The real cost of desalination

With the ongoing levels of drought and falling (failing) water supplies, Adelaide is finding itself in somewhat of a pickle. For you see, a city of over one million people need a lot of water and we are not sited on a major river or near major supplies of fresh water. This has been an issue with Adelaide from the earliest days of settlement.

In the first few decades we relied on the River Torrens although it dried up into a series of stagnant and nearly unusable  pools in summer. After the big push for sanitation in the colony, the need for even more water became overwhelming and Thorndon Park reservoir was constructed. Then Hope Valley and on it went until these days we have to top up the reservoirs with “water” from the Murray. However through the most amazing mismanagement up stream we now find this river becoming unreliable. Scientists have warned about this for as long I can remember and they were promptly ignored until the proverbial hits the fan.

And so we find ourselves, after a few years of increasingly severe water restrictions on the brink of a brave new world. Electric powered reverse osmosis desalination. Now initially I thought that maybe using power this way would be bad but if you do the calculation it doesn’t use too much power, something like 3 to 4 kW per kl of water so that’s about $1 even allowing for the cost of power to increase. That’s pretty cheap.

However, and here’s the nasty bit, these plants are not cheap. For a plant of 50GL pa, which is about 25% of Adelaide’s annual requirement the cost is about $1.4 Billion. There is also a few hundred million of extra piping to wherever. I’d estimate a conservative total cost of $2.5 Billion assuming the usual greed, incompetence and cost blow-outs by large companies. This is roughly $2500 for each person in Adelaide and the per person cost is usually a good way to work out how expensive something really is because a million people is a lot to spread the cost over. It also makes big numbers in the billions more understandable. In this case this is a real freakin’ lot of money. So how much will this cost each year?

If we ignored interest and wanted to pay the principle back over 25 years this would be $100 million pa, at least for the first year. And in the first year we get 50 Gl or 50 Million Kl. So the price of this water is $2 per kilolitre assuming a whole pile of unreasonable things. If we add say5% interest (hey this this government, they can do miracles like this) then the interest is another $125 Million for the first year. We’ll assume our dumb government lets private industry supply our critical infrastructure so we’ll be paying for the interest. This makes our water at $4.50 per kilolitre. This might be all well and good except that the supposed price increase is only a few tens of percent or up to about $1.65 at most. Water at the moment is about $1.16 per kL. If we mix the water we will have 3 parts normal plus 1 part desalinated for a total cost of $7.50 per 4Kl or about $1.75. This is assuming desalinated water is 25% of total supply.

And this I predict will be the initial cheapest they will ever supply it. Once they double the plant size, allow for maintenance and new membranes you can expect your water to soon head towards the $3 per Kl mark and then beyond.

To quote this announcement from the government “To offset this massive investment, we’re announcing a new water pricing structure which will see water prices rise in real terms by 12.7 percent on average from July 1 next year.” 

And here’s the initial pricing:

The new three tier structure for 2008-9 is:
o $0.71/kL for water use from 0-120 kL.
o $1.38/kL for water use from 120-520 kL.
o $1.65/kL for water use above 520 kL.

compared to the old:

The current two-tier structure for 2007-08 includes:
o $0.50/kL for water use from 0-125 kL
o $1.16/kL for water use above 125 kL.

However if you work out the actual cost of 250kL of water, the declared average use, using the new figures you get $264.60 compared to $207.50 under the old two tier pricing stream. This is an increase of 27.5% and not the 12.7 claimed above. In fact the lowest increase is roughly 21% for someone using a massive 525kL.

So here we have a government, the same as the proceeding ones, that has sat on it arse fiddling while Adelaide burned,  bumping up it’s own super funds whilst telling porkies about the real cost of desalinated water and lying about price increases.

I take my hat off to their spin merchants and Mr Wran. Mr Barnum would be proud to have you as his son.

3 Comments on “The real cost of desalination”

  1. Interesting. It is interesting to see some of the nuts and bolts of financing. When I was in Singapore, they were going through the feasibility of desalination. Singapore has to import most of its water from Malaysia and it was considered a security issue for the nation. There is no question that it is expensive, but the reality is that there really is no other viable option to ensure the long term viability of Adelaide, especially with the government keen to double the population. Where is all the water for the new people going to come from, far less those who are here now. There is no guarantee that it will rain for the next x years. Your point is fair that it is a rushed strategy and makes a mockery of the Waterproofing Adelaide Document that was developed to great applause a few years ago. I wonder if anyone has read it? What was the plan to waterproof Adelaide. It was not desalination I am sure. More knee jerk responses from Rann Foley Inc, who seem to like to fiddle while South Australia burns in the sun.

    • Water Wizard says:

      Water can become available from the Murray River from Melbourne’s storages at $350/ML. So the desalation plant will not be economically viable long term.

  2. E. Mackenzie says:

    Australia being the driest continent on the planet should have desalination plants along the coast from Brisbane to Perth. Unfortunately, we have mindless morons who control the purse strings and don’t comprehend if we have no water we have nothing.

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