Desalination

John Quiggin8 Comments

Reader Nic White asks for some comments on WA Premier Geoff Gallop’s desalination plan, and I’m happy to oblige, as this is a topic I’ve been meaning to do some work on. We’re talking here about about desalinating seawater or groundwater for human use, rather than schemes for reducing salt inflows to river systems like the Murray-Darling, another big topic in itself.

There are two basic ways of going about this. One is distillation. The most common approach to distillation is to evaporate the water, leaving salt and other pollutants behind, and capture the steam, but freezing and vapour compression. The other is to separate pure water using reverse osmosis or electrolysis. The first approach is the traditional one, but it’s inherently energy-intensive, so unless you have a cheap source of waste heat, it’s becoming outdated. The top candidate at present is reverse osmosis, which involves passing the water through a membrane, and using pressure to reverse the normal osmotic flow from high salt concentration to low. The current energy cost is about 4.5KwH for each Kl of seawater desalinated (the cost increases with the salinity of the source). Electrical energy is required, so this would come in around 25c/kl. The main operating cost comes from the need to replace the membranes.

I found this report (1.2 Mb PDF) which focuses on small scale plants for remote areas, up to 50/kl a day or around 15Ml/year. I assume there are significant scale economies beyond this, but it’s worth noting that, unlike large-scale engineering works, desalination is an incremental option, so you shouldn’t have problems of excess capacity. Operating costs are estimated at 65c/kl for a source with 2000mg/l up to $1.89 for 35 000 mg/l (seawater), for an output salinity less than 500mg/l. I’d guess the optimal way to go would be to accept more saline output and dilute it with fresh water. At a rough guess, I think a larger scale plant could produce water with operating costs of $1/kl

Capital costs are about $1600/kl/day or about $5/kl/year for small scale plants. That’s $5 million for each GL of annual capacity, compared to $10/GL in the unlikely event that the canal alternative could be delivered for $2 billion[1]. Assuming BOOT financing as I did for the canal (a high-cost option, but I want to be fair), the annual capital charge would be around 70c/kl, for a total of $1.70/kl, before reticulation and any additional treatment.

At that price, desalination is a pretty expensive option, and I’d expect to see some fairly dramatic reductions in optional water uses, like watering lawns. Before going to seawater desalination on a large scale, it would be sensible to work through the cheaper options, such as conservation, repurchase of irrigation water and use of groundwater in appropriate locations. This large PowerPoint file has some interesting data.

The availability of desalination as a backstop also suggests we need to take a sceptical look some of the more overblown rhetoric implying that urban Australians are going to run out of water. If we conservatively put the cost of large scale desalination up to $2.50/kl and assume water use of 200kl/person/year (you could manage a suburban lifestyle, including a water-efficient garden but no lawn on half that) it’s still only $500/person/year or $1500 for a three-person household. Not trivial, but cheaper than broadband or cable TV.

fn1. In my post, I suggested staged construction costs of $3 billion (still v. conservative) which gives a capital cost of $15/kL capacity and an annual capital charge of about $2/kl.

Monday Message Board

John Quiggin31 Comments

It’s time for the regular Monday message board, where you are invited to post your thoughts on any topic. I’ll probably be fairly quiet this week, as I have to give a couple of conference papers, so feel free to take up the slack

Trackback problems

John Quiggin1 Comment

I seem to have lost trackback capacity – people are linking but they are not showing up as trackbacks. If any readers can automagically divine the source of my problem, I’d be very grateful. My host recently rearranged my directories, putting the WordPress blog at root level to fix the RSS feed, so perhaps I’ve gained on the roundabouts and lost on the swings.

What I’m reading

John Quiggin4 Comments

Blood Matters by Matthew Klugman is a fascinating history of the Red Cross Blood Transfusion Service in Victoria. As well as being of great interest in itself, it yields lots of insights into the role of volunteers and social social solidarity, particularly in relation to the “gift of blood”.

The story ends in the 1990s, when organisations that had served Australia well for decades were swept away in a tide of managerialist and market-oriented reform. The Victorian service was merged into a national body, while Commonwealth Serum Laboratories, the government organisation that had processed blood was privatised on terms that were grossly unfavorable to the public. It’s arguable that this is all for the best. Certainly the quality of Australian blood supplies remains high, and the ethic of blood donation is still strong. But I can’t help feeling that in this, and many other respects, we are living off social capital accumulated in the past.

Shameless

John Quiggin7 Comments

This Sun-Herald front page “exclusive” by Matthew Benns is one of the most despicable pieces of journalism I’ve seen in a while. Taking the eminently forgettable occasion of Prince Charles’ visit to Australia, Benns decides to chase down the disturbed young man who shot blanks at the Prince with a starters pistol during his last visit 11 years ago. The man has turned his life around and recently qualified as a barrister. As the story makes clear, all he wants to to is forget about the whole business.

Certainly 11 years ago was a traumatic experience and is something I don’t want to bring back those memories again … To think about it even now unsettles me a little bit … what happened back then was extremely traumatic and the effect it had on my family was deeply upsetting.”

The other people quoted in the story, including then premier John Fahey and his wife seem equally unhappy about revisiting it.

Faced with this kind of response to a story idea, a responsible journalist and editor would have quietly killed it. But not Benns or the Sun-Herald edito. Their idea of letting the guy move on is to splash his picture all over the front page. I am seriously considering cancelling my subscription as a result of this.

