The water industry could learn a few lessons from the energy sector about using technology to manage an increasingly scarce resource, according to panelists at the Cleantech Forum in Toronto on Friday.

"Water is inextricably linked to energy," said Greg Sullivan, managing director of Vancouver, British Columbia-based venture-capital firm Chrysalix Energy, who moderated a wide-ranging discussion on the drivers and challenges of water-technology investing and emerging opportunities for early-stage deals.

Zeroing in on California, he said 20 to 30 percent of the state's electricity goes to water transport, treatment, delivery and pre-treatment before disposal. A significant portion of energy is used to process and deliver water that is ultimately lost through leaks or simply wasted in a complex system of aging pipes and pumps.

Technologies that reduce the cost and improve the efficiency of waterstorage treatment, transportation, monitoring and recycling all are experiencing huge demand, driven by increases in energy prices, fears over security of supply and a rapidly deteriorating infrastructure, Sullivan said.

According to the most recent figures from the U.S. Environmental Protection Agency, the country has 74,400 water systems that will need an estimated $276.8 billion in investment in the next two decades.

The U.S. market, however, is highly regulated, meaning that prices are not market-driven, and the major players are conservative and difficult to penetrate.

"It is an area that's dangerous for early-stage investing," said Michael Bevan, managing director of DFJ Element, which is an investor in Seven Seas, which owns, consolidates and operates drinking-water and wastewater-treatment plants in the Caribbean.

North America is a more challenging market to tackle, he said, pointing to the existence today of water subsidies and the public perception that it's an abundant, cheap resource. "In North America, water prices are highly regulated, but we think that will change," Bevan said.

Risk aside, investors are excited about the space. North American and European venture-capital investments in water and wastewater jumped 146 percent in the third quarter compared to the previous quarter, according to data released Thursday from the Cleantech Network.

But water's portion of investment is small compared to areas such as clean energy generation. "There's going to have to be some event to stimulate fast adoption of the technology," said Todd Wilson, managing partner at RockPort Capital Partners, an investor in HydroPoint Data Systems, which has developed software for managing irrigation of residential and commercial properties.

More technologies that can eliminate the wasteful use of water and drive efficiencies in its treatment and delivery are needed, said Wilson, adding that there's room for new business models that mirror the kind of new ventures that have emerged in the electricity sector.

He pointed specifically to demand-response aggregators such as Comverge, another Rockport investment. Comverge helps reduce peak-time strain on the grid by reducing, under contract, blocks of electricity consumption at the request of system operators. The same approach could just as well apply to water management, meaning a greater dependence on sensor technology and the use of software for real-time measurement, monitoring and dispatch, he said.

Companies in this area include Sensicore, which specializes in water monitoring and testing, and Early Warning, which has developed a biosensor that can test up to 100 different pathogens in less than 30 minutes.

While water conservation and quality control are key, the panel agreed that securing adequate supply that's clean enough to drink or pure enough for industrial use, particularly with the irrigation for biofuel crops on the rise, is also putting a spotlight on technologies for recycling gray water, treating wastewater and tapping the oceans.

Many jurisdictions will have no choice. Shortages have crippled parts of drought-ravaged Australia and China, and U.S. states such as Florida, California and Vermont have been hit with restrictive water-use polices. Atlanta, the largest city in the U.S. south, has less than 90 days of water supply and city officials are struggling to come up with a backup plan.

In India, 90 percent of the sewage water that could be recycled for use in agricultural irrigation is instead being released into rivers without treatment.

The economic effect on industry, particularly agriculture, will be immense. The International Water Management Institute said this month that ambitious plans to produce biofuels in China and India will deplete water reserves and hurt the food supply because of the vast quantities of water that will be diverted to growing fuel crops.

Integrating water treatment and recycling with renewable power could prove essential over time. Dianne McCord Maughon, new business development manager with Dow Water Solutions, pointed to a controversial desalination plant in Australia that, when complete, will be powered by 75 wind turbines.

"We've seen a couple of companies using ocean power to operate desalination facilities," said Bevan, adding that the potential is massive, particularly if U.S. prices are deregulated and begin to rise along the same curve as electricity rates. At the same time, the cost of desalination has dropped "dramatically" in the last 15 or 20 years, he said.

Peter Grubstein, managing partner with NGEN Partners, said the future of desalination is just as much about good planning as it is the emergence of better, more efficient technologies. All the panelists agreed that overseas opportunities are huge, but require people on the ground that can understand the unique needs of each place and establish the right partners to navigate the world of policy and regulation.

They also agreed it was highly risky to build a business on regulation, which leaves new ventures highly vulnerable to delay or dramatic shifts of policy. "It's wonderful when it comes," said McCord Maughon. "But counting on it as a startup is a challenge."