Municipal pipe market spending makes up 30 percent of overall utility CAPEX for water infrastructure. In part, to address aging pipes, bursts, and other leakage management issues, the pipe market is turning to new materials (plastic) and new technologies (trenchless).
More than US$234 billion of capital expenditures (CAPEX) are forecasted over the next decade to address aging municipal water and wastewater pipe network infrastructure, according to Bluefield’s forecasts. Precipitated by decades of underinvestment, municipal utilities are under increasing pressure to address deteriorating linear assets at a faster pace.
Water losses through leaks for U.S. utilities average 15 percent annually, with some cities, towns and communities losing more than half of all water pumped and treated for distribution to customers. As a result, rehabilitation of existing pipes is the fastest growing spend category, increasing annually from US$253 million in 2019 to US$576 million by 2028. Network expansions, particularly in high population growth across the sunbelt states (e.g. Texas and Arizona), will drive the lion’s share of spend on new build.
As the estimated national average age of water pipes climbs—from 25 years in 1970 to 45 years in 2020 — largely because of underinvestment, utilities are increasingly forced to replace and rehabilitate linear assets at a faster pace. While asset age is not the sole determinant of asset quality, it is a quantitative signal towards market conditions.
New Materials Reshape Footprint
Piping infrastructure in the United States has been installed in three waves — 1800s, 1900 to 1945, and post 1945. Each wave has brought about a transition in the preferred material type. The material used in the installed pipe assets also varies by geography, as it relates to pipe age. The Northeast and Midwest have the oldest networks and therefore the greatest reliance on legacy cast iron pipes.
The pipe market is undergoing a shift in material types from traditional, legacy materials, like ductile iron and steel, to newer materials including pre-stressed concrete and various plastics — PVC, HDPE and PE. Regional differences in the installed materials, as well as varied procurement processes for various utilities will drive material selection.
New, greenfield pipe networks are most likely to source plastic pipes, which have lower upfront costs and are easier to install. However, they have a shorter lifespan than legacy materials and may result in greater lifecycle costs.
Much of the new pipe networks laid in the United States are installed by private developers to connect new commercial and residential units on the fringes of existing service areas. These private developers are more motivated by upfront costs and ease of installation as compared to established utilities that are more likely to consider the full lifecycle costs of pipe materials.
Current annual replacement rates of less than 1 percent are only slowly changing the material mix of pipes in the group. While traditional pipe materials — iron, steel and cement — will continue to dominate older water and sewer networks. Plastic pipes — PVC, HDPE and PVCO — make up 35 percent (US$17.3 billion over 10 years) of total pipe spend, while legacy materials — ductile iron, steel, concrete and other materials — make up the remaining 65 percent, or US$32.5 billion.
Emerging material types are also growing faster than the sector as a whole, with average annual growth of 4.5 percent in plastic pipe investment, compared to 2.1 percent average annual growth for legacy materials.
Conversely, long-established utilities with existing network infrastructure continue to replace aging pipes with traditional materials — ductile iron, steel and concrete. Emerging pipe material suppliers face an uphill battle trying to convince conservative utilities to move away from legacy materials, despite potential cost savings. Traditional pipe materials — iron, steel and cement — dominate older water and sewer networks, especially in large cities with old utilities in the Northeast and Midwest, which have the oldest networks in the country and a much higher reliance on already installed iron pipe networks.
Further, the disruption caused by pipe breaks and replacement in densely populated cities is much higher than in rural areas, making urban utilities more sensitive to pipe breakage rates and lifespans when evaluating various material types. Ductile iron scores very well on both of these measures, further enforcing its continued use.
Impact of Trenchless on Pipe Material Types
With installation costs including labor and paving making up 68 percent of total network CAPEX, buyers are looking to trenchless solutions for pipe replacement and rehabilitation in order to reduce network maintenance costs. The trenchless rehabilitation market has steadily grown over the past 40 years but has only begun to take hold with increased suppliers and solutions in the last decade.
Trenchless solutions can typically be applied quicker, with less initial planning efforts and lower interference with the environment. Trenchless technology solutions experiencing increasing popularity, with horizontal directional drilling (HDD), microtunneling and cured-in-place pipe (CIPP) being among most frequently used methods. The applicability of each technology depends on various factors, such as pipe diameter, material type, and soil consistency.
Trenchless technology solutions usually come with a higher up-front cost (up to 30 percent compared to open-cut), due to the necessary sophisticated machinery and engineering know-how. Some rehabilitation techniques, such as in-place repairs, also come with a shorter design life, compared to full pipe replacements.
As a result, rehabilitation of existing pipes is the fastest growing spend category, increasing annually from US$253 million in 2019 to US$576 million by 2028. Network expansions, particularly in high population growth across the sunbelt states (e.g. Texas and Arizona), will drive the lion’s share of spend on new build.
At the same tie, rising costs to address these growing needs will continue reshaping the installed material types. Well-established, large urban centers (e.g. Boston and New York) will continue to rely on traditional, legacy materials, like ductile iron, while suppliers of polymer-based pipes (e.g. PVC and HDPE) will make greater inroads on the peripheries of existing pipe networks, where developers have greater influence on procurement.
Turning to Digital
Addressing this issue of aging pipe networks is going to require a combination of increased utility spend on buried assets as well as deploying data and predicative analytics to effectively target the sections of pipe network that are most in need of rehabilitation and replacement.
The scale of investment required necessitates prioritizing rehabilitation of these aging assets and is expected to usher in more advanced asset management, such as predictive analytics. And in some cases, as we are already seeing in select cities, the opportunities for private investment, or investor-owned utilities, will increase because of these escalating costs. Irrespective of the solution, utilities are increasingly forced to do more with less—and the pipe network is no exception.