Desalination:

The Future
of
Fresh Water

Hiroshi Kita
Winnie Lau
John Milonas
Rick Wright

EXECUTIVE SUMMARY
The global fresh water shortage is among the worlds greatest challenges. Declining fresh water
resources and increasing population will make this problem more acute in coming years. The
solution, in part, may lie in merging renewable energy and seawater desalination technologies.
Over 15,000 facilities in more than 120 countries produce over 3.5 billion gallons of desalinated
water every day using processes involving thermal or membrane technologies with membrane
technologies rapidly becoming the dominant process in application, process improvement and
cost reduction. Linking desalination with renewable energy sources (RES) makes sense from an
environmental and sustainability viewpoint with several small-scale, low capacity RES driven
desalination facilities built, mostly in arid regions with high solar energy capacity. However, the
combination of desalination and RES technologies for effective and efficient large scale RES
powered desalination is still years away.
Policy drivers for desalination in the United States include The Safe Drinking Water Act and
national security. High quality water produced by desalination meets the requirements of the
Safe Drinking Water Act where traditional water sources, which are becoming contaminated,
often cannot. The CIA has assessed that half of the worlds population is expected to live in
water-stressed conditions by 2015 with a potential rise in regional conflicts as the fresh water
supply dwindles. Thus, the U.S. Government, to lessen the probability of conflicts over water,
funds research and development to help ensure the global availability of fresh water.
Domestic fresh water demand continues to increase while the supply declines. Augmentation of
existing domestic water supplies through seawater or brackish water desalination may reverse
this trend. Current population growth projections for California require annual increases to its
fresh water capacity by 200 million gallons per day. As the energy cost to deliver water to
Southern California is almost 38% of the total price, more water cannot be imported without
significantly increasing consumer costs. In the last ten years the cost to desalinate seawater has
decreased by about 30% such that it is produced at about a 50% premium over municipal water.
Continued market expansion and technological innovations may serve to further reduce the cost
of desalination bringing it in-line with the increasing cost of municipal water. Still, desalination
is part of but not the entire solution to Californias fresh water shortage. Water conservation,
recycling, aquifer storage and new sources need to be included in a comprehensive water
strategy.
Desalination is fostering more attention as a solution to global problems where $95 billion will
be spent on desalination projects in the next 10 years. Foreign markets are influenced by
government policies reflecting the countrys particular situation, such as the environment,
available domestic water supplies, geography, etc. Saudi Arabia, the worlds largest desalination
market is moving away from thermal processes to membrane-based desalination through
privatization of its desalination market. Spain, the top producer of desalinated water in Europe,
continues to promote desalination as an integral part of its national water management policy.
Following the Spanish model, desalination in the U.S. as well as foreign countries, should not be
considered a de facto policy and an end-all to water problems. Rather, it should be considered as
a component of a balanced portfolio for locations where desalination is an economically and
environmentally acceptable augmentation to domestic water supplies.
2

TABLE OF CONTENTS
VALUE PROPOSITION . 4
INTRODUCTION... 4
TECHNOLOGY
Background................ 4
Thermal Processes ............ 5
Membrane Processes ............. 6
Advances in desalination technologies . 9
Renewable energy sources ............ 9
POLICY DRIVERS
Background: Regulations regarding water supply 10
Resource management: water, energy and seawater .............11
Policies on Desalination 12
Energy issues that impact desalination . 14
Summary ... 15
MARKET ANALYSIS
Background ... 15
Customer Needs ............ 16
Benefits and Outcomes Achieved . 16
Future Benefits and Expected Outcomes .. 17
Resources Required to Produce Future Outcomes ............18
Alternative Methods of Satisfying Needs . 18
Condition of the Desalination Industry . 19
Market Penetration Strategy . 29
FOREIGN COUNTRY ANALYSIS
Introduction ... 21
SAUDI ARABIA
Desalination Market Growth ............ 22
Desalination Powered by Renewable Energy 22
Business Climate in Desalination Market of Saudi Arabia ............ 23
Market Entry Strategy for Saudi Arabia 24
SPAIN
Water Shortages in Spain ........... 24
Desalination Market Growth .. 25
Emerging Market: Desalination by Renewable Energies .. 25
Business Climate in Desalination and Renewable Energy ............ 26
Market Entry Strategy for Spain ............ 26
CONCLUSIONS/RECOMMENDATIONS 27
APPENDIX A, INTERVIEW SCHEDULE ............. 30
APPENDIX B, TABLES and MAPS.... 31
BIBLIOGRAHY ... 35

VALUE PROPOSITION
The emerging technology of renewable energy-driven desalination plants positions desalination
as an economically and environmentally viable alternative to satisfy growing regional freshwater
demands.
INTRODUCTION
The worldwide shortage of fresh water is one of the greatest humanitarian, ecological and
economic challenges facing the world today. With the continuing decline in available fresh
water resources and increasing population, this challenge will become more acute in coming
years.
Globally, over 1 billion people do not have access to adequate drinkable water resulting in the
death of over 2 million people each year - most of them children. The United Nations estimates
that over half of the people in the developing world are continuously ill as a direct result of
unsanitary water, collectively costing 100's of billions of dollars annually from medical costs and
lost productivity.
Many of the world's major rivers, among them the once mighty Colorado River, often no longer
reach the sea due to over-consumption and mismanagement of their water. The global supply of
groundwater is also in trouble. In vast portions of the world the water table is dropping ten to
twenty feet per year while other areas are experiencing salinization of aquifers. If current trends
continue, by 2025 an estimated 40% of the world's population will not have access to adequate
clean water.
Even if it were possible to correct this problem with traditional methods such as dams, canals,
reservoirs and deep wells, it would require an annual investment of approximately $180 billion
on top of the $30 billion already spent each year. Fortunately, a combination of conservation
practices and advances in desalination technology now provide a potential solution.
Objectives
Determine the state of renewable energy technology for application in desalination.
Assess cost drivers for desalination: projected energy costs of renewable energies versus
fossil fuel based energy sources, capital and operational costs.
Analyze public policy drivers: water management, incentives and subsidies for desalination
and renewable energy

TECHNOLOGY
Background
It was during President Kennedys administration that conversion of saltwater to fresh water was
brought to the forefront of U.S. policy. At that time solar stills and multi-stage flash were the

only viable methods of seawater desalination. For decades low capacity solar stills used ambient
solar energy to heat seawater collected in covered containments and collected the fresh water
vapor as it condensed on the containment covers surface area. The capacity of solar stills, on
the order of liters a day, matched their simplicity. Early multi-stage flash desalination was a low
efficiency process that consumed considerable energy to evaporate seawater under vacuum
pressure with the resultant water vapor condensed to produce fresh water. During the 1960s and
1970s energy consumption was not a strong consideration in MSF desalination design or process
due to the perceived abundance of low cost fossil fuels. Since the 1970s membrane technology
has advanced to the point where membrane desalination processes make up a slight majority of
total global desalination with its industry share rapidly expanding.
Today there are over 15,000 desalination facilities in more than 120 countries that produce on a
daily basis more than 3.5 billion gallons of potable water using a number of desalination
processes based on thermal or membrane technologies. Each has its own advantages and
disadvantages with RO membrane technology as the new dominant process.
Thermal Processes
Thermal processes, multi-stage flash desalination (MSF Figure 1), multiple effect distillation
(MED Figure 2) and vapor compression (VC Figure 3), involve the heating of seawater under
vacuum conditions to create water vapor that is contaminant free. As a result of the phase
change, salts, organic compounds, and pathogens are not carried with the water vapor that is
condensed to make the distillate.

Figure 1: Diagram of Multi-stage Flash process

USAID1

Buros, O., 1999. The ABCs of Desalting. Topsfield, MA. International Desalination Association.

Figure 2: Diagram of Multi-effect Distillation process

USAID1

Figure 3: Diagram of Vapor Compression process

USAID1

The advantages of distillation processes are that they can be used with lower quality water than
other methods and require less chemical pre-treatment than membrane based processes. The
major disadvantages are that distillation consumes significantly more energy as a result of
inherent inefficiencies and the energy required to heat the incoming feedwater to force the
change of state, scaling of heat exchanger surfaces and corrosion. As a result of its energy
dependence, thermal distillation facilities are mostly located in areas where energy cost is less of
a consideration than the need for water such as in Saudi Arabia which presently has the worlds
largest MSF desalination facility producing 100 million gallons of fresh water per day using
waste energy from cracking crude oil. Both MSF and MED use an external energy source to
heat the incoming feedwater whereas VC uses an external energy source to drive a mechanical
vapor compressor which in turn adds thermal energy in the form of heat of compression. In
some applications, VC uses steam ejectors to effect thermal vapor compression instead of
mechanical vapor compression.
Membrane Processes
Electrodialysis (ED Figure 4) and Reverse Osmosis (RO Figure 5) are the primary membrane
desalination processes. ED uses electrodes to create an electrical potential to move ionized salts
through membranes. The salt separation process occurs as the various membranes employed in
6

ED allow passage of either the anion or the cat ion as they are drawn to their polar opposite
electrodes. A typical ED desalination process will consist of several hundred membrane
electrode pairs with capacity a function of scale. As ED employs membrane technology, the
feedwater must be pre-treated to prevent membrane and flow channel fouling.

