More than any other substance, fresh water is essential to our society. It is needed to produce electricity, it is needed to grow crops, and the average person needs around two to four liters of fresh water a day just for drinking. 

Fresh water is, unfortunately, not as plentiful as it should be. The average North American uses 1,280 cubic meters of fresh water per year. In stark contrast, the average African uses only 186 cubic meters per year. 

While the shortage of fresh water is a problem now, the problem will become even more urgent in the future. The World Bank-sponsored 2030 Water Resources Group forecasts that fresh water demand may exceed supply by a staggering 40% by 2030. 

In short, the ability to produce fresh water will be in major demand.

The desalination tipping point
To solve their fresh water shortage problems, water-poor but cash-rich countries used to import fresh water. While many countries still import fresh water, a significant number of countries are building desalination facilities to convert salt water to fresh water. Desalination facilities are popular now because they are increasingly more cost effective than importing fresh water. 

The growth potential for desalination facilities is enormous. At the current moment, there are more than 11,000 desalination facilities worldwide. Those 11,000 desalination facilities have a cumulative capacity of around 4 billion gallons daily. This may sound like a lot, but it is only around 0.26% of world demand , which pales in comparison to the 40% excess demand forecast by 2030.

The current leaders in desalination are small divisions of large companies such as GE (NYSE:GE) and Dow Chemical (NYSE:DOW).

GE was named Global Water Intelligence's 2012 Desalination Company of the Year, and according to, the conglomerate ranks third in terms of contracted capacity of engineering, procurement, and construction of desalination plants since 2000. 

Dow Water & Process Solutions currently leads the way in manufacturing desalination reverse osmosis membranes, which is a $1 billion plus per year market that should grow by at least 10% a year.  

Another desalination leader is Veolia Environnement (OTC:VEOEY) According to, Veolia Environnement  is the market leader in terms of contracted capacity of engineering, procurement and construction of desalination plants since 2000.

In addition to desalination solutions, the company also offers water and wastewater solutions for industrial and municipal clients. 

An energy problem
At its heart, the scarcity of fresh water is an energy problem. It takes energy to convert salt water to fresh water. It takes energy to transport fresh water from the coastal areas to inland population centers and aquifers. 

Investing in solar companies such as SunEdison (OTC:SUNEQ), which is likely to win a contract to build a $6.4 billion solar PV manufacturing plant in Saudi Arabia, is one way to play the energy problem. Because many Middle Eastern countries have money and need fresh water, most of the world's desalination plants today are in the Middle East. Because the region also gets a lot of sunlight, the Middle East is one of the more promising solar markets.

Investing in solar companies such as SunEdison should give investors exposure to energy demand from new Middle Eastern desalination plants. As technology progresses and solar becomes more cost effective elsewhere in the world, solar investors should also gain exposure to other desalination energy markets as well.  

The bottom line
The world's fresh water shortage is a huge problem that requires multifaceted solutions such as improving sewage and irrigation systems, lowering the cost of desalination plants, and realizing cheaper energy costs.

Investing in leading conglomerates with substantial resources and market share is one way to play the opportunity. Investing in leading solar companies is another way. 

In my opinion, fresh water production technology is still in the nascent stages. It is the proverbial first inning of a nine inning ball game. There is a lot of room for future innovation and growth, and with it, profitable opportunity to invest in this generation's blue gold. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.