How to invest in water, the next big clean tech crisis

One of the most commonly heard expressions at clean tech conferences has become "water is the new oil."

The analogy makes sense, particularly when you compare it to pre-1970s oil embargo world. People, particularly in developed countries, take water security for granted and expect it to flow out of their tap cheaply. Unfortunately, water shortages are looming in both emerging and developed nations and there's a good chance that lawsuits and political conflicts will follow. Singapore already has NEWater, which is reclaimed and purified water from the sewer system that returns for human consumption.

Several start-ups specializing in new ways of purifying water, using it more efficiently or desalinating it, have been formed in recent years to help solve some of these problems.

But most people don't get the opportunity to invest in start-ups, so how can the average person participate in the market now? (This is actually a question that comes up in a lot of clean tech markets.)

One way is to buy shares in General Electric, which has become one of the large players in desalination and purification, according to a green tech report from Dave Edwards at ThinkEquity Partners. Others include Hyflux (desalination) and Basin Water (purification.).

"Chinese government officials have recently stated that the government plans to spend $125 billion in the next five years to help resolve the water problem," he wrote. "Since this is a global, multi-decade problem, we think that $125 billion could seem like a drop in the bucket before too long."

Edwards also highlights the somewhat unusual Vidler Water Company, a subsidiary of Pico holdings. Vidler acquires water rights and interests in underground storage facilities and effectively releases or resells them. Vidler expects it will transfer agricultural water rights to urban centers.

"The company believes that continued growth in water demand will generate rate adjustments to its water contract prices that meet or exceed the rate of inflation, while the value of its underlying resources may continue to appreciate," Vidler says on its Web site.

One could argue that Vidler seems to rest on a flimsy, legalistic base. A state government could pass laws that help reallocate water in a more efficient manner. On the other hand, history shows that's a tough goal to achieve: state governments in the west have fought over water rights for over 100 years.

Look also to the Israeli stock market. Many of the new water companies will come from there.