USAID1

Figure 4. Diagram of Electrodialysis process

RO (RO Figure 5) consists of four connected processes that involve pumping high pressure
feedwater through semi-permeable membranes manufactured with pores sized to allow water
molecules to pass through the membrane but prevent passage of salts and other contaminants.
First the feedwater is mechanically pre-filtered to remove particulates and sediments that may
clog the RO membranes and chemically treated to ensure microbial products do not harm
membrane elements and that the feedwater is chemically balanced for the particular membranes.
This is followed by pressurization to between 800 and 1000 pounds per square inch (psi), RO
membrane separation of water molecules from the feedwater, and finally chemical post-treatment
to ensure the water meets drinking water quality and chemistry standards.

Figure 5: Diagram of basic Reverse Osmosis process

USAID1

The standard RO membrane consists of an 8-inch by 40-inch spiral wound membrane element,
which is grouped together in a pressure cylinder with six or seven similar membranes. Each
cylinder is then connected in a train. A typical 50 mgd RO desalination facility will have
19,000 elements in 12 trains with an extra train built into the plant that can be placed on line

allowing for another train to be taken off line for maintenance and cleaning. As a result the
desalination plant remains on-line while allowing for membrane cleaning or maintenance.2
Pre-filtering and treatment is vital to RO membrane desalination with 99.99% of bacteria and
most suspended solids removed by pre-treatment. Three common methods of pre-filtering are:
1) Sand/coarse media: Designed conservatively, removes suspended solids and silt. Used to
be the most common method.
2) Membrane pretreatment: Uses micro/ultra filter membrane. Filters out suspended solids
> 0.1 micron. More popular method now.
3) Cartridge micron filter (5 microns): Used prior to membrane to protect membrane.
Chemical pre-treatment is required to maintain system capacity and operational life of
membranes. Pretreatments include the addition of chemical anti-scalants and membrane cleaners
to control membrane fouling from organics and metal oxides.
RO membrane desalination is dependent on and sensitive to system pressure and temperature.
The water molecules pass through the membranes in a reverse direction requiring high feedwater
pressures to overcome the osmotic membrane pressure and maintain the pure water separation
across the membrane. If system pressure were reduced sufficiently the water molecules could
return to the feedwater side lowering system productivity and efficiency. The rate of membrane
fouling is also directly related to system pressure and flux with higher pressures and flux
resulting in more rapid membrane fouling.
Additionally, pressure and temperature have operational design limits for effective desalination.
Most RO membranes can handle a wide range of temperatures from 5C to 45C. The lower limit
is driven by water density and the pressure required to pump a more dense liquid; the maximum
limit is to protect the membrane. Above 45C membrane material starts to deform and accelerates
membrane aging. There is a proportional linear relationship between pressure, temperature and
power for present day municipal membranes. As feedwater temperature increases from 14C
38C the pressure requirement decreases and as a result the required power decreases. A 5C
increase in temperature results in approximately a 5% decrease in the power requirement.
Therefore, a 50mgd facility that uses 30 MW/yr of power at $0.06/KW would cost $1.8
million/yr in energy cost. A 5C increase in temp would save $90,000 in energy cost if the
temperature increase was external to the desalination facility. 3
The advantages of RO include: less energy dependence, a smaller footprint, requires less
maintenance, and it is easier to operate and automate requiring fewer personnel.4 When colocated with power plants, the brine discharge has lower thermal impacts since the feedwater
does not have to be heated and the brine concentrate is mixed with the higher volume outflow of
the power plant.5 The brine discharge, as a concentrate of the feedwater, presently not restricted
under the Clean Water Act, does pose a potential future regulatory compliance problem for all
desalination methods. However, under the National Pollution Discharge Elimination System

Voutchkov, N., VP for Technical Services, Poseidon Resources. May 5, 2005. Personal interview.
Ibid.
4
Reiber, S. HDR Engineering. May 17, 2005. Personal interview.
5
California Coastal Commission. 2004. Seawater Desalination and the California Coastal Act, March 2004.
3

(NPDES), brine discharges can be subjected to the NPDES permit process for flow, pH and
temperature.
Advances in desalination technologies
As distillation involves physical properties of seawater and methods to add the necessary energy
to create the phase change, little can be done to affect the cost basis of the process.6 Technology
cannot change the energy required for vaporization for seawater except for lowering the system
pressure which is already accomplished. With the best available technology applications
distillation processes produce high quality desalinated water but require excessive amounts of
energy with high capital and production costs. The consensus of industries and agencies
involved in desalination is that distillation processes such as MSF offer little advantage in the
area of technological improvements and remain energy intensive operations. Therefore, the
majority of efforts in desalination technology and process improvements over the last 30 years
have focused on reverse osmosis.
Advances in membrane technology and energy recovery systems coupled with co-location of RO
desalination plants with power generating plants have resulted in an 80% drop in the cost of
desalinated water via RO to the point where energy cost today equate to 30-40% of the total cost
of RO desalinated water. Industry has realized that further gains in lowering the cost of
desalination will mainly be realized through increasingly smaller marginal gains in energy
savings either through process or membrane improvements. The Affordable Desalination
Collaboration, a compilation of companies and agencies in the desalination industry, has initiated
a demonstration project in conjunction with the U.S. Navys Seawater Desalination Test Facility,
Port Hueneme, California. This collaboration is researching energy and cost savings through an
integrated approach using the best available current off the shelf technologies (COTS).7
Koch Membrane Systems recently introduced its MegaMagnum RO membrane for brackish
water desalination. The seawater MegaMagnum membrane is expected to be in the market by
the end of the year. Major advantages envisioned with MegaMagnum are lowered capital cost
for desalination as well as the operations and maintenance costs as plants will have a single
membrane in place of 7 smaller ones. Both the Bureau of Reclamation and Koch estimate a 1530% savings in capital costs, a total footprint decrease and a 5-9% savings in life cycle costs for
a desalination plant using MegaMagnum.8
Renewable energy sources
Conceptually linking desalination with renewable energy sources (RES) makes sense from an
environmental and sustainability viewpoint. Globally, several small scale, low capacity
renewable energy driven desalination facilities have been built, mostly in arid regions with high
renewable energy capacity.9 However, there are several barriers that need to be bridged before
6

Miilu, M., 2003. Desalination and Its Potential for Harnessing Brine and Solar Energy in the US Virgin Islands
Masters Thesis, Massachusetts Institute of Technology, June 2003.
7
In Search of affordable SWRO U.S. consortium takes off. The International Desalination & Water Reuse
Quarterly. November/December 2004, Vol. 14/3.
8
von Gottberg, A., Director of Municipal Technologies, Koch Membrane Systems. May 17, 2005. Personal
interview.
9
See Solar Energy 75 (2003): 381-393; Desalination 156 (2003) 275-279, 295-304 & 323-332; SOLEL Solar
Systems Ltd (http://www.solel.com); and Desalination and Water Purification Research and Development Program

these technologies can be effectively linked for large-scale desalination processes. First is the
present state and cost of renewable energy technologies. The capital cost of RES technology is
too expensive. A study by Sandia National Laboratory indicates cost of $5-6/1000 gallon of
fresh water using solar energy.10 If RES and desalination are to be successfully linked, industry
and research agencies must integrate RES and desalination technologies similar to that being
conducted by Sandia National Laboratory in their Tularosa Basin desalination research project.11
Photo-voltaic (PV) solar energy capture presently offers the most potential for RES application
to desalination, but even with todays best PV technology would require an area of at least 200
acres in solar panels to provide the 30 MW of electrical power required to operate a 50 mgd RO
desalination facility. Areas of high potential for desalination are nominally in the crowded
coastal zone where what little available land is at a premium price which significantly increases
the capital investment.12 A second consideration is the desalination capacity versus demand.
Without using an energy storage system such as batteries, sufficient solar flux is available less
than 10-12 hours depending on latitude, thereby requiring solar powered desalination facilities to
be built with excess capacity and water storage to meet demand during periods of inadequate
solar flux.13 As a result of RO membrane operational requirements of pressure and flow, any
RES would have to provide stable and sufficient energy to support 24/7 operations which could
be met by including connections to an external power grid but this only adds to the capital cost.
Therefore, with present day technology, RO may not be the best process to link with RES.

