STORMWATER: Seizing the potential of an untapped market

By: Laura Chamberlain, Consultant, and Dorothée Chabredier, Principal

Interest in stormwater – also known as stormwater runoff – is increasing around the world due to a number of decisive long-term trends. These trends include climate change and urbanization, which are linked to increasingly severe floods and prolonged droughts, and more stringent environmental regulatory compliance.

The International Institute for Sustainable Development notes that “stormwater runoff refers to water that is not absorbed by soil (because the surface is saturated or sealed), and flows on impermeable land cover, such as roads.” traditionally underfinanced, the stormwater market, which provides stormwater technologies and solutions, or sustainable drainage systems (SuDS), suffers from a number of restraints. Commonly observed restraints include fragmented local regulations, lengthy product certifications, resistance to innovation, outsized focus on upfront capex rather than totex, etc., that the industry would need to overcome to realize the full potential of stormwater as an untapped
water resource.

In this article, we explore and contrast the market dynamics, address the impact of the COVID-19 pandemic on the market, and offer ideas about how a player could leverage the market potential, as we apply the examples of Germany, France, and the UK, the three largest stormwater markets in Europe.

Europe’s stormwater market: dynamic despite COVID-19

The COVID-19 pandemic is expected to have limited impact on the stormwater market. The stormwater market remains dynamic in spite of the pandemic, and this trend is supported by other sectors. Specifically, the construction market, national infrastructure, and spending plans, and increasing enforcement for EU regulatory compliance, particularly the Water Framework Directive and the Urban Wastewater Treatment Directive, have supported the stormwater market without taking into account the impact of the COVID-19 pandemic.

Upon the first wave of national lockdowns in Spring 2020, construction projects were paused and/or cancelled entirely consequentially with revenues contracting between an estimated 10% – 15% in France, for instance. Yet many stormwater equipment providers experienced record-breaking monthly sales as European countries reopened and construction projects resumed over the Summer.

Over the longer run, the construction market may well drive stormwater investment, likely to be further supported by national transport and economic recovery strategies from the COVID-19 pandemic:

  • The UK’s Spring Budget 2020 promises over £640 bn in housing development projects, transport, and climate change adaptation by 2025.
  • Germany’s 2030 Federal Transport Infrastructure Plan (Bundesverkehrswegeplan in German) invests €269.6 bn to fund road and public transportation infrastructure upgrades and expansions.
  • France’s 2030 Plan Relance will allocate over 100 bn of French government and EU funds to transform the transportation and building sectors.

The construction market, in other words, promises immense opportunity for implementing SuDS, especially among member states seeking solutions to meet or remain in compliance with EU water regulations.


Overcoming challenges, breaking barriers to entry

In spite of the market’s importance and continued growth, it faces certain challenges and barriers to entry. One of these is fragmentation due to the impact of local regulations and best practices, wide-ranging
development types, and involvement in the decision-making process of various stakeholders, who often work in silos.

Stormwater regulation is diverse and can vary widely among different municipalities, which makes scaling up difficult for stormwater equipment providers. The greatest administrative power for stormwater rests at the municipal level. Local authorities are able to better tailor long-term land use planning to their local conditions while meeting compliance with high-level governmental regulations.

Urban planning and more progressive building regulations, zoning codes, local ordinances and best practices have increasingly encouraged, or in many cases, required property owners to install sustainable drainage systems onsite such as green roofs, subsurface infiltration pipe systems, and rain gardens. Moreover, many local authorities favor stormwater infiltration wherever local conditions make it possible as opposed to attenuation or direct discharge to nearby water bodies.

In addition, there are different water quality requirements for each development type from petrol stations to high traffic roads, commercial lots, urban pedestrian areas, and more. Sites in highly urbanized and industrial sites require targeted stormwater treatment solutions to mitigate runoff pollution – for instance, oil separators and filters. There is no one-size-fits-all approach to stormwater management at sites. However, the suite of SuDS offers variety to meet site-specific requirements and comply with local regulations.

The market is also quite fragmented among different players and thus, the respective responsibilities regarding stormwater management as well. Accountability is divided among the different stakeholders, and selling a solution requires intense lobbying. Both the public and private sectors are involved in the market – namely distributors, municipalities, water utilities, construction companies, engineers, landscape architects, and stormwater associations for research and knowledge sharing platforms. These players often require further collaboration and relationship-building, and in fact, the market as a whole can benefit from increased collaboration and engagement.

While traditional vehicles to facilitate relationship building, such as attending trade shows and in-person Corporate Development Programs, are off the table for now, virtual events and other online platforms including
social media offer opportunities for stormwater equipment providers to increase visibility, gain product recognition, and build references with key planning officers, local contractors, and representatives of stormwater associations.

