation for an OEM but with all the mergers, etc in the industry you can end up with a rep having two competing OEMs). I called the module manufacturer for a quote and was told “sorry we are teaming with the other OEM on this one, but would love to work with you on another project”….. That is the last time we seriously considered that module and it wasn’t long before we also found a new rep in that region.

Before I get some module manufacturers too angry, I’m not talking about membrane replacements on existing systems where there is no role for the OEM. In that case it can make sense to have a rep involved to get the new replacement module qualified and help with the bidding process. But the reps should not be provided any incentive to push this module on new systems and risk opening the can of conflicts.

So how does a new module manufacturer get to market? Obviously, you have to sell to OEMs with the objective of having as many as possible bid a project to increase the chances of the module being selected by the winning bidder. In parallel you have to go direct to the engineers and end users to get a comfort level with the module and have it put in the specification. This latter point is very important. As an OEM, you have a lot of options (this applies to RO membranes also) and OEMs often don’t have time to market a new product to get it spec’d. There are exceptions when the OEM sees an advantage in bidding the new product, but in this crazy busy world right now, very few have time to pause and find the right opportunity do this up-front missionary work. So that is why some module manufacturers are using reps, right? I get it, and it may help on a specific project if all the stars align but in the long run to maximize sales opportunities it is better for module manufacturers to not use reps. Don’t bite the OEM hand that feeds you!

The comments and opinions in this post are my own and not those of my employer.

’21 Membrane Technology Conference Exceeds Expectations – The Wrap

With almost 600 attendees, around 200 more than expected, the 2021 Membrane Technology Conference (MTC) at West Palm Beach, July 19-23, was a resounding success! While this show normally has 900-1200 attendees, getting 60% of this number was a fantastic result for the first National water industry conference since the Covid cancellations (this show was cancelled the week before it was due to be held in early March 2020).

So why was MTC such a success?

For me, it was seeing the beaming faces of colleagues reuniting face to face after 18 months or more of working at home. The networking opportunities that can’t be replaced by Zoom calls. The large parties of conferences past were not held but the outdoor bar at Copper Blues became a popular hangout after dinners each night.

While the technical program had a few less sessions, the quality of the presentations I went to was excellent. One thing I noticed that was a lot different from other years was a lot livelier discussion after presentations – maybe people were bursting to be heard after being locked up for so long. Whatever the reason, it was great to hear these discussions.

There were less exhibitors this year, maybe 70% of other years, but the turnout was still strong and provided a great opportunity for delegates to catch up with manufacturers. Representatives from some manufacturers who didn’t exhibit were still present. Of course, there have been a lot of acquisitions since the last MTC in March 2019, so for instance, Dupont, Inge and Memcor shared a large booth for the first time.

 I think the timing also helped with a late surge of registrations. In late June/early July the country was very optimistic about vaccines slowing Covid and the Delta variant was in its early stages.

 What was new?

The hottest technology trend that I saw was a large number of presentations on novel high recovery RO processes that are now being adopted full-scale. We have heard of CCRO applications at past shows and also this one, but we are now hearing of Pulse Flow RO and Reverse Flow RO starting to be scaled up, so the folks at Dupont/Desalitech may have some competition in the near future. I still think these are niche technologies that are a fit in certain situations and not yet mainstream technologies, but I’m open to changing my mind as more data from different applications at full scale installations becomes available.

Congratulations to AMTA/AWWA for taking the risk with the first national in-person water conference since the Covid shut-downs and pulling off a great show! With this years MTC delayed 4 months due to Covid, it wont be long until MTC22 in Las Vegas, February 21-15. I can’t wait!

Increasing RO recovery is not just a case of adding stages!

I had an engineer recently tell me he was working on a project where they needed to minimize RO brine volume and he wanted at least 90% recovery, so please quote a 3-stage system… Antiscalant projections on the raw water quality showed 78% recovery at best, even with acid dosing. The chemistry won’t allow any higher recovery on this water on matter how many stages the RO system has, and don’t get me started on whether CCRO can do better (I’ll discuss this later).

That is the fourth inquiry like this I have had in the past 6 months and the second from this engineer who is finding it hard to understand the limitations on recovery… so I thought I would put the explanation in print here.

Before you start to think of how many stages you need to design the RO system for, you first need to look at the water chemistry to see what recovery is possible. All the antiscalant manufacturers have projection programs where the raw water quality data is entered, an antiscalant is selected and from the empirical data the program calculates the maximum recovery that can be achieved and what are the limiting salts. You can adjust the feed pH to see the impact of pH correction and you can also change some feed parameters so see how pretreatment will impact recovery. At this point, stages do not even come into the equation. For a customer that wants to get as high a recovery as possible, I also often ask the antiscalant suppliers to do a projection for me, because sometimes they have a product I may not be aware of or that is not part of the projection software version I have.