POLICY DRIVERS
Background: Regulations regarding water supply
Two major policy drivers that affect desalination within the United States relate to the quality
and the availability of the water supply. The first is the Safe Drinking Water Act. This act gives
the U.S. Environmental Protection Agency (EPA) the jurisdiction to establish National Primary
Drinking Water Regulations (NPDWR).14 These regulations set the maximum contaminant
levels for particular contaminants in drinking water or the treatment methods required to remove
the contaminants. Because traditional water resources are becoming contaminated, the high
quality of water produced by desalination can be an alternative to meeting these standards.
Moreover, the maximum contaminant levels set forth in the NPDWR have implications for
competing desalination technology. For example, recently the World Health Organization has
issued a provisional guideline level of 0.5 mg/L for boron15, but the U.S. drinking water
Report No. 104, U.S. Department of Interior, Bureau of Reclamation for a general understanding of the state of
renewable energy driven desalination processes.
10
Hightower, M., Co-chair of the Executive Planning and Review Committee for Tularosa Basin National
Desalination Research project. May 11, 2005. Personal interview.
11
Ibid.
12
Linsky, R., Executive Director of the National Water Research Institute, Fountain Valley, CA. May 12, 2005.
Personal interview.
13
Linsky, Hightower and Voutchkov interviews.
14
U.S. Environmental Protection Agency (EPA) website, Safe Water Drinking Act,
http://www.epa.gov/safewater/sdwa/30th/factsheets/understand.html#5
15
World Health Organization, Boron in Drinking-Water, publication WHO/SDE/WSH/03.04/54, p.15

10

standards currently do not regulate boron.16 However, this issue is under discussion.17 In
addition, the California State government is also considering establishing a boron standard.18
A second major policy driver is national security. In a report published by the Central
Intelligence Agency (CIA), half of the worlds population is expected to live in water-stressed
conditions by the year 2015. 19 As a result of dwindling water supplies, the possibility for
conflicts over water will increase between now and 2015.20 In the interest of national security,
the U.S. government funds research to develop technology that will ensure the availability of
water globally. For example, the Department of Energy (DOE), the Department of Defense
(DOD), Nuclear Non-proliferation Act, and Weapons of Mass Destruction Act jointly support
government research at national labs for development of critical infrastructure for water, energy,
and food.21 The goal is to take a proactive approach to prevent conflict.22
Resource management: water, energy and seawater
The primary oversight of the water systems occurs at the state level. The US EPA grants primacy
to state agencies to regulate the NPDWR standards. The state agencies then conduct tests for
contaminants, review plans for water system improvements, and protect water sources from
pollution, among other duties.23
Within the State of California, the Department of Water Resources (DWR) is responsible for
managing and overall planning of the water supply, specifically the California State Water
Project. In the draft report of the California Water Plan, the policy for local governments and
agencies in water resource planning is a diversified portfolio.24 DWR outlines various resource
management strategies to aid local agencies and governments to manage their water and related
resources, among which is desalination.25
Because freshwater is an increasingly scarce resource within California, the responsibility to
safeguard this resource extends beyond DWR. The State of California issued Resolution 75-78
with the purpose to protect beneficial uses of the states water resources and to keep the
consumptive use of freshwater for power plant cooling to that minimally essential for the welfare
of the citizens of the state.26 As a result of this state law, the California Energy Commission
also has the responsibility to protect water resources and accordingly promote the use of
alternative cooling technologies.27

16

U.S. EPA National Primary Drinking Water Regulations, http://www.epa.gov/safewater/mcl.html

von Gottberg. Personal interview.
18
Alsop, R., Manager of Government & Public Affairs, Long Beach Water. May 3, 2005. Personal interview.
19
CIA, Global Trends 2015: A Dialogue About the Future With Nongovernment Experts
20
Ibid.
21
Hightower. Personal interview.
22
Ibid.
23
U.S. Environmental Protection Agency (EPA) website, Safe Drinking Water Act,
http://www.epa.gov/safewater/sdwa/30th/factsheets/understand.html#5
24
Department of Water Resources, California Water Plan Update 2005, Volume 2 Resource Management
Strategies, Public Review Draft, p.1-1
25
Ibid.
26
California Energy Commission, 2003 Integrated Energy Policy Report, p. 40.
27
Ibid, p. 40.
17

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Of particular importance to desalination is that seawater is a public resource and is part of the
public commons. Thus approved uses of ocean water must ensure protection of public rights,
interests, and values for ongoing navigation, fishing, recreation, and ecosystem preservation
pursuant to the Public Trust Doctrine and [California] Coastal Act policies.28 As seawater
desalination becomes a marketed good, seawater uses will switch from non-consumptive to
consumptive uses. Such a switch has implications for how seawater will be perceived and valued
by the public. This change may affect how much seawater can be used for power plant cooling as
this use may eventually compete with freshwater generation.
Policies on Desalination
The Water Desalination Act of 1996 is the major federal legislation directly dealing with
desalination. This Act specifically authorizes the Secretary of the Interior to conduct studies
regarding the desalination of water and water reuse, and for other purposes. 29 The Secretary is
authorized to award grants and contracts for desalination research, development and
demonstration projects in order to determine the most cost-effective and technologically
efficient means by which usable water can be produced from saline water or water otherwise
impaired or contaminated.30 To fulfill this goal, the Secretary under the Bureau of Reclamation
(Reclamation) established the Desalination and Water Purification Research and Development
Program (DWPR). The estimated total program funding for 2005 is $4 million, and eligible
applicants for this funding include state, local, and tribal governments, educational institutes,
nonprofits, and private businesses. Through this program, Reclamation is forming partnerships to
address a broad range of desalting and water purification needs and to expand the countrys
water supply. 31
State of California
Under California State law, DWR was directed to convene a Water Desalination Task Force to
make recommendations related to potential opportunities for the use of seawater and brackish
water desalination.32 From this Task Force stemmed two reports, DWRs Water Desalination:
Findings and Recommendations and the California Coastal Commissions Seawater
Desalination and the California Coastal Act.
The major finding of the DWR report33 and the de facto policy34 is that desalination should be
considered part of a balanced portfolio where economically and environmentally acceptable.
Accordingly, desalination projects and permitting must be evaluated on an individual basis
depending on local needs and environmental conditions, as well as the technology employed.35 It
is projected that desalination will compose about 7-10% of the statewide water profile in 20-25
years, where regionally it can make up as much as 30-40% of the water supply.36
28

California Coastal Commission, Seawater Desalination and the California Coastal Act, p. 39.
Water Desalination Act of 1996, Public Law 104-298, p. 2.
30
Ibid.
31
Ibid.
32
Department of Water Resources, Water Desalination: Findings and Recommendations, p. 1.
33
Ibid, p. 2.
34
Keene, C., Executive Officer, Water Desalination Task Force and Environmental Program Manager, Department
of Water Resources, May 23, 2005. Personal interview.
35
Ibid.
36
Ibid.
29

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The Coastal Commission report findings and recommendations parallel many of the findings and
recommendations in the DWR report although the Coastal Commission does not take a position
in support of or in opposition to desalination. However, because the Coastal Commission is
charged with managing public coastal resources, the Coastal Commission is particularly
concerned with the environmental impacts of desalination and the private ownership of
desalination facilities utilizing a public good. The major environmental concerns relating to
seawater desalination is the impact of desalination intakes (impingement and entrainment of
organisms) and outfalls (high salinity and chemicals from treatment of water) and co-location of
desalination facilities with power plants, all of which pose potential significant impacts on the
marine environment.37
With regard to private ownership of desalination facilities, the Coastal Commission recognizes
the inherent conflict between the interest of a community in having a local and reliable supply
of water while at the same time placing the decisions about how that water is used, priced, and
managed outside of the communitys control.38 Moreover, multi-national companies pose a
special concern as international free trade agreements may supersede Coastal Act environmental
protection statues. Project proposals from multi-national interests will undergo careful review
and evaluation to ensure international trade agreements allow conformity to the Coastal Act.39
Under bond initiative Proposition 50, the Water Security, Clean Drinking Water, Coastal and
Beach Protection Act of 2002, $50 million is allocated for desalination efforts in California.
DWR has recently recommended $25 million of the funds to support 25 desalination projects.40
The funds will be used by local agencies, water districts, academic and research institutions for
construction, pilot and demonstration projects, research and development, and feasibility studies
to increase the development of new water supplies using water desalination technologies.41
Southern California
Desalination within the State of California is of particular interest and importance to Southern
California as this part of the state is a desert and needs to import 50-60% of its water supply42. In
Southern California, the water supply is managed by Metropolitan Water District (MWD) for its
26 member agencies. As part of its management strategies, MWD supports research and
development of desalination among its member agencies, while recognizing at the same time that
desalination does not represent the solution for ensuring Southern Californias future water
supply.43 Rather desalination is projected to compose about 10% of the water profile for
Southern California by 2025.44

37

Seawater Desalination and the California Coastal Act, p. 65.