Timing also matters. The largest window of opportunity to propose SuDS at a site is during the pre-construction planning and design phases. Specifically, SuDS apply best to drainage plans at new developments and road rehabilitations. Today inspection and maintenance costs are rarely taken into account during the planning phases of a site, which can create issues sometimes not identified until years after project completion.

In addition, the stormwater market is conservative. Municipalities, water utilities, designers, and engineers can be reluctant to implement innovative solutions as flood liability is high, making the market more difficult to penetrate. In Germany, concrete-based stormwater solutions have been the preferred type among players, although plastic solutions are gaining traction. In the UK, plastic crate systems are widely used; however, microplastics are a growing concern. Drainage engineers and designers tend to provide detailed product type specifications in public tenders with limited flexibility to consider alternatives.

Last but not least, stormwater equipment providers need the appropriate national and local product certification to win bids in public tenders. Each European country has its own national certificate: the British Board of Agreement (BBA) certification in the UK, Scientific and Technical Centre for Building (CSTB) certification in France, and the German Institute for Building Technology (DIBt) technical approval in Germany. Acquiring a certification can be a long and costly process and may pose a barrier to entry for new players. Certification processes generally require roughly a year to three years to complete. Fees cost thousands of euros, and certification renewals are required every three to five years.

Applying creative solutions

A number of actions could promise more opportunity to implement SuDS and grow the market.

  • Local authorities and public water utilities overseeing stormwater management are often resource-strapped. Lobbying local or national government and environmental bodies to increase financial availability is one possibility for municipalities to receive reliable funding streams.
  • An alternative funding mechanism is the introduction of a separate local stormwater fee. In Germany, most municipalities and larger water utilities charge property owners a stormwater fee to budget sewer rehabilitation, drainage projects, and other water management projects. Private property owners and municipalities are incentivized to lower or even eliminate their stormwater fees by installing decentralized SuDS onsite and thereby disconnect stormwater runoff from entering existing sewerage networks entirely.
  • Currently, capex is a key purchasing criterion for stormwater products with lesser consideration for totex, bearing in mind that totex encompasses both construction and post-construction costs, with the latter concerning inspection and long-term maintenance cycles of products. More experienced end customers are more often aware about ease of access to maintain SuDS and cost of maintenance as well.
  • The development of an alternative and powerful European certification such as the CE marking would ease scaling of innovative solutions and reduce development costs.
  • Developing partnerships among stakeholders would also benefit the stormwater industry. Specifically, established partnerships between stormwater equipment providers and developers can ensure end-to-end solutions and thus develop accountability and reassurance for end customers. A partnership between providers yields opportunity to close a gap in a company’s product portfolio, such as offering advanced stormwater filtration systems. Lastly, partnerships can develop and test an innovative product by showcasing its effectiveness through pilot projects. Pilot projects could serve as a critical step in the approval process by municipalities and design engineers as well.

“There is no one-size-fits-all approach to stormwater management at sites”

On dealing with stormwater, municipalities are transitioning away from the conventional “out of sight, out of mind” approach of fast conveyance of stormwater into centralized sewerage systems, and instead are moving towards managing stormwater onsite through decentralized SuDS. Ultimately municipalities approach SuDS as key to “slow the flow” of rain to improve water quality and quantity issues, while benefiting biodiversity and quality of life of the local catchment.

Under this context, SuDS can be viewed as fostering additional environmental and social benefits. In Germany, for instance, net-zero carbon life cycle products, cradle-to-cradle solutions, and water reuse practices are gaining traction. Concerns regarding microplastics are pushing the UK market towards more green and environmentally friendly solutions as well. Municipalities and property owners can continue to develop reuse, infiltration, and integrate sustainable stormwater management into urban green landscaping.

Looking ahead

While the European stormwater market presents an untapped opportunity, taking advantage of its growth potential will require further research, collaboration, and relationship-building among players across the private and public sectors. Municipalities and public water utilities are expected to meet stricter environmental regulations and adapt to longer periods of water scarcity and flooding exacerbated by the impacts of climate change and urbanization. Seeking stormwater equipment providers for SuDS and services is likely to continue gaining traction as the market develops. Key profitability drivers from the construction market, national infrastructure and recovery plans are likely to continue supporting the stormwater market, especially following the COVID-19 pandemic.

Additionally, stormwater equipment providers need to familiarize themselves with certification processes and fragmented stormwater regulations, and consider the implications of whole lifecycle costs of a stormwater solution. In the meantime, consistent and sufficient funding streams for stormwater management must be realized for municipalities and public water utilities.

“The construction market promises immense opportunity for implementing sustainable drainage systems.”