Take It With a Grain of Salt: What You Need to Know About SWRO and Costs A Presentation By A...

Take It With a Grain of Salt:What You Need to Know About SWRO and Costs

A Presentation By:

Brent AlspachMalcolm Pirnie

The Water Division of ARCADIS

AWWA Membrane Technology ConferenceLong Beach, CAMarch 30, 2011

Co-Authors

Brent AlspachSenior Environmental EngineerMalcolm Pirnie / [email protected]

Ian WatsonExecutive Director, AMTAPresident, RosTek [email protected]

The Peril of SWRO Cost Figures

Plant #1: The cost of this SWRO project is $1.30 / kgal.

Consider two seawater desalination projects:

Reverse osmosis technology~100 mgd capacity

Located in the Southern Hemisphere (Not in the Middle East)

Plant #2: The cost of this SWRO project is $20 / kgal.

Purpose

• Highlight cost citation issues

• Create discriminating readers

• Promote informed discussion

• Provide an industry resource

Reference the paper in the MTC conference proceedings

or in the IDA Journal

Overview

• Background on SWRO Cost

• The Context of Cost

• Cost Citation Issues— Omitted Cost Components— Insufficient Cost Components— Fluctuating Cost Components

• Summary

You can’t believe everything you read.

Background

Background on SWRO Cost

Cost Type ExpressionExamples

(US)

Capital Cost ($) per unit of installed capacity $/gpd

Operating Cost ($) per unit volume of water produced$/kgal

$/AF

Life Cycle Cost ($) per unit volume of water produced$/kgal

$/AF

Summary of SWRO Cost Types

• Units of operating and life cycle costs are the same

• Multiple units for operating and life cycle costs



(US)



$/AF


$/AF




Eastern US / General



(US)



$/AF


$/AF




Western US


Unit Category ExpressionExamples

(US)

Flow / Capacity

1 mgd 1,120 AFY

1 ML/day 1,000 m3/day

1,000 m3/day 0.264 mgd

1 mgd imperial (MIGD) 1.2 mgd

Volume 1 AF 326,000 gallons

Useful SWRO Unit Conversion Factors

• English or metric units may be used

• Use of different metric units varies by country / world region


Total Water Cost:

Properly expressed, all-inclusive cost

of a developing a water resource

($/kgal or $/AF)


Total Water Cost:



($/kgal or $/AF)

Total Water Cost

Life Cycle Cost

Total Water Cost

Life Cycle Cost


Total Water Cost:



($/kgal or $/AF)


Total Water Cost:



($/kgal or $/AF)

SWRO Plant

Important Points

SWRO Project

vs.

TWC is inherently an estimate.

Context

The Context of Cost

1. Consider the author

Author Example

MainstreamJournalist

The desalination plant will cost $500 million.

Water Treatment Professional

The desalination plant will cost $500M to build and $25M per year to operate.

SWRO Expert Seawater desalination will cost $4.50 per kgal.

The Context of Cost

1. Consider the author– Mainstream journalist

– Water treatment professional

– SWRO expert

2. Consider the perspective— Pro-desalination generous assumptions— Anti-desalination conservative assumptions

3. Consider the target audience— General public— Water