Seawater Desalination and the California Coastal Act, p. 43.
39
Seawater Desalination and the California Coastal Act, p. 48.
40
Department of Water Resources, News Release, May 25, 2005.
http://www.publicaffairs.water.ca.gov/newsreleases/2005/05-25-05desal.cfm.
41
Ibid.
42
Joe, B., Group Manager External Affairs, and Vergara, J., Engineer, Metropolitan Water District. May 23, 2005,
Personal interview.
43
Ibid.
44
Ibid.
38

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MWD is responsible for ensuring a reliable water supply for its member agencies. Because of the
uncertain future of the Colorado River water source, MWD is broadening its water resource
portfolio to include seawater desalination, groundwater storage, and water conservation.45 In
order to promote, desalination efforts, MWD is incentivizing desalination efforts through a $250/
acre-foot maximum incentive for desalinated water produced by its member agencies. 46
Moreover, MWD has funded five member agenciesCity of Los Angeles, City of Long Beach,
San Diego County Water Authority, West Basin Municipal Water District and the Municipal
Water District of Orange Countyat $50,000 each to conduct research, site assessment and
feasibility studies.47
Long Beach Water (LBW), one of the recipients of grant money from MWD, along with funding
from Reclamation, the state and local stakeholders is currently in the demonstration phase of
their desalination facility. This next phase of research and development is to test the Long Beach
Method (NF2, two stage nano-filtration) alongside RO technology. Major drivers for the City of
Long Beach to pursue desalination include internal drivers by leadership, long range planning for
water profile, and federal, state and local stakeholder funding. Seawater desalination is projected
to compose 10% of LBWs water profile by 2010.48
Energy issues that impact desalination
In California, the projected energy demand for the planned desalination plants is estimated to be
less than 0.5% of annual California energy demand.49 This is because the annual cost of
desalinated water for the average Southern California household is on par with the electrical
utility cost to run a household refrigerator for the same period.50 Thus energy consumption by
desalination is unlikely to have an impact on overall energy demand in California. However,
California is nearing its capacity to meet demand during peak hours and operation of desalination
plants during peak hours will exacerbate this issue. The Energy Commission is considering
installing time-of-use meters in which the rate structure of energy will depend on peak versus
non-peak hour use.51 Water demand is highest also during highest energy demand52; hence
changes in the rate structure of energy have important cost implications for energy consumption
of desalination.
DWR recommended in its Task Force report for the study [of] the potential for developing
renewable energy systems in California, in conjunction with desalination implementation
strategies.53 Currently, there are various monetary incentives for renewable energy in
California. These incentives can bring the operating costs of a desalination plant down and
increase the cost competitiveness of renewable energy-driven desalination. The Energy
Commission provides the following renewable energy incentives: a $/watt rebate to a rebate
45

Metropolitan Water District, Dec. 10, 2002.Press Release.

Joe and Vergara, Alsop, Keene. Personal interviews.
47
Joe and Vergara. Personal interview.
48
Alsop. Personal interview.
49
California Desalination Task Force, Energy Options White Paper, Sept. 15, 2003, p. 2.
50
Voutchkov, N. Personal interview.
51
Chaudhry, S., Water-Energy Program Manager, California Energy Commission, May 19, 2005. Personal
interview.
52
Ibid.
53
Water Desalination: Findings and Recommendations, p. 8.
46

14

capped at 50 percent of the project cost, a rebate for small wind generating facilities up to 30
kW, rebated of up to $3.80 per watt of photovoltaic capacity in grid-connected systems with less
than 30 kilowatt capacity that serve on-site load, and incentives for new renewable electric
generation plants built for the purpose of meeting Californias Renewables Portfolio Standard.54
The California Public Utilities Commission program also provides incentives for grid-connected
photovoltaic systems larger than 30 kilowatts of capacity.55 California also has a tax credit for
grid-connected photovoltaic and small wind electricity generation systems (i.e., 15% for the
2003 tax year and 7.5% for the 2004 and 2005 tax years). Commercial installations may also be
eligible for a Federal 10% Investment Tax Credit. 56
Summary
The major policy drivers relating to desalination mainly deals with promoting research and
development. No existing policy specifically directs the use of desalination or its coupling to
renewable energy. Energy policies on renewable energy likewise provide incentives rather than
directives. Both the US and the California governments have taken a hands-off approach to
desalination, allowing local governments and agencies to flush out their own issues of cost and
population growth. Instead, the federal and state governments have adopted to promote
desalination and renewable technology indirectly via incentives for research and development.
This approach has been successful in California as their planned capacity will increase by five
times over current capacity.57 As Chuck Keene of DWR and Executive Officer of the
Desalination Task Force in California stated, subsidies render the technology being subsidized
unsustainable in the long run in the market economy.
MARKET ANALYSIS
Background
The Need for Desalination
In most parts of the world, including portions of the United States, the demand for fresh water
constantly increases while the supply rapidly declines. If these basic conditions do not change,
shortages and rapid price inflation will follow. Seawater desalination is a technology that has the
potential to reverse this trend. Even noted environmentalists like Barry Nelson, a senior policy
analyst with the Natural Resources Defense Council, are becoming proponents of desalination.
"Desalination is no longer on the lunatic fringe. It has entered the mainstream. That means we
look at desal projects on a case-by-case basis, as we would any other legitimate water policy."58
Market Locations
The most attractive markets for desalinated water in the United States are locations where:
The price of public water is already comparatively high.
The climate is arid.
The population is rapidly growing.

54

Ibid, p. 6.
Ibid, p. 6.
56
Ibid, p. 6-7.
57
California Water Plan Update 2005 Volume 2, Resource Management Strategies, Public Review Draft, p. 3.
58
Black, J. May 3, 2003, Treasure from the Deep: Drinking Water. Business Week.
55

15

States meeting these conditions include: Texas, Nevada, Arizona, New Mexico, California and
Florida. California has the largest number of desalination projects under construction or planned
and is an excellent case study for our purposes. What is true for California will be similar in
Florida and Texas, at least regarding water scarcity and means to alleviate it. Nevada, Arizona
and New Mexico are somewhat different as they are inland states where desalination typically
involves brackish groundwater desalination which is not a focus of this study.
Customer Needs
Population Growth
Southern California has one of the fastest growing populations in the United States. In the past
three years, Californias population has grown at a rate that is 45% faster than the U.S. as a
whole. During this period the population in the country grew 3.3% while the population in
California grew 4.8%. The bulk of this growth occurred in the driest counties in the south and
east parts of the state.59 There is no reason to believe this growth will slacken in the next decade.
Demand Growth
Historically, fresh water demand grows at about twice the rate of population growth. In 1990
fresh water use per person in California averaged 228 gallons per person per day.60 The
estimated fresh water consumption per person in California today is over 300 gallons per person
per day. At current growth and consumption rates, every year California must increase its
available fresh water capacity by a staggering 200 million extra gallons per day. This equates to
an additional 73 billion gallons of fresh water every year.
By 2010 California is scheduled to have 250 MGD of desalinated water capacity. With that
capacity, desalinated water is expected to provide 3% to 4% of Californias drinking water.61
Benefits and Outcomes Achieved
God made Southern California a desert. Californians will pay dearly to make it otherwise.
said the Californian activist Carey McWilliams in 1946. His foreboding message is proving true.
General Municipal Water Supply Costs
Southern California imports 80% of its fresh water from Northern California and Colorado at
great expense. Most is carried via the State Water Project (SWP) or the Colorado River
Aqueducts (CRA). The cost in electricity to deliver this water over these great distances is well
known. It currently requires 3.1-kWh/cubic meter to transport water from in the SWP canals.
The CRA consumes 1.6-kWh/cubic meter to transport water from the Colorado River.62 On
average this adds nearly $0.57 to the cost of 1000 gallons of water. Therefore, the energy cost to
deliver water to Southern California is almost 38% of the total price consumers pay for water.
California consumes an inordinate amount of power to provide water. By consuming 6.5% of
total electrical power used in the state, California exceeds the national average by over two
times. Washington State, by contrast, uses only about 2% of total electricity for water delivery.63
59

U.S. Census Bureau, 2003.

U.S. Environmental Protection Agency, 2004. Domestic Water Use Report.
61
Los Angeles Times. April 20, 2004. Desalination Plants Could Divide California Officials.
62
Black, Jane. May 3, 2003, Treasure from the Deep: Drinking Water. Business Week.
63
Chaudhry, S., May 19, 2005. Personal interview.
60

16

California carefully guards these water resources. Although the Federal Bureau of Reclamation
is forcing California to decrease its water draw from the Colorado down to the contractually
mandated maximum, it is unlikely they will diminish beyond that.64 However, it is equally
unlikely that more water could be imported without significantly increasing consumer costs.
The current price for municipal water in Southern California, at the tap for a private individual, is
about $1.50 per 1000 gallons or under $500 per acre-foot. (An equal amount is spent on
wastewater disposal and various taxes and fees, bringing the total bill to about $1000). By
contrast, an agricultural consumer may pay only 10% as much. If the consumer were to bear the
total, unsubsidized cost of municipal water delivered to their tap, the price may actually be as
high as $2972 per acre-foot.65 Additional substantial cost of municipal water infrastructure
maintenance and repair is estimated to be $150 billion nationwide over the next ten years.66
Desalinated Water Supply Costs
There are three major cost drivers in water treatment, including seawater treatment: Energy,
Capital and O & M (operation and maintenance). The total cost to desalinate water has been
falling at a rate of about 30% per decade for the last thirty years. The greatest reduction has been
in the consumption of energy.67
Future Benefits and Expected Outcomes
Expected Cost Affect of Current Technology
The Affordable Desalination Commission (ADC) believes it can demonstrate that the current
Salt Water Reverse Osmosis (SWRO) technology has matured to the point where energy
consumption to desalt 1 cubic meter of Pacific Ocean water is 1.7 to 2.0 kWh. 68 If true, this will
represent a 50% or better reduction in energy requirement compared to the highly efficient Israel
plant noted above. At $0.07 per kWh, that represents a $0.53 reduction in the cost of 1000
gallons of water. This brings the price to the consumer down to approximately $2.25 per 1000,
or about a 50% premium over current average municipal water prices.
The Affects of Renewable Energy on Desalination
It is unlikely that renewable energy will have a significant impact on the economic justification
or the cost of desalinated water in the near term. The current benefits of renewable energy
coupled with desalination plants are twofold. 1) Renewables greatly reduce or eliminate power
price volatility. This in turn, reduces risk which could slightly reduce the financing rate for desal
installations. 2) Improving desalinations environmental image by driving it with renewable
energy could improve its perceived acceptability by parts of the community. However, the main
obstacle for desalinated water is its high cost. Coupling desal with a higher cost energy source
will, in the short term, be counter-productive.69

64

Alsop, R., May 3, 2005. Personal interview.

