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Key Issues for Seawater Desalination in California: Cost and Financing Table 1. Desalination Costs for Proposed and Recently Constructed Plants Capital O&M Unit Capacity Project Cost a Cost b Cost c (MGD) ($ millions) ($ millions) ($/AF) <strong>San</strong>ta Cruz/ Soquel Creek Water District California American Water e 4.9 – 8 $175 - $207 Deep Water Desal e 4.9 - 8 $134 - $ 160 The People’s Moss Landing Water Desal 4.9 - 8 $161 - $190 Project e 2.5 $114 $3 - $4 N/A $7.77 - $11.0 $9.38 - $12.3 $7.06 - $10.1 12 $2,555 - $3,250 $2,395 - $3,120 $2,345 - $2,980 Tampa <strong>Bay</strong>, Florida 25 $158 N/A $1,100 Dollars d are in… 2012 dollars 2012 dollars 2012 dollars 2012 dollars 2007 dollars Gold Coast Desalination Plant f 33 $888 $30 $1,982 2009 dollars Kwinana Desalination Plant – Perth f 38 $330 $17 $1,221 2008 dollars Carlsbad Desalination Plant Camp Pendleton 50 - 100 50 $771 $50 - $54 $1,300 - $1,900 $45 - $105 $2,042 - $2,290 $1,900 - $2,340 2012 dollars 2009 dollars Kurnell Desalination Plant- Sydney f 55 $1,565 $47 $2,407 2008 dollars Southern Seawater Desalination Plant f 72 $1,466 N/A $2,827 2012 dollars Port Stanvac – Adelaide f 72 $1,878 $136 $2,389 2012 dollars Wonthaggi Desalination Plant – 109 $3,651 $63 $6,552 Melbourne f 2012 dollars Status Proposed Proposed Proposed Proposed Complete Complete Data Source Luckenbach 2012 Separation Processes, Inc. 2012 Separation Processes, Inc. 2012 Separation Processes, Inc. 2012 Pankratz 2012a Complete NWC 2008 Proposed Proposed SDCWA 2012b SDCWA 2012b Complete NWC 2008 Complete In progress In progress Notes: N/A: not available (a) Capital costs here are based on capital expenditures (Cap Ex) and include the cost of the desalination plant plus any other infrastructure required to integrate the desalination plant into the rest of the water system. The cost to finance the project is not included. (b) O&M costs include the operation and maintenance costs of the desalination plant and any other infrastructure required to integrate the desalination plant into the rest of the water system. (c) The unit cost captures capital and O&M costs as well as the cost to finance the project. (d) Costs have not been adjusted for inflation. Unless otherwise indicated, we assume that cost estimates are provided in the year in which the project was completed. (e) The actual capacity of these projects may differ from what is stated here. The study these estimates were drawn from (Separation Processes, Inc. 2012) adjusted the plant capacities to make a more accurate comparison among projects in the region. (f) Costs for plants in Australia were converted into U.S. dollars based on conversion rates for the year in which the cost estimates were made. Pankratz 2012a Pankratz 2012, Kemp 2012 Pankratz 2012a
Key Issues for Seawater Desalination in California: Cost and Financing Desalination Costs Can Vary Over Time It is important to note that desalination costs are not static but can vary over time. Many of the estimates shown in Table 1 are engineering estimates based on the initial project design. Actual production costs can be higher due to increases in the capital and O&M costs or a reduction in the amount of water produced. Capital costs may change if the price of materials, such as cement or steel, or the cost of borrowing money changes. Major project delays are also likely to increase capital costs. O&M costs can also change over the life of the desalination plant due to changes in input costs or in the lifetime of major equipment. Energy, for example, represents a major cost component (Figure 1), and short-term and long-term increases in energy prices can increase production costs. If energy accounts for 36% of the annual production cost, a 25% increase in energy costs would increase the cost of produced water by 9%. Similarly, membranes typically last between 5 and 7 years, although in some cases, 10 years is possible. If the actual lifetime of the membranes exceeds 5-to-7 years, the production cost may be lower than the initial estimate. Conversely, if the membranes foul more quickly, than production costs may be higher. The cost of produced water from a desalination plant is especially sensitive to changes in the amount of water produced. As described previously, the unit cost of water is determined by dividing the annual costs by the amount of water of produced. Typically, unit cost estimates during the design and planning of the project are based on the assumption that the desalination plant will operate at or near full capacity. By producing less water, however, the unit cost increases (Table 2). For example, a 50 MGD plant produces water at cost of $2,700 per acre-foot ($2.17 per m 3 ) at full capacity; an estimated 1/3 of the cost is fixed, and the remaining 2/3 of the cost is variable. If the operator reduces water production to 40 MGD, on average, then the unit cost of water increases to $3,100 per acre-foot ($2.53 per m 3 ). If the operator further reduces water production to 10 MGD, then the unit cost increases to more than $9,800 per acre-foot ($7.96 per m 3 ). Table 2. An Example of the Relationship between Desalination Plant Production and Unit Cost Plant Actual Annual Annual Fixed Unit Cost Capacity Production Variable Cost Cost ($ millions) ($/AF) (MGD) (MGD) ($ millions) Unit Cost ($/m 3 ) 50 50 $100 $50 $2,678 $2.17 50 40 $100 $40 $3,125 $2.53 50 30 $100 $30 $3,869 $3.14 50 20 $100 $20 $5,356 $4.34 50 10 $100 $10 $9,820 $7.96 13
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