PLEASE NOTE - INCREASING THE NUMBER OF STAGES DOES NOT ALLOW A HIGHER RECOVERY THAN WHAT THE ANTISCALANT PROJECTIONS PREDICT!!! ALSO, INCREASING THE NUMBER OF STAGES DOES NOT ALLOW A HIGHER RECOVERY THAN WHAT THE ANTISCALANT PROJECTIONS PREDICT!!! Got the message??

Some antiscalant projection programs incorporate calculations on RO unit arrays, but I prefer to first optimize recovery then use the membrane manufacturer’s projection programs to design the best array – I just feel more confident with the RO/NF system design when I use the membrane vendor programs.

Now that I know the maximum recovery that is possible determined by the water chemistry, not the number of RO unit stages, I then go about working out how many stages are needed to achieve this recovery. When designing an array for an RO system there are several important design conditions that need to be accounted for, including crossflow velocity and flux across the membrane elements. The projection programs have built in warnings when these are too high or low. Operating outside the safe ranges will result in membrane fouling.

A 2-stage RO system is limited to up to 80-85% recovery because somewhere in this range you will violate the minimum crossflow requirements for the membranes. When the crossflow is too low you can get concentration polarization at the membrane surface resulting in scaling. By adding a third stage you can reduce the number of housings required in the first 2 stages to increase the crossflow velocity to within the desired range and add back those housings via the third stage to maintain the desired flux rate. For instance, rather than try achieving 85% recovery using a 4:2, 7M array at an average flux of 15 gfd at a permeate flow of 175 gpm which sends some low crossflow warnings for the first stage, you could change this array to a 3:2:1, 7M 3-stage system which has the same flux but the crossflows are better balanced across the membranes.

When attempting really high recoveries, where the water chemistry allows, you may even need to add a fourth stage. Another option to adding stages, is to recycle some Stage 2 concentrate back to the Stage 1 feed to increase cross flow velocity and allow higher recoveries but this increases the concentration of feed water constituents and subsequently the permeate quality is worse.

 And CCRO is not the silver bullet either!

Now a short discussion on ClosedCircuit RO (CCRO). The recovery rate of a CCRO system, like conventional RO, is limited by the chemistry and how much the feed water salts can be concentrated with antiscalant addition. In most cases, the recovery of CCRO is predicted by the antiscalant projections exactly the same as for conventional RO. Because CCRO purges the recycled concentrate every 15-45 minutes, if silica is the constituent limiting the recovery, due to the saturated silica concentration being reached towards the end of this cycle and the slower induction time for silica to precipitate once it reaches saturation (say 10 minutes), CCRO can push past the maximum recovery predicted by antiscalant projections. For that scenario, CCRO will achieve a higher recovery than a conventional RO system.

But for more common scalants such as calcium carbonate and calcium sulfate, the induction time is just seconds and the CCRO process offers no advantage over conventional RO if these are the limiting salts. I would be happy for someone to give me a good technical explanation how CCRO can achieve a higher recovery when CaCO3 and CaSO4 are the limiting salts because from my investigations I have not found one. Don't get me wrong, I'm all for new technologies that can improve on the recovery of conventional RO systems, but I also want to see good science on how this is achieved.

The main message I want you to get from this post though is the following:

INCREASING THE NUMBER OF STAGES DOES NOT ALLOW A HIGHER RECOVERY THAN WHAT THE ANTISCALANT PROJECTIONS PREDICT!!!

The comments and opinions in this post are my own and not those of my employer.

Westech joins Club of Foreign Aquired Companies

The announcement in late November that Westech was being acquired Swire, a diversified global group headquartered in the UK, signaled another previously US owned water treatment company being purchased by foreign interests. This follows Wigen being purchased by Metawater earlier in the year and Tonka/US Water and Avista being purchased by Kurita in recent years. Metawater also purchased Aqua-Aerobic Systems in 2016. Suez bought the RO business of Lanxess in late 2020 making it a very active year for acquisitions by foreign companies (of course Lanxess is German).

It raises the question; why are foreign investors so interested in acquiring home grown US water treatment companies while large US companies are not? A few decades ago there was US Filter who quickly gobbled up a lot of water companies to create the US Filter empire before these were eventually sold off to Veolia in 1999…..we also had GE getting into the water treatment business in 2006 with the notable acquisition of membrane company Zenon which has since been sold to Suez. But in the last 10 years the purchases have mostly all been off shore with companies such as Suez, Veolia, Siemens, Xylem, Kurita and Metawater picking up the best of the local companies. The notable exception is Dupont’s acquisition spree in 2019 (see previous post).

 

I don’t know much about M&As but from my perspective it seems like US investors are not interested in the steady but unspectacular rate of growth of the water treatment market. The potential for water treatment products in a drier and more crowded planet is alluring, but those companies that have bought into it expecting water will be the ‘new oil’ have been disappointed by the long sales cycles for capital infrastructure and government procurement processes and rules. You can’t just buy say an OEM in the desalination market, cut costs, standardize the products, increase revenue then flip the company… In fact, for large custom capital equipment you standardize at your own peril as some large OEMs have found out when trying to cut costs then becoming uncompetitive for large custom projects.