Linsky, R. Personal Interview.
66
Government Accounting Office (GAO), March 11, 2005. Special Report for the Water and Power Committee.
67
California Desalination Task Force. Sausalito, CA, July 30, 2003.
68
Montellano, N. West Basin Municipal Water District Press Release, November 15, 2004.
69
Reiber, S., Dr. May 17, 2005. President, HDS Engineering. Personal Interview.
65

17

Resources Required to Produce Future Outcomes

Cost of Capacity
In the U.S., the largest desalination facility currently operating is the Tampa Bay Desalination
Plant. At an initial capacity of 25 MGD and total cost of $110 million, the rough cost per MGD
capacity is about $4M. However, the plant has not lived up to output and cost per gallon
projections. Originally, the plant was projected to produce desalinated water for about $2.00 per
1000 gallons. The disappointing reality has been $2.75 per gallon. Cost overruns are primarily
the result of rapid membrane fouling and numerous component failures. Allegations have
included shoddy workmanship and use of inferior materials.70
Investment in New Capacity
The planned Carlsbad California 50 MGD seawater desalination plant is budgeted to cost $270
million to construct, or about $5.4M per MGD capacity. So, for rough estimating purposes, it is
safer to use $5M or $6M per MGD capacity. Therefore, the 250 MGD that California plans to
bring on line over the next 10 years will require an investment of $1 billion to $1.25 billion. For
this effort, California will be able to accommodate less than two years worth of additional water
demand. Desalination could prove very helpful, but clearly it is not the total solution to
Californias fresh water shortage problem.
Alternative Methods of Satisfying Needs
There are a limited number of options available to fill the water gap created between the growing
demand for water and its finite and dwindling supply.
Water Conservation
Any plan for a sustainable water future must include a significant effort towards conservation.
Consuming or wasting less water will generally be the lowest cost option. Between 20% and
50% of all fresh water is lost in the transmission process.71 Point of use waste is significant as
well. Over 50% of all fresh water used in agriculture is wasted, as is 20% to 30% of domestic
water. Of all domestic water used in California, only 56% is consumed inside the home, the rest
is used for lawns, gardens, swimming pools and car washing.72
Water Recycling
Using essentially the same RO process as seawater desalination, used water can easily and
economically be returned to drinking water cleanliness standards. Since this water contains only
a fraction of the total dissolved solids (TDS) as seawater, it can be treated at less than one-half
the cost of seawater. This puts the cost of recycled water at less than the current cost of new
fresh water, making it the lowest cost alternative, other than simply using less water.73
Aquifer Storage and Recovery (ASR)
Even in drought, there are parts of the year in which California receives too much water from
rainfall and melting snow pack. Typically this coincides with the lowest domestic consumption.
Because of very limited storage capacity, the vast majority of this fresh water is left to run into
70

Schou, N. December 12, 2003. The Poseidon Misadventure, OC Weekly.

Matthews, J. June 4, 2004. Janet Matthews Information Services. Economic Briefing: Desalination Markets.
72
U.S. Environmental Protection Agency, 2004. Domestic Water Use Report.
73
Atwater, R. CEO, Inland Empire Utilities Agency. 9/9/2004. Testimony, House Subcommittee, Water and Power.
71

18

the ocean. By treating this water to drinking water standards, then injecting it back into the
aquifer, the vast underground storage capacity of the earth can be utilized. 74
New Sources of Water
Southern California already transports water great distances. New water supplies would have to
travel even farther, making this source uneconomical in the near term. The state of Alaska
recently completed a study to analyze the feasibility of importing tankers full of Alaskan water to
Southern California. They calculated that tankers of water from Alaska to Los Angeles would
cost over $9,000 per acre-foot, an expensive alternative and one not pursued by either state.75
Condition of the Desalination Industry
Demand for fresh water in the United States is expected to grow 70% over the next 25 years.
Demand in China alone is set to grow more than 20% annually. The American Water Works
Association predicts that the market for desalination plants and equipment, now just $1 to $2
billion will grow to more than $12 billion in annual sales over the next two decades.76
Market Consolidation
As with most fractured, rapid growth industries, the water purification and desalination market
has experienced considerable restructuring and consolidation. GE, known to move deftly in
consolidating emerging markets, has purchased several smaller players to become one of the
market leaders in water the purification business. GEs recent $1.1 billion purchase of industry
giant Ionics consolidated this position. By purchasing Ionics at a 48% premium over the market
cap, GE strongly signaled that they believe desalination is a global high growth market.77
Major Players
Siemens, the other mega company in the field, has moved aggressively to keep pace with GE.
Their purchase of another sector leader, US Filter for nearly $1 billion confirms their belief in
the desalination and water purification market. Dow remains the sector leader in the RO
membrane business, with the best selling seawater RO filter on the market. Finally, not wanting
to get left behind in a major emerging market, 3M announced in May of 2005, that they will be
acquiring one of the remaining crown jewels in the water purification industry with their
purchase of Cuno in a $1.35 billion an all cash deal.78 Additionally, Koch Membrane Systems
is set to become a market contender with its MegaMagnum seawater RO membrane release later
this year. The MegaMagnum membrane has seven times the surface area of present day
membranes and is projected to lower desalination costs capital costs 15-30 percent and lifecycle
costs 5-9 percent.79
Market Penetration Strategy
It is essentially a forgone conclusion that the desalination of drinking water will constitute an
increasing share of the fresh water market in certain parts of the U.S. and the rest of the world.
Increasing demand, deterioration of existing supplies and the continued reduction in desalination
74

Ibid.
Denali Commission. Alaska Water Export Final Report, February, 2004
76
Caffrey, A., G.E. Agrees to Pay $1.1 billion for Ionics. The Globe, November 25, 2004.
77
Kang, P., Water Investing Enters the Mainstream. Forbes Online. December 20, 2004.
78
Ibid.
79
Gottberg, A. Personal interview.
75

19

cost make this a certainty. The question is how fast the desalinated water market will expand
and what industry segments will profit most.
Design Build Operate (DBO)
Modern desalination plants are mammoth installations. Their size and capital cost mean that
only very large companies can engineer and install them. Their complexity means that local
municipalities are often unable or unwilling to operate them. This creates a huge new
opportunity for those firms able to integrate the design, building and operation, DBO, of these
plants. Many of these firms are hoping to transition from construction companies into water
companies and plan to eventually receive 40% to 50% of their annual revenue from selling
water.80
RO Membrane Manufactures
The success of RO membrane seawater desalination has created a new growth industry with huge
potential, RO Membrane manufacturing. This is likely to be the most profitable industry subsector in the desalination field. There are two reasons for this:
Much of the technology and IP is concentrated in the membranes
Advanced membrane technology is at the heart of the viability and growing popularity of
desalination. Unlike the know-how involved in plant engineering and construction, this
technology is patented and defendable.
Membranes are consumables
It requires a great number of membranes to fill a plant, 19,000 in a 50 mgd facility. Each
membrane is expensive, at $800 each for Dow FilmTech. But more important, every filter has a
finite lifespan, five to seven years is the current estimate. This means that filter makers get to
supply not only the new installation market, but will service the entire installed base. Potentially,
this is a market as large as or larger than the new plant construction market.
Because the market size for replacement filters will be known, market sales will be very
predictable. The membranes will be manufactured in factories, so the costs will also be very
predictable. This lack of volatility and steady revenue stream will make membrane
manufacturing a highly prized and growing market niche as shown in the following graph.

80

CEO Interview with D. Brown Ionics Inc., September 15, 2003. The Wall Street Journal.

20

Market for RO Membranes

$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$2005

2010

2015

Revenue, New Installation

2020

2025

Revenue, Replacement Market

Some of the worlds largest and most successful companies agree with this assessment. GE,
Siemens and 3M have collectively purchased three of the five largest RO membrane
manufacturers in the past twelve months.
FOREIGN COUNTRY ANALYSIS
Introduction
Desalination is fostering more attention as an alternative for water problems on a global scale.
The global desalination market will generate expenditures of $95 billion in the next 10 years81.
However, each countrys market is highly influenced by the policies of its government which
reflects the respective countrys particular situation, such as the environment, available domestic
water supplies, geography, other policies, etc. After careful consideration of various aspects for
several countries, we decided to look at Saudi Arabia and Spain in an effort to analyze the
international market for desalination.82 Included in this analysis is the potential linkage of
desalination and renewable energy in each country.
SAUDI ARABIA
Water Shortage in Saudi Arabia
In SA, water shortage is a severe problem. SA has limited water resources and rapid population
growth of 3.27%. As a result of population growth, depletion of ground water and increasing
demand in all sectors, available fresh water is estimated to be 107 m3/capita/year in 2050.83
Major cities, such as Riyadh, Jeddah and Medina depend on desalination for more than 90% of
81

Desalination Market 2005-2015, Executive Summary, A Global Water Intelligence Publication.