The Great Canal

John Quiggin24 Comments

It looks as if the WA election may turn on a PPP scheme: Liberal leader Colin Barnett’s proposal for a canal bringing water from the Kimberleys to Perth. This seems to me like complete lunacy. The estimated construction cost is $2 billion, but given a 10-year staged construction process, accumulated capital costs will be closer to $3 billion by the time the first water flows. The private owner will want a nominal return of at least 10 per cent, and depreciation of 4 per cent[1]. That’s more than $400 million a year in capital costs alone, or something like $800 a household. I think a saw an estimated water flow of 200 GL, which suggests $2/kl in capital costs.

But that’s just the start of it. Water is heavy. Every kilolitre of water is a tonne of matter that has to be transported nearly 3000km with no assistance from gravity. I have no idea how much this would cost, but I’d be amazed if it could be done for $1/kl. And all of this is before treatment and reticulation, and without even thinking about evaporation and seepage, environmental issues, native title, compensation for non-indigenous freeholders and so on. Desalination is considered expensive at $1-2/kl but it looks like a marvellous bargaing compared to this.

The proposed contract is take or pay, so if demand falls short (this scheme will supply around 400kl/household, more than total consumption for many) the loss will be borne by existing public water suppliers.

Barnett has apparently committed himself to the scheme without any sort of feasibility studies, and, according to the Fin, scored a big win with the TV audience in his debate with Geoff Gallop by doing so. But, on the evidence of this scheme, he’s unfit to be trusted with a footy club raffle, let alone running a state government.

One interesting feature of this kind of scheme is that I’m in agreement with the Institute of Public Affairs. We have very different views on infrastructure policy in general, but we can both recognise a boondoggle when we see one.

Update 5/04 The Fin quotes a Treasury report that estimates the cost at $6.50/kl which includes higher construction costs. That sounds about right to me, and confirms my conclusions about Barnett. The story says the $2 billion promise was based on a proposal from Tenix (the planned private partner) that was exceptionally sketchy – apparently they didn’t even know the route of a major gas pipeline in the area.

Further update Rob Corr is all over this story. For what it’s worth, I’d judge that Barnett has a few days left to back off the idea and claim he’s been misunderstood. Any longer than that and he’s better off brazening it out all the way to the election. But three weeks is a long time in politics.

fn1. It’s supposed to be a BOOT apparently, so the capital will have to be amortised over 25 years or so, making 4 per cent a lower bound.

Weekend reflections

John Quiggin38 Comments

This regular feature is back. The idea is that, over the weekend, you should post your thoughts in a more leisurely fashion than in ordinary comments or the Monday Message Board.

Please post your thoughts on any topic, at whatever length seems appropriate to you. Civilised discussion and no coarse language, please.

Will you go bankrupt before Social Security?

John Quiggin25 Comments

In his push for Social Security privatization choicepersonal accounts abolition, George Bush is raising the prospect that, some time around 2050, Social Security will go bankrupt. This claim has been refuted quite a few times, so let me raise a different answer.

If you’re a young working-age American, don’t routinely pay your credit card balance(s) down to zero each month, and don’t have top-flight health insurance, it’s odds-on, based on recent experience[1] that you’ll go bankrupt at some point.
Read More »

A general request for civil discussion

John Quiggin20 Comments

There’s lots of interesting issues under discussion at present, but, inevitably, vigorous discussion is sliding into flamewar. No individual comment has been offensive enough for me to intervene, but there’s a lot of shouting going on. That tends to reduce comments threads pretty rapidly to repetitive exchanges between two or three people – entertaining for a little while, but a turn-off after that. Could I ask everyone involved to take a deep breath and avoid any personal criticism for a while. There’s plenty of meat left in these issues, I think.

The OECD on user pays

John Quiggin15 Comments

I normally ignore OECD reports on the Australian economy, since they are in essence, a Paris republication of the Australian Treasury policy line of the day. The OECD is largely staffed by officials from national treasury departments on temporary postings, and its primary source in consultations is the Treasury. If there has been an instance of substantive disagreement between the OECD and the Australian Treasury in the past 30 years, I’m not aware of it (corrections welcome on this!). Of course, if you think Treasury is always right, this isn’t a problem.

The latest calling for a renewed push on reform and so on, fits the pattern perfectly. But there was one para that caught my eye, and so I’ll try to dig out the report.

The health system, it said, needed more market incentives and a strong user-pays approach.

Private health insurers should be able to cover risks outside hospitals, while there should also be less reliance on paying doctors on a fee-for-service basis, which encouraged them to over-service their patients.

This seems entirely self-contradictory, but consistent with my general view of the OECD. Fee for service is the only real “user pays” system, since a privately insured person faces exactly the same incentives as someone consuming free public health services. On the other hand, concern about medical over-servicing and support for central planning as a method to control it has been a characteristic feature of the Treasury/Finance view for many years. But, I’ll have to read the whole thing.

Update Treasury is pretty well-informed about the Australian economy, and likes to play its cards close to its chest, so the OECD reports are a useful guide to the way Treasury is thinking. But when Treasury gets it wrong, don’t expect the OECD to correct them. In early 1990, for example, when anyone in the private business sector could have told them a catastrophic crash was under way, the OECD Report said “A severe recession is unlikely … the task for policy is to ensure that the necessary weakening of domestic demand continues”.

This report is also interesting reading for those who now deny that the current account was the policy target driving the credit squeeze that gave us ‘the recession we had to have’.