 

I understand that as a small self-funded company you can only grow so much before outside investment is needed to provide the resources to take that next growth leap, but from a local industry perspective it is disappointing there are not large local companies willing to invest in so many successful local homegrown businesses.

The comments and opinions in this post are my own and not those of my employer.

Non-Communication of Bid Results...

With a lack of in-person networking events, conferences, etc. I don’t have any breaking industry news to talk about lately. So, I’m going to ramble about a pet peeve of mine – not receiving any response or feedback when you are an unsuccessful bidder…

To submit a bid/proposal for process equipment requires a lot of work for no return unless you win the bid. Just pricing a custom designed piece of equipment can require quotes from dozens of vendors and many hours of work by a number of engineers combing detailed specifications, not to mention preparing the proposal and sometimes even preparing custom drawings and lifecycle cost analyses for the bid. The very least the recipient of the bid can do is inform the unsuccessful bidders who won the bid and the decision-making process uses in selecting the winner. 

Ideally I also like to see the price spread of the bids or an evaluation matrix that was used so I know if we were competitive and may have a chance of winning next time or if we should not waste our efforts. Often that feedback is provided, particularly for government projects where it is a requirement to provide a bid tab, but there are also many cases where no feedback is provided at all. I haven’t heard back on an industrial job bid a few months ago where we were begged to submit a bid and had to drop everything to get this together in less than 2 weeks, it was submitted at 11pm on a Friday night (bids due by 12pm) and since then it has been all crickets… I did find out indirectly after the bid that we were just there to provide another number so I haven’t pursued a response (plus I was a bit bitter about not being seriously considered after the owner pleading for us to bid). You can’t win them all but a response that we were not successful and why would be nice.

Here are my rankings from worst to best on the types of bids that provide feedback and why I think this is the case:

 

1. Industrial Projects

These are the worst for feedback. My theory for this is that to the owner, this is a one-off transaction and they don’t think they will need to bid this out again, so who cares what the losing bidders think… It is these projects, bidding either direct to the owner or via a consulting firm, where more often than not I have not had any feedback after a bid without badgering them. Good luck getting bidders if they need to rebid the project!

 

2. Design-Build and CMAR Bids

These can be confusing where the contractors ask for firm pricing at 30%, 70% and maybe 90% design and you never know if a selection will be made at the earlier stage quotes or the contractor is just checking the budget. That is often not communicated, so you can put in a lot of work on a proposal when a decision will not be made yet. On the other hand, you could throw a swag budget number out there at 30% design and find out a few months later someone else was selected based on a lower price… I think the contractors like to keep their options open and not commit too early unless they really need to pick a vendor early to help with the design.

 

3. Preselection Bids

In this case you are often sending bids to the design engineer or the owner, where the engineer makes the evaluation based on a selection criterion. Typically, you find out formally who won, but often no reason or a very vague reason is provided for the selection. So there is little you can learn about why you were not selected. These bids are the ones that often require specific system drawings and detailed lifecycle analyses. Where very little feedback is provided, I suspect the engineer or owner had a preferred bidder from the start and you were just making up the numbers. If the bids are sent to a municipality, in most cases you will get a detailed bid tab after the evaluation is complete (see Municipal Bids).

 

4. Municipal Bids

Where a bid is made directly to a municipality, it is a requirement that a bid tab be provided showing the ranked prices submitted. Selection criteria is usually very transparent and a manufacturer is left in no doubt where it finished up and why.

 

There are exceptions when there are some qualitative evaluation factors used as well as price with percentages or points applied to each factor to select a winner. This is where the grey kicks in and the owner (or engineer) can massage the numbers to pick who they want. The evaluation matrix will be published but the results can be very subjective. This also applies to direct/pre-selection bids.

 

5. Design-Bid-Build Contractor Bids

These are bids where you are providing your price to contractors on bid day and the contractors are submitting a total project bid to the owner. There are usually no grey areas here – the contactor will go with the lowest price in nearly all cases unless an OEM has a special relationship or the contractor has had a bad experience with an OEM. If the contractor must write in the suppliers on the bid form, you know within 24 hours if you were selected. If not, you rely on the honesty of the winning contractor to go with the low bidder on bid day and hope there is not post bid backroom deals done (if you were low on bid day). It is possible to get an idea of where the competitor pricing was if you know one of the bidding contractors well enough who will give some feedback. It is in a contractor’s best interest to provide some feedback if he thinks you may be working together on a future project. Otherwise, there is no way to find out if you were way low, or way high.

 

With all that said, it is nearly impossible to predict what feedback you will get despite the type of bid unless you have bid to that entity in the past. If you suspect you are just making up the numbers with another bidder preferred, you could very well be wasting your time and don’t expect any useful post bid feedback.

The comments and opinions in this post are my own and not those of my employer.