For the assessment of the Saudi Arabia, Spain, Singapore, and Aruba, please refer to Appendix B.
83
Less than 1000 m3/capita/year is thought to be critical level of water shortage. United Nations, 2001. The Role of
82

Desalinated Water in Augmentation of the water supply in selected ESCWA Member Countries.

21

their water. Without new water desalination projects industry sources predict that water
shortages will reach more than four million cubic meters per day by 2020.84
Desalination Market Growth
Saudi Arabia (SA) is the largest desalination market in the world. As such, SA presents
enormous potential for the desalination industry now and in the future. Today, the total installed
capacity of desalination in SA is about 6,000,000 m3/day.85 To meet expected demand,
additional capacity will expected to be 5 million m3/day or $ 8 billion in next 10 years.86 This
rapid increase is due to the governments five-year socioeconomic development plan including
the water sector (Seventh Plan). Under its Seventh Plan, the Kingdom is planning to quench its
water shortage with 22 additional plants.87 This plan is driven by its water shortage, and lower
cost and environmental impact of desalination compared to other water resources.
The total cost of producing 1m3 of desalinized water in SA is $0.75 with average capital cost and
operational cost totaling $0.325. The percentage of cost due to energy consumption is 35%. As
a result of technological advances these costs are dramatically decreasing. Besides, in 30 years
experience with desalination in SA, the brine discharge from desalination practically has had no
environmental impact.88
Water from dams and wells is not suitable to satisfy the increasing urban demand, because of
increasing cost and environmental impact. The potential land for dams is in the countrys
extreme southwest corner, thousands of kilometers away from major cities, which are located in
the middle and northern part of the Kingdom. Thus the cost of water transfer is an expensive
option.89 Also, constructing a dam has high capital costs and potentially huge environmental
impacts. Wells which account for 90% of water supply can be developed relatively cheaply, but
they are considered a non-renewable water supply.90 Thus, the government is trying to conserve
this water for future generations, providing present and immediate future water needs through
desalination.
The biggest competitor for desalination in SA is sound water management. In SA the water
tariff is practically free. The government is working to increase its tariff for demand control.
However, it is a very sensitive subject in SA, both politically and religiously.91
Desalination Powered by Renewable Energy
SA is the worlds largest oil producing country and currently there is no public policy to
accelerate the installation of renewable energy. However, the most ambitious applied research
84

Saudi Arabia's Interim Country Commercial Guide for FY 200.

Inventory Report, International Desalination Association, 2001.
86
Adil, A. President for Bushnak Water Group, May 20, 2005, Personal Interview. Bushnak Water Group is a Saudi
Arabia based company for technology, management services and financial solutions to water works.
87
Seventh Plan http://www.planning.gov.sa/PLANNING/INTROe.HTM.
88
Adil, A. Personal Interview.
89
Ibid.
90
At current rates of extraction, the fossil ground water resources will only last another 22 years. United Nations,
2001. Energy Options for Water Desalination in Selected ESCWA Member Countries.
91
Harrion, R. A Problem With Liquidity, Washington Report On Middle East Affairs, 2004 July/August.
85

22

project of King Abdulaziz City for Science and Technology (KACST), which is responsible for
the administration and supervision of all research projects in various scientific areas, is the Solar
Energy Research Program.92
Although SA had some research and development programs for solar energy desalination and
operational renewable energy powered plants, currently SA does not have a renewable energy
source powered desalination plant in operation nor plans to build one. It will take a few more
years until renewable energy is commercially available for desalination. One, a facility located
south of Yanbu, had the capacity to produce 183 m3/d of desalinated water. The other was
installed in the village of Sadous to study the economical feasibility of typical photovoltaic
systems in remote areas.93
Business Climate in Desalination Market of Saudi Arabia
At present only limited multinational companies are in SAs market. For large MSF plant
projects, Doosan, South Korea, heavy industry has a competitive advantage in both cost and
quality, and thus the largest market share.94 For RO projects, Mitsubishi Heavy Industry has
largest market share. Additionally, large and middle RO market is increasing, because of
government backup and increase of usage RO coupling with MSF for co-located power plant.95
As for small projects, it is impossible for international companies to compete with local
companies in terms of cost competitiveness.96
Tech/Mkt Share MSF (68%)
RO (29%)
1
Doosan (South Korea) Mitsubishi Heavy Industry: 240,000 m3/day (Japan)
2
Fisia-Italinpianti (Italia) Preuzzag*: 90,000 m3/day (Germany)
3
Saudi Binladin Group: 60,000 m3/day (Saudi)
others
GE Water, Cadagua and Pridesa
Table1: Leading Company in desalination market of Saudi Arabia97
* Preuzzag has withdrawn from RO market.
There will be many opportunities for foreign firms in this sector. The huge financial burden of
desalination plan let Saline Water Conversion Corporation (SWCC), which is the governments
corporation responsible for seawater desalination, to looking at privatization of desalination
plants. The selected developer will own 60% of a project company, incorporated in SA, which
will build, own and operate the plant. The project company will enter into a 20-year power and
water purchase agreement with Water and Electricity Corporation.98 The Saudi Government
issued the first license to Sumitomo Corporation to build a $2.2 billion, 340,000-m3/d
desalination and power plant in Jubail.99

92

Johannesburg Renewable Energy Coalition http://www.iea.org/.

Saleh A. Solar Energy in the Kingdom of Saudi Arabia, http://www.un.int/saudiarabia/solar2.
94
Uchimura, T. ITOCHU Plant & Machinery Corporation, May 24, 2005, Personal Interview.
95
Adil, A. Personal Interview.
96
Uchimura, T. Personal Interview.
97
Ibid.
98
MEED Middle East Economic Digest, Nov 12, 2004 v48 i46 p44(2).
99
Saudi Arabia Country Commercial Guide FY 2003 - Leading Sectors for U.S. Exports and Investment.
93

23

Fundamentally, there is no barrier to enter the market, reflecting the countrys traditions of
liberal, open-market private enterprise policies. However, in order to win the bidding of the
desalination project companies are required achievement in the desalination field.100 Thus, a
new company has to prove that they are not newcomers. It will take them installing many plants
and working with other people to show their clients that they have the experience.101
Market Entry Strategy for Saudi Arabia
The rapidly growing desalination market and privatization of desalination industry provides huge
opportunity for an international company. New international companies should have a strength
in the large and middle RO A&E field, because small projects are under occupation of local
companies, and Doosan has competitive advantage in the market of large MSF projects. Large
and middle RO market is increasing, because of government backup and increase of usage RO
coupling with MSF for co-located power plant.102 However there are some leading companies in
this segment already. Thus, in order to increase competitive advantage in Saudi RO A&E
Market, we recommend following.
Whole system integration
There is significant opportunity for a company that is able to effectively integrate the entire
water production and delivery market. A single company that can combine the development of
power generation, desalination and water delivery will have a distinct advantage over
competitors that can only provide a single service. It should be emphasized that, to enter the
Saudi Arabia market, it is required to consolidate a company, which has accomplishment in
desalination field, in order to close relationships with local suppliers and consultancies and have
gained the trust and loyalty of their customers.
Another Option
Many desalination plans in SA, which were built in 70s of oil boom, are close to end of life
cycle, thus the extension project is expected to increase. Therefore specializing in extension of
desalination facility can be an option.
SPAIN
Water Shortages in Spain
Spain has the geographical and seasonal imbalance of supply and demand of water. The
Mediterranean coast and Andalusia have only 23% of the nations water supply while this area,
where tourism and intensively irrigated agriculture are centered, has 55% of the population and
commensurate water demand. Regions along the Mediterranean Rim, where there is no
precipitation for 5 months during the summer season, are highly dependent on desalination for to
meet water demand. In the case of Lanzarote, the island that most strongly depends on
desalination, 97% of the water comes from desalination.

100

Uchimura, T. Personal Interview.

