The Data Trust Opportunity in Water

Digital Water, an era where our natural and man-made water systems are described and managed by data, is here.  IoT (Internet-of –Things) smart pumps and pipes that generate massive amounts of data are standard gear now, and there are many companies offering both ways to retrofit and instrument existing water infrastructure, and innovative ways to harness data to optimize our water usage. And this all comes on top of decades of governments, non profits, and companies collecting lots (and lots!) of water data.

 But while the trend is clear, Digital is happening, there is less agreement, or understanding, about  what Digital actually is, in Water. There is not exactly a shared vision of our collective destination. What do we do with water data? And where do we end up, as a sector?

 Water is far from the first industry to digitize; in fact, it is one of the last. “Software is eating the world” digitization has already disrupted and transformed retail, travel, supply chain management, purchasing, and many other industries. This gives us opportunities to learn and chart the likely course of water digitization.

 Digital of course means data.  Not just creating data, not just having data, but using data. Everywhere. Using data in all interactions among all industry participants.

 Digital can  transform and improve many fundamental aspects of water, including (just to cite only a few examples!) areas such as:

• Consumer education and Demand Response
• Pricing normalization
• Revenue recovery and optimization
• Leakage reduction
• Markets, credit systems, and water finance
• Water rights demand allocation
• Integrated resiliency planning
• Basin wide planning and optimization
• Flood resiliency financing and Resiliency bonds
• Green water bond certification automation
• Asset finance due diligence and Impact ROI accounting
• And many others

 Data is also critical to the evolution of our water stewardship and water management practices, and to innovation in water in general. There is a global trend right now of establishing “water hubs”, or water innovation centers, that allow multiple parties from the water ecosystem to come together for experimentation and adoption planning on new water technologies. These efforts are extremely important, because innovation theorists know that innovation happens at social and organization boundaries…it is there that you have the intersection of mission, ideas, fears, and constraints that are the feedstock of innovation. But effective, useful innovation is also a rider atop the horse of information, and without data from many sources, and perpetually refreshed data, innovation is challenged. And so the better the data sharing, the more effective and impactful our innovations will be.

 When we consider new software technology, the need for data sharing is even worse, because many new software innovations with high potential in water are essentially useless without adequate data supply. For example, blockchain offers the promise of “Smart Contracts” that can automatically execute a contract provision, and provide transparency and immutable ledgering of transactions. But all that requires data, and most often that data will be coming from outside the blockchain system, and even from outside the organization running the blockchain.  How do we ensure its easy to get that data?

 So for many reasons we need to encourage and foster data availability, or data sharing, in water. For this, two critical things must happen.

 The first critical sharing requirement is technical. There must be modern software architectures and technology to securely share, transmit, and receive data. This means APIs, or Application Programming Interfaces. APIs are like smart valves for water data…they can be opened or closed, and can control the rate at which data is released or accessed, and can also ensure great security. (When I say ‘sharing’, I mean permissioned sharing employing robust security, by the way.)

 While there are vast amounts of free, open water data around the world today, very little of is API accessible; most of it is only available manually. For example, people go to the US EPA web site, or the USGS site,or the site of one of the non profits offering water data, and they manually type in information and receive back a spreadsheet or a CSV file.

 That the data is publicly accessible is great, but it’s not API access, it’s manual access. It therefore can’t be the basis for automated exchange and usage of data, it can’t support efficient quantitative calculations for optimization, or real time calculations supporting operational decisions, and so forth. And so one as-yet unmet precondition of Digitization is ubiquitous APIs. To overcome that barrier, we’re going to need tools that facilitate the rapid creation and adoption/usage of those APIs. (On this topic, software tools for creating APIs, stay tuned…in a future post I’ll cover tools for publishing and subscribing to water APIs, and the state of implementation and usage of APIs for water data.)

The second great precondition to “deep Digital” in water is development of the economic, social, political, and legal structures that allow the efficient sharing and usage of data. We need the covenants, contracts, conventions,and protocols that govern data access,  in addition to the access points (APIs) themselves. What we need are Data Trusts. Not trust as in, trusting data, but Trust as in, a consortium that through agreements can effectively collaborate and to some degree act as one. Trust, in the legal sense of the word. As the Open Data Institute says, “a data trust takes the concept of a legal trust and applies it to data.”

In its simplest form a data trust may just be an agreement between two parties regarding sharing data, privacy, pricing, and so forth. But it’s full meaning implies a consortium of many players. Agents and fellow travelers in an industry, and including competitors or potential competitors, who realize they are better off agreeing to the conventions and means of interaction than to risk being left out in the cold.

