Mea culpa but drought doesn’t drive the desal market

Published October 26th, 2017

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Insight from Christopher Gasson, GWI publisher

I was in São Paulo last week for the IDA World Congress. The desalination market still has a long way to go before it has a smile on its face. The combination of too little work and too much competition doesn’t spread much happiness – especially when you are holed up in a dislocated conference centre 2,000 miles away from the nearest decent desal market.

In the final discussion panel, I had to take some share of the blame for the current situation. My forecasts of continuing growth in the market played a part in encouraging companies to continue to invest in desalination once the music stopped in 2010. At the peak of the market ten years ago, there were 20 companies with experience of building seawater desalination plants with a capacity of more than 100,000m3/d, and there were 12 such plants awarded that year. So far this year there have been seven seawater desal plants with a capacity of more than 100,000m3/d awarded, but there are 44 companies with reference plants of that size or greater competing for them.

So where did I go wrong with the forecasts? Some things like the Arab Spring and the fall in the oil price were difficult to foresee, but the most important factor I got wrong is the fact that drought is no longer a significant driver of demand for desalination.

It was a big driver eight years ago when the four big cities on the eastern side of Australia turned to desalination in response to the Millennium Drought, but it isn’t now. California saw no great rush towards desalination during its extended drought, and despite the best efforts of the International Desalination Association, Brazil shows no signs of moving seriously towards desalination in the face of its current devastating drought.

In the past, I – like many others in the industry – assumed that the growing severity of droughts and floods brought on by global warming would mean that the cities affected would add seawater desalination to their water resource portfolios, and over time, as these cities grew, they would come to rely on seawater more heavily as a day-to-day resource. It hasn’t happened like that.

The central problem is that politicians are reluctant to buy a fixed-cost solution to a variable problem. We can talk as much as we like about insurance policies and the need for a balanced water resources portfolio, but the politicians are not buying it. They looked at what happened to the politicians who backed desalination in Australia – then lost their jobs when the rains came – and decided they wanted something different.

At the moment, that something different is demand management and water reuse, but so far no government has had to face the question of what they intend to do when the water really runs out. Nor has the desalination industry truly faced that question: no one can develop and build a truly optimised 100,000m3/d plant in less than 18 months. That is too slow for most droughts.
My panel in São Paulo discussed how best to grow the industry. The consensus among my fellow panellists from the large desalting companies – Yves Besse from Veolia, Jean-Luc Alexandre from Suez, Manuel Manjón from Acciona, and Marta Verde from GS Inima – was that the solution is to improve the technology and educate clients to become better at planning and procuring assets. These things will certainly speed up the market – at the moment, GWI is tracking 314 desalination projects, but scarcely 10% of them will be awarded this year. Lowering the cost of water might help some of the ditherers make up their mind, and improving the way in which utility customers interact with the market will make a huge difference in terms of the quality of solutions, but it won’t necessarily increase overall demand. Doug Brown of AquaVenture, who was also on the panel, was less bothered about the opportunities in new-build: he sees a wealth of growth in the existing installed base, where plants typically run at 70% efficiency. His business model is based on buying these underperforming plants and increasing that figure to more than 90%.

The final member of the panel was Henry Charrabé from Fluence. His company specialises in decentralised water solutions, including containerised desalination plants. He sees growth everywhere that centralised utility systems are failing to reach. It’s a good market, but his shipping containers could also be the beginning of a more flexible solution to drought: rented out monthly at short notice as the crisis develops.

It seems to me that in order to take advantage of the growing drought-related market for water security solutions, it isn’t so much new technologies that we need, but new business models.