Adil, A. Personal Interview.
102
Adil, A. Personal Interview.
101

24

Desalination Market Growth

The Mediterranean Rim is estimated to be the largest growth market for desalination. Including
the Canary Islands, Spain presently has 700 desalination plants in operation including several
small-scale plants.103 The current installed desalination capacity is 800,000 m3/day with planned
increases in capacity of 380,000m3/day. By 2015 the total desalination market in Spain is
estimated to grow to 1,300,000 m3/day.104 The cost of this plan was estimated to be 20 billion
euros.105 This rapid market growth is due to the National Hydrological Plan (NHP), which is
approved by the Spanish Government in February 2001, aims to construct more than 41
desalination factories amount to on south east coast over a period of 8 years. In the Spanish
Mediterranean coastal area government is to urgently build several desalination plants to produce
more than 110,000 m3/year, with an investment of 3.9 billion .106
Average total cost of desalination in Spain is 0.80/m, 20% is operational cost and 80% is
capital for seawater, 10% and 90% for brackish water respectively. At Almeria, an RO
desalination plant of Carboneras which is presently under construction, is projected to achieve
the price reduced to 0.40 /m3 of desalinated water with a capacity of 120,000 m/day. This
facility, with its reduced energy consumption, will be the most productive in Europe.
Environmental impacts of the brine discharge from desalination to weak Mediterranean is
controlled by Real Decreto Legislativo 1/2001, de 20 de Julio, and others.107
Environmental concerns led the Spanish government to be more in favor of desalination. The
Ebro transfer plan with the cost of 4,207 million , which is part of NHP, received severe protest
from people, EU, scientists and environmental groups because of the environmental impacts to
the Ebro Delta Natural Park wetland in Catalonia. It covers an area of 320 km2 and is recognized
for its aquatic environment in the Western Mediterranean.108 In response to these environmental
concerns, the government announced plans to replace the dam and canal with 12 additional
desalination plants.109
The biggest competitor for desalination is sound water management, as seen in other countries.
In Spain, the agricultural sector is heavily subsidized; the price of water for agricultural usage is
as much as 1/10-1/100 times against urban usage. According to the Integrated Water Resources
Management, a proper water price should be the most effective way to manage water demand.110
Emerging Market: Desalination Powered by Renewable Energies
With domestic energy production only meeting 23% of Spain's total energy consumption in 2002
Spain is highly dependent on imports to meet its energy requirements. Therefore, the Spanish
government is aiming to increase its renewable electricity output to 29.4% by 2010.
Additionally, under provisions of the Kyoto Protocol Spain is required to reduce its CO2
emission 15% of its current level. Under this condition, the Spanish government in 1999
103

The IRC International Water and Sanitation Centre, Spain: new water programme emphasizes desalination.

104

Global Water Intelligence, Market Leading Analysis of Private Water Projects, Volume 5, Issue4, April 2004.
Lacroix, V. UNIVERSITARY ESSAY ON THE N.H.P, http://www.rivernet.org/.
106
Suarez, B. Manager of the Water Technologies Section, Instituto Tecnolgico de Canarias, Email interview.
107
Hispagua, Spanish Water Information System, http://hispagua.cedex.es/.
108
Lacroix, V. UNIVERSITARY ESSAY ON THE N.H.P, http://www.rivernet.org/.
109
Global Water Intelligence, Market Leading Analysis of Private Water Projects, Volume 5, Issue4, April 2004.
110
Gasc, G. Influence of state support on water desalination in Spain.
105

25

adopted the Promotion Plan of Renewable Energies, the Renewable Energy Promotion Plan and
The National R&D Plan. The total budget for these plans is over 10 billion euro.111 National
and European subsidies for the installations of renewable energies permits a faster return on their
investments. Under these political drivers, it is forecasted that Spain will add about 9,000MW of
wind capacity between 2004 and 2010.112
Desalination powered by renewable energies is becoming commercially viable, because of strong
support for both desalination and renewable energy. In response to the social concern for the
huge energy consumption of new desalinations plants (4,100 MWh/year), Spains Minister for
the Environment, Cristina Narbona, stated that the government plans to invest heavily in
renewable energy powered desalination technologies being developed in the Canary Islands.113
In some Spanish autonomous region (Canary Islands, Navarra), there are policies that accelerate
installation of wind power generation directly to desalination plants (only for more than 2,500
m/day capacity plant) in parallel with the grid of the area.114
Wind energy can reduce the price of desalinated water about 25 %: 0,60 /m3 against 0.80/m3,
if the sale of excess energy is taken into account. Recently, Spains environment ministry has
selected a project by industrial group M Torres to build floating desalination plants using wind
energy at high sea. The first prototypes of the platforms will be installed off the Murcia coast in
southeastern Spain within 18 month, using the reverse osmosis method in the Mediterranean.115
Business Climate in Desalination and Renewable Energy Industry of Spain
In Spain 80% of desalination plant is RO system. Pridesa, which is an umbrella company of
RWE group, has the largest market share and it constructed desalination plants amount to about
500000m3/d in Spain, including Almerias plant. In the renewable Energy market, especially
wind market, Iberdrola, Endesa, and RWE are the leading player.
Tech/Company Desalination
Renewable Energy (Wind)
Pridesa (Spain, Part of RWE)
Iberdrola (Spain)
Veolia Water Systems (France) Endesa (Spain)
Drace (Spain)
RWE (Germany)
Others
Degremont, Ionics
Table 2: Leading Company in desalination and renewable energy market of Spain116
Most of the leading companies are Spanish or EU companies. This is the entry barrier for Spain
market. New market participants may not find it easy to enter the market, because there are
already several large, well-established Spanish companies with close ties to local construction

111

Johannesburg Renewable Energy Coalition http://www.iea.org/.

Thaler, H. Desalination in Southern Europe: Focus on Spain, Frost & Sullivan.
113
Global Water Intelligence, Market Leading Analysis of Private Water Projects, Volume 5, Issue4, April 2004.
114
REAL DECRETO 2818/1998, ORDEN de 21 de septiembre de 2001, DECRETO 53/2003, de 30 de abril,
Decreto Foral 71/2005.
115
Platts, Renewable Energy Report, Issue 77, 4 April 2005.
116
Uchimura, T. Personal Interview.
112

26

companies and consultancies and also Spain will see local knowledge as an important factor for
market dominance. 117
There is barrier for the desalination driven by RES. As for a large isolated desalination plant
driven by RES, the intermittent nature of the RES forces to design the installation with an
oversize capacity to produce average water per month or year, and the initial cost of installation
of the desalination driven by RES is very high.118
Market Entry Strategy for Spain
The market for desalination driven RES is in Introduction Stage of product life cycle. Thus the
profit may not be positive, because company needs to more R&D. However, as we discussed,
the government needs desalination, but cannot accept increase of fossil fuel consumption. Thus
this market is expected to continue to increase, with its massive public policy support.
Whole System Design combine desalination system and RES
The company, which has the know-how of whole system integration for desalination and RES,
will have competitive advantage in this market. Because, as we discussed in this paper, the
system components will be specifically matched to each other for greatest efficiency,
infrastructure costs could be lower because of combined uses and such a large and important
project could not be allowed to fail so generous subsidy and financing would be attached.
Additionally, Similar to the market of Saudi Arabia, new company needs to consolidate Spanish
company, which has connection to local companies and local knowledge, to enter the market.
CONCLUSIONS/RECOMMENDATIONS
Desalination has emerged as a technically, environmentally and economically sound process to
augment domestic water sources. Although there is room, justification, and ongoing research
projects for improvement in desalination energy consumption, the present dollar cost of energy
for RO desalination is not necessarily considered significant. The present state of renewable
energy technologies in power production, storage and desalination application is insufficient to
support desalination on a large domestic scale. Still, the existence of small-scale renewable
energy driven desalination facilities in places such as Spain may be an indication of future
potentials in linking renewable energies and desalination. On the other hand the technology for
desalination alone has matured to the point where this market will be growing very rapidly in the
near future.
Growth of the desalination market will continue and accelerate. The current $1 billion market
will grow by at least 12% annually, possibly at twice this rate depending on the cost of
desalinated water and the rate of public acceptance. RO membranes are the heart of the system
and only last from five to seven years. Because they are consumables, the entire installed base
must be replaced regularly, which will provide a constant, predictable and significant revenue
stream for the manufacturers. Investment in the RO membrane segment of the desalination
market will prove to be the most profitable.

117
118

Barker, M, Desalination in Southern Europe: Focus on Spain, Frost & Sullivan.

Suarez, B. Email interview.

27

In both Saudi Arabia and Spain, the increasing demand for water and decreasing cost of
desalination are leading both governments to turn towards desalination. Saudi Arabias policy to
privatize the desalination industry and to increase the use of RO desalination technology will
provide ample opportunities in this market. New participants for the Saudi Arabian market
should aim to enter the large and middle RO A&E segment.
In Spain, the government strongly supports the use of renewable energy due to its awareness of
the environment and dependence on imported energy. Thus, in Spain desalination coupled with
renewable energy is about to take off. Companies with knowledge in the integration of power
generation, desalination and water delivery will be highly competitive in this segment. The
market for desalination powered by renewable energy is at the beginning stages in Spain, and
thus, potential entrants to this market should focus their R&D on this area. Investments in system
design that integrates desalination with renewable energy will be important for the Spanish
market.
Over the next twenty years the growth of the desalination market in water-stressed portions of
the United States will be dramatic, perhaps explosive. During this timeframe in California alone,
if that state is to meet its goal of providing at least 7% of total municipal water supply through
desalination, they will need to deliver 1.8 bgd of desalination water. This will require an
investment of approximately $10 billion in treatment facilities.
Within the U.S., federal, state and local governments have adopted a hands-off policy with
respect to desalination. Their role in the promotion of desalination is by providing funding for
research and development. Because these funding sources are available to both public and
private interests, businesses looking to enter the desalination market should submit proposals to
receive this funding for research and development of their products. Moreover, since many
municipalities and water management agencies are considering desalination as part of their water
profile, businesses looking to enter this market should also strive to form public-private
partnerships with these agencies, both to increase the chance of receiving research dollars and to
establish first-to-market positions when these agencies start building their desalination facilities.
Industry has experienced considerable gains in RO membrane technology improvements over the
past 20 years. The decreasing marginal gains in RO membrane technologies are indicative of
this previous progress and the maturity of the membrane science. Reverse osmosis membrane
technology is rapidly approaching the point of diminishing returns. As such, in order to continue
to command market share in the long run, companies need to look to other means to reduce the
cost of seawater desalination. The integration of renewable energy technologies with desalination
technologies, especially employing a systems design approach, should prove be a profitable
endeavor.
Desalination as a source of freshwater is here to stay. This market will grow tremendously
worldwide in the near future. As this market is young, there is still room for companies new to
this field to enter the market and establish a market position that will capture a substantial share
of this projected multi-billion dollar market.