Data Trusts have been around for a long time, though we don’t necessarily realize it. Basically it’s a data trust that for decades has allowed the players in the credit card food chain to exchange information for credit card transaction processing. And there are many other examples. One hallmark of these trusts is that they tend to be dominated by one or a few “gorillas” in the space, and all the other players basically have to play along and take terms dictated to them. But in today’s “software is eating the world”, digitally-disrupted environment there is more opportunity for collaborative efforts. There are two current, non-water examples of data trusts that are worth looking at as examples of what more collaborative water Data Trusts might look like.

First, the cargo container industry. 5 of the largest container shipping firms, which together transport about 2/3 of all ocean cargo, are forming a consortium to standardize data (scheduling, cargo manifests, etc.) for container shipping management. All the firms will still need to implement APIs, but those APIs can count on standard formats and conventions for authorizing access to the data, representing entities, and so forth. (This actually isn’t the first data trust in container shipping, but comes on the heels of an earlier effort called iShare. Which illustrates the point that in a big industry there can be more than one data trust…though over time they tend to converge, as has happened in say the travel industry.)

A second industry data trust, and one that is directly relevant for water finance, is the new Orange Button standard for information across the US solar energy value chain.  The solar industry comprises many   players and types of players, which leads to high costs when trying to accomplish basic business operations such as credit scoring an application for a loan to cover a rooftop solar installation.  In this context “Orange Button supports the creation and adoption of industry-led open data standards for rapid and seamless data exchange across the solar value chain, from origination to decommissioning. Standardizing data allows for a reduction in soft costs - making it easier to share solar data and speed up processes, like financing.”

Turning to water, there are many current initiatives that Data Trusts like this could highly benefit. One is the global effort to push our modeling, planning, stewardship, financing, and other activities to Basin-scale. Externalities stemming from how we have historically thought of water have led us to countless inefficiencies, distortions, misuses…and eventually to shortages, lawsuits and wars, with many, many more such conflicts brewing around the world.  Basin wide planning, across a variety of issues and locales, social entities, and mixtures of grey and green projects, offers some hope for relieving pressure.  

In the US, the many entities involved with water in the Chesapeake Bay basin have been sharing information for decades, and with good effect. Such data sharing is likely to be a recommended outcome of the current planning going on during the formative phase of California’s dozens of new Groundwater Sustainability Agencies (GSAs)…most will have a compelling if not dire need to access scientific, business, economic, governmental, and other data so as to manage groundwater effectively for that groundwater area.  If the state is smart it will move at the state level to create the legal frameworks to make this smooth, fast, and efficient, and ensure that data is available for the GSAs.

What California has done so far is create a technical standard covering all state water data…the Open Water Information Architecture (OWIA). This sets out how the state’s many public agency data sets must participate in a federated data warehouse. But OWIA does not address how the agencies will actually make the data available (publish the stipulated APIs) nor the policies and covenants regarding sharing of the data. And so it is the barest start on the actual public/private data sharing that the GSAs will actually need, and not at all like an actual data trust.

One theoretical benefit of a data trust is that you can enable interactions across many types of players, to use integrated Social/Environmental/Physical/Economic Sustainability data for integrated planning, and to measure progress. The efforts to think through, plan, and finance mitigations to the impending devastations from the  Himalayan glacier retreat  are just one example of where this could be useful.

An entirely different area begging for a Data Trust is corporate water chain (water supply chain) resiliency planning. Most people don’t realize how many sectors of our economy are dependent on water; agriculture and beverages are obvious, but less obvious are manufacturing (including the chips and electronics that go into your phone and computer), mining, and textiles, to name just a few. Investors are putting increasing pressure on public companies to report their water risk, and Ceres, World Wildlife Fund, World Resources Institute, and others, have developed ESG Analytics tools for investors to assess risk and track mitigation and risk improvement across companies and stock portfolios.

These are important starts on water chain resiliency, but the more data that is flowing freely and available, the more effective these tools will be. Moreover the next frontier is to evolve from water chain risk assessment and accounting, to water chain Impact ROI accounting. This will allow investors to include not only profitability risk in investment considerations, but also social and environmental benefits. Given the many types of data that must be integrated and represented in these analytics, the myriad silo boundaries that must be transcended, and the sensitivities corporations have regarding their data use, Data Trusts seem highly advantageous.

Here at the beginning of 2019, the need and benefits of Data Trusts in water seem abundantly clear. It is less obvious that any will actually form, though there are signs of interest among key players and influencers.  Hopefully we can overcome the inertia inherent in the Logic of Collective Action. Because water is one area where commercial  monetizers of data are not yet very well established. (Though they’ve started….Nasdaq now has an index on the wholesale price of California water.) Creation of monetization trusts by them may subsequently impede data access in trusts with more altruistic intent. Or, maybe it will be a case of needing these players to lead the charge and actually get the ball rolling.

Time will tell.