Water and the Internet of Things 2017

I became interested in water and the Internet of Things (“IoT”) two years ago when I had a below ground water leak at home that resulted in a large water bill.(1). Since I live in the Silicon Valley, California, the high tech capital of the world, I thought there should be a better way to track water usage so problems can be identified and solved sooner. I needed a smart water meter, an IoT application that I could read online, at least on a daily basis, to monitor water consumption and provide actionable information so I could save money. Motivating water conservation is more effective when there is a clear and timely picture of how water is used.

During the past two years I have been a good citizen to conserve water but have not seen any opportunity from my water utility, California Water Service (“CWS”), to implement a smart meter. I contacted the utility to see if smart meters are available for my neighborhood. I learned that it will not happen soon because the California Public Utilities Commission (“PUC”) has denied CWS’s requests to add smart meters to the water system in the last two rate cases.(2)

I also learned that there is a small but vocal group of opponents of smart meters who believe the wireless emissions from smart meters are not healthy and are concerned about consumer privacy and that smart meters could result in higher not lower utility bills.

What is the Internet of Things?

Smart water meters are a form of IoT, a network of technologies which can monitor the status of physical objects, capture meaningful data, and communicate that data over a wireless network to a computer in the cloud for software to analyze in real time and help determine action steps. Technologies are capable of monitoring objects such as smart water meters and other electronic devices, organisms or a natural part of the environment such as an area of ground to be measured for moisture or chemical content. A smart device is associated with each object which provides the connectivity and a unique digital identity for identifying, tracking and communicating with the object. A sensor within or attached to the device is connected to the Internet by a local area connection (such as RFID, NFC or BTLE) and can also have wide area connectivity.  Typically, each data transmission from a device is small in size but the number of transmissions can be frequent. IoT involves many, many things interacting with each other to produce actionable information.(3)

Each sensor will monitor a specific condition or set of conditions such as vibration, motion, temperature, pressure or water quality. More IoT applications have become feasible because the cost and size of such devices continues to decrease and their sophistication for measuring conditions keeps increasing. Cisco estimates that 500 billion devices will be connected to the Internet by 2030.(4)

For example, at home I would need a smart water meter (device) that collects usage data which is communicated wirelessly to the water utility company where software analyzes the data and reports the results on the web site for me to view. In the San Francisco pilot program described below, a customer can view the current data as it is collected and compare their numbers with past use and city averages. The usage data should eventually alert me to a leak but another device that measures water pressure could detect a leak faster. To find the location for repair, however, I would need to add sensors to measure pressure at various locations in my water system. The sensors would be connected to data analytics software in the cloud that would analyze the data transmitted to identify the location of the leak between two sensing points in my water system. This is a much more complex application than simply tracking water usage and illustrates the importance of the data analytics software needed to make sense of the transmitted data.

Smart Water Meters Status

One of the largest pilot programs of smart meters and related water management software platforms (a smart water management network) is in San Francisco. About 96% of the city’s water accounts are monitored by the meters.(5) Water consumption is measured hourly and data is transmitted on a wireless basis to the utility four times a day. Both the utility and customers can track use. A pilot program in the East Bay Municipal Water District, which targets mostly single-family homes, provides a daily update of hour-by-hour consumption via a website. Consumers can be alerted, for example, by email or phone call, when water use exceeds a specified limit or when a meter indicates continuous running water for 24 hours.(6)

News articles in 2016 report the adoption of more smart water meter programs in California cities but adoption is not universal as demonstrated by my utility’s rate case requests to the PUC. I estimate that that about 15-20 percent of California customers are now equipped with smart water meters. Smart water meter implementation remains slow in California and elsewhere around the U.S. The most recent published research I have seen indicates that smart water meters totaled less than 20% of the approximately 100 million water meters nationwide in the U.S., according to the smart-utilities research firm IHS Technology Other research indicates that adoption rates for smart water meters are increasing but don’t quantify the extent of adoption.(7)

Budget limitations are the largest obstacle to faster adoption of smart water meters. As indicated above, the PUV has denied my utility, CWS, from adding smart meters in the last two rate cases. Smart water meters are more expensive and less ruggedized than traditional mechanical meters. Opponents of smart meters also cite consumer health and privacy fears. A complete smart meter management network can also be expensive and some utilities do not have the capability to effectively deploy and manage such technology. Some vendors are offering a managed services business model to utility companies for this purpose.

More smart meter and platform products became available in the market in 2016 but there does not appear to be any market leader yet. The products vary from the very basic to those that integrate water metering networks with leak detection and usage monitoring applications.

Can the IoT Help Solve the California Water Problem?

I still believe that even the simplest form of smart water meter installed at homes and businesses on a wide spread basis can provide actionable information, which if applied with common sense, can help save millions of gallons of water in California to help meet the governors 25% water usage reduction order.(8) If the water utilities can provide the smart meter and basic water management platform, private vendors can offer more sophisticated features that are accessible as an app on a mobile phone similar to how AT&T provides the Digital Life home security system. Private vendors are already offering advanced features such as water leak detection.

Agriculture consumes about 40% of the freshwater available in California with a large amount being wasted by leaky irrigation systems, inefficient field application methods and the planting of water intensive crops in the wrong growing location. Agricultural usage is not subject to the 25% water use reduction order. The IoT has great potential to make water use smarter and reduce waste for the agricultural industry, particularly in irrigation efficiency. To help make the economics work, tax incentives (such as accelerated depreciation and investment tax credits) can be used to spur adoption of IoT and other water saving measures by agricultural and other businesses.

Another focus for IoT to help water savings is landscape irrigation in parks, medians and elsewhere. This is a major use of water in cities. Nationwide, it is estimated to be nearly one-third of all residential water use and as much as half of this water is wasted due to runoff, evaporation or wind.(9) Landscape irrigation systems, which apply sophisticated data analytics to a wide variety of objects, are available in the market.(10) Current weather data is combined with sensors for moisture, heat and other data such as the slope of the land, type of soil and the relative exposure to sunshine at a particular time.

In the water infrastructure, a utility can use an IoT network for predictive information to remotely determine the status and working condition of equipment (open or closed, on or off, full or empty, etc.). The information can be actionable, for example; a water gate can be opened or closed or a pump turned on or off remotely to adjust the flow of water through a water supply system. Pumps, gates and other equipment with moving parts in the water infrastructure can be monitored for predictive maintenance alerts based on vibration and other indications of failure to prevent equipment malfunctions. If a water pump is about to fail, the utility can be prompted to repair or replace it. An IoT-enabled water treatment plant can report if its filters are clean and functioning properly. The IoT can measure water pressure in pipes to find leaks faster in the water transportation system or the presence of certain chemicals in the water supply.

Legal Issues

IoT networks need to be designed and implemented with adequate security and privacy protection. A recent article predicts that security attacks on IoT devices will surge in 2017.(11) A network failure or hacker attack could have serious consequences, particularly in the water infrastructure. The most recent publicly reported incident is of hackers changing chemical settings in a water treatment plant.(12) Sensors and other entry points for an IoT network have such small software footprints that implementing security is difficult at such entry points without architectural changes which would impact the economics of the network(13) Most water infrastructure IoT networks will have only security concerns but there will also be privacy issues in consumer IoT networks. Hacking into a smart water meter, for example, could reveal whether or not a family is at home. Better security will mitigate privacy concerns.

Ownership rights to data used in an IoT network can provide a competitive advantage. While some data may be from the public domain or licensed from third parties, a business should try to own as much data as it can. The business that controls the most data will likely be the most successful.

The advances in sensing technology, the way that IoT physical components are combined into a network and the related data analytics software can have significant business value. There should also be innovation specific to the particular application for which intellectual property (IP) protection is important. Businesses need to think both offensively and defensively in creating an IP strategy so they have the freedom to operate without a license from a third party and also provide a barrier to entry by a competitor. A search of the US Patent and Trademark Office (USPTO) data base indicates there are already more than 900 patents issued in which the term “Internet of Things” appears and over 75 patents issued in which the term “Internet of Everything” appears.

There may be liability issues if an IoT device fails or the data analytics software provides erroneous information. Limiting liability by contract with a utility, state or local government or business may be feasible in the same way as for other equipment and software but contracts will not be possible for many consumer applications. Insurance will be the safety net and the only feasible way to mitigate the risk at the retail stage.


The widespread implementation of simple smart water meters for residential customers would help save millions of gallons of water in California and elsewhere. The IoT can be used to determine when, where and how much water is needed in landscape and agricultural irrigation. Given the amount of water used in agriculture, tax incentives should be used to motivate the adoption of IoT and other conservation measures in that industry. The IoT can help reduce water shortages by providing actionable information which enables usage be more efficient and less wasteful.

(1) See Water and the Internet of Things, October 28, 2014, rroyselaw.com/water-and-the-inter-of-things

(2) Given the timing of PUC general rate cases for CWS, a smart water meter program is probably at least three years away.

(3) Cisco and others also use the term “Internet of Everything” (IoE) which has a broader meaning than IoT that includes services such as a search engine, users and other objects.  Cisco defines the IoE as the intelligent connection of people, places, data and things.

(4) www.cisco.com/c/r/en/us/internet-of-everything-ioe/internet-of-things-iot/

(5) Do San Francisco’s smart meters help curb water use?, http://smartcitiescouncil.com/article/do-san-francisco%E2%80%99s-smart-meters-help-curb-water-use

(6) Water Meters Begin to Get Smarter, www.wsj.com/articles/water-meters-begin-to-get-smarter-1430881505

(7) Smart Water Meter Adoption Rates On The Rise, http://www.wateronline.com/doc/smart-water-meter-adoption-rates-on-the-rise-0001

(8) 7 Ways Smart Meters Save Water, www.wateronline.com/doc/ways-smart-meters-save-water-0001; see also http://spark.mckinstry.com/say-goodbye-to-wasted-water-how-smart-water-meters-help-us-conserve/. The governors executive order B-29-15 was issued April 1, 2015 and applies to “potable urban water usage”.

(9) www.epa.gov/WaterSense/pubs/outdoor.html

(10) www.govtech.com/fs/perspectives/3-Ways-the-Internet-of-Things-Can-Address-the-Water-Crisis.html

(11) https://www.scmagazine.com/gazing-ahead-security-predictions-part-4/article/578979/

(12) http://www.infosecurity-magazine.com/news/water-treatment-plant-hit-by/

(13) In information technology, a “smaller footprint” for software means that it needs less space in memory for storage and execution.  Vendor AgilePQ believes it has security technology that can be implemented at an IoT entry point without changing the economics of the network.

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Fred Greguras

Fred Greguras is an experienced business lawyer and entrepreneur. He works with global and U.S. businesses from startup through public company stage with an emphasis on start-up and emerging growth companies. He has helped many foreign companies set up and expand their operations in the United States and represents various types of businesses including software, clean technology, semiconductor and medical device companies. His transactional experience includes equity and debt financings of various types including project financings for energy projects, seed and venture capital and other financings. Mr. Greguras has also advised on many M&A, joint ventures, licensing and other business transactions both in the US and internationally. Fred has substantial experience representing companies with a market focus on, or operations in, China, Vietnam and India, and in supporting investors and businesses from those countries.
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