28

APPENDIX A
INTERVIEW SCHEDULE
Interviewee

Affiliation

Associate Professor

206-543-2394

korshin@u.washington.edu

5/5/05

V.P. for Technical Services

203-327-7740

nvoutchkov@poseidon1.com

5/5/05

Co-chair of the Executive

Planning and Review
Committee for Tularosa
Basin National Desalination
Research project

505-844-5499

mmhight@sandia.gov

5/11/05

Technical Adviser

81-3-56447565

taniguchi@wrpc.jp

5/11/05

Executive Director

714-378-3278

rlinsky@nwri-usa.org

5/12/05

HDS Engineering

President

425-453-1523

not given

5/17/05

CA Energy
Commission
Koch Membrane
Services
Bushnak Water
Group
Metropolitan
Water District
Metropolitan
Water District
CA Department of
Water Resources

Water-Energy Program
Manager
Director of Municipal
Technologies

916-654-4858

Schaudhr@energy.state.ca.us

5/19/05

978-694-7132

ajvongottber@kochmembranes.com

5/19/05

00966-26672644

adil@bushnak.com

5/20/05

213-217-6702

rjoe@mwdh20.com

5/23/05

213-217-6702

jvergara@mwdh20.com

5/23/05

818-543-4620

chuckk@water.ca.gov

5/23/05

University of
Washington
Poseidon
Resources, Inc

Michael
Hightower

Sandia National
Laboratory

Yoshio
Taniguchi

Water Reuse
Promotion Center
National Water
Research Institute

Jose Vergara
Chuck
Keene

Date
5/3/05

Gregory
Korshin
Nikolay
Voutchkov

Bob Joe

Email
Ryan_Alsop@lbwater.org

Long Beach Water

Dr. Steve
Reiber
Shahid
Chaudhry
Antonia von
Gottberg
Adil
Bushnak

Phone
562-570-2314

Ryan Alsop

Ron Linsky

Position
Manager of Government &
Public Affairs

President
Group Manager External
Affairs
Project Manager for the
Local Resources Program
Environmental Program
Manager II

Takeshi
Uchimura

ITOCHU Plant &

Machinery
Corporation

Head of the Sales

Department No.3

81-3-54148418

t-uchimura@itpm.co.jp

5/24/05

John
MacHarg*

Affordable
Desalination
Collaboration

Managing Director

650-283-7976

jmacharg@affordabledesalination.com

5/25/05

Baltasar
Peate

Instituto
Tecnolgico de
Canarias

Head of the Water

Technologies Section

34-928-727547

baltasarp@itccanarias.org

5/26/05

* Personal Communication

29

APPENDIX B
TABLES AND MAPS
Table 1. Existing and planned desalination capacity in California.

Feedwater
Source
Groundwater
Seawater

Plants in Operation
No. of
Annual
Plants
Capacity*
14
68500
6
1440

Total
Cumulative
*Acre-feet per year

20

69940

Plants in Design &

Construction
No. of
Annual
Plants
Capacity*
3
31700
1
50

Plants Planned or
Projected
No. of
Annual
Plants
Capacity*
3
55800
6
187100

4
31750
9
242900
24
101690
33
344590
Source: CA Water Plan Update 2005 Volume 2

Table 2. Cost comparison of two very similar seawater RO desalination plants. Each was
state of the art when they were built. This is a good illustration of the reduction in desalinated
water production cost during the twelve-year period, 1991 to 2003.
Year
Capacity MGD
Total Installation Cost
Capital Cost, per K Gal.
Energy Cost, per K Gal.
Energy Usage, kWh/CM
O & M Cost, per K Gal.
Total Cost, per K Gal.
Capital Cost, % of total
Energy Cost, % of total
O & M Cost, % of total

Canary Islands
1991
5.3
$20 Million
$ 1.14
$ 1.67
5.50
$ 0.91
$ 3.72
31%
45%
24%

Israel
2003
5.3
$20 Million
$ 1.02
$ 0.91
4.00
$ 0.80
$ 2.73
38%
33%
29%

Change

$
$

(0.12)
(0.76)
(1.50)
$ (0.11)
$ (0.99)
7%
-12%
5%

% Change

-11%
-46%
-27%
-12%
-27%
23%
-27%
21%

30

Table 3. Matrix for Country Assessment

Ability to pay
clear
Aruba
Singapore clear
clear
Spain
Saudi Arabi clear
Demand for
renewable
energy
3
Aruba
Singapore 3
4
Spain
Saudi Arabi 1

Demand for
Desalination
2
2
4
4

Market for
Desalination
1
2
3
4

Access to
information
1
4
3
3

Geography
2
3
3
4

Public policy for

Desalination
1
3
4
4
Water
management
plan
1
4
2
2

Public policy for

Renewable Energy
2
3
4
2

Sum
6
10
15
14

Total
13
24
27
24

Sum
7
14
12
10

1 worst or no-information, 2 worse, 3 better, 4 best

The total point of Singapore and that of Saudi Arabia are the same. We chose Saudi Arabia for
Foreign Country Analysis, because this country has the world largest desalination market, and
also it is expected to remain the leader of desalination market in the future.
Scoring information (Score is indicated right side of countries name.)
1. Demand vs. supply
Aruba 2: Currently supply capacity can satisfy demand
Singapore 2: Currently supply capacity can satisfy demand
Spain 4: There is water crisis.
Saudi Arabia 4: There is water crisis.
2. Market size of desalination
Aruba 1: 4100m3/day
Singapore 2: Desalination: 136,000 m3/day (under construction), Newater 72,000 m3/day
Spain 3: 800,000 m3/day
Saudi Arabia 4: 6,000,000 m3/day at 2001
3. Size of economy (ability to pay)
Aruba: Clear
Singapore: Clear
Spain: Clear
Saudi Arabia: Clear
4.Public policy drivers for desalination
Aruba 1: No plan (no information)
Singapore 3: Wastewater recycle for drinking water (Newater), Plan to build more
desalination plan
31

Spain 4: Spain has 3.8 billion euros plan, called the National Hydrological Plan, aims to
construct hydrological facilities including 41 desalination plants on south east coast.
Saudi Arabia 4: During the current five-year development plan (2000-2005), 12 new
desalination plants will be built, providing an additional 2.1 million cubic meters per day of
water.
5. Public policy drivers for renewable energy
Aruba 2: Aruba is hoping to install a 3 MW farm.
Singapore 3: Installation of 50,000m2 of solar thermal systems by 2012. Complete recovery of
energy from municipal waste
Spain 4: 29.4% of electricity output by 2010, Kyoto Protocol
Saudi Arabia 2: Government has invested renewable energy, especially in solar energy.
6. Potential demand for renewable energy for desalination
Aruba 3: 100% energy importing country, there is available renewable energy, land is limited,
potential barrier from tourism industry
Singapore 3: 100% energy importing country, land is very limited
Spain 4: Renewable energy available, most of energy is imported, land is not such limited
Saudi Arabia 1: Largest oil producing country in the world.
Solar energy is available, has the worlds largest solar energy collecting facility in the world.
There were several R&D for the desalination powered by renewable energy.
7. Ease of research (access to information)
Aruba 1: Available information is very limited
Singapore 4: They have lots of information and their first language is English.
Spain 3: Much information, most of governments information is in Spanish
Saudi Arabia 3: Much information, most of governments information is in Arabian
8. Geography / climate condition / growing population
Aruba 2: Small island, there is little land for water storage, easy to access to saltwater,
population growth 0.55%
Singapore 3: Small country, there is little land for water storage, easy to access to saltwater,
population growth 3.42%
Spain 3: Geological imbalance demand and supply, easy to access to saltwater, population
growth 0.16%
Saudi Arabia 4: Very small participation, easy to access to saltwater, population growth 3.27%
9.Water management plan
Aruba 1: No information
Singapore 4: Good. They are conserving and reusing water, and utilizing rain. The use of
agriculture is negligible, compared to other countries.
Spain 2: Heavily subsidized agriculture
Saudi Arabia 2: Heavily subsidized agriculture

32

Map 1. The map of desalination plants of Saline Water Conversion Corporation119

119

Water-technology.net, http://www.water-technology.net/

33

Map 2. Map of National Hydrology Plan in Spain120

120

Source: River Net, European Rivers Network (in Spanish), http://www.rivernet.org/

34

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