Brookings has a new paper called The Path to Water Innovation. Here’s an excerpt:

The primary barriers to innovation are related to the way that the many layers of governmental agencies and water entities manage the nation’s water sector. Among the main management and policy barriers are (1) unrealistically low water pricing rates; (2) unnecessary regulatory restrictions; (3) the absence of regulatory incentives; (4) lack of access to capital and funding; (5) concerns about public health and possible risks associated with adopting new technologies with limited records; (6) the geographical and functional fragmentation of the industry; and (7) the long life expectancy, size, and complexity of most water systems. Although the last three factors are inherent to the water sector and hard to change, substantial policy reforms are feasible that could alter pricing, regulation, and finance in the water sector—all in ways that would encourage innovation.

We focus on several recommendations: (1) pricing policies that would both better align with the full economic cost of supplying water and decouple revenues from the volume of water supplied; (2) regulatory frameworks to create an open and flexible governance environment that is innovation friendly and encourages valuable new technologies; and (3) financing and funding mechanisms, such as a public benefit charge on water, that can help raise sufficient funds to implement innovative solutions. As has been demonstrated in the clean energy sector, implementation of these policy reforms would facilitate greater innovation in the water sector. In addition, we recommend the creation of a state-level water innovation vision that would identify state-specific innovation opportunities and policies, along with state innovation offices to help implement the vision across the many varied agencies and firms relevant to the sector. While we expect these state water innovation offices would become common, a small group of states with the greatest water challenges—such as California, Florida, and Texas, or a consortium of like-challenged states in a region such as the West—would begin the process. Based on the lessons learned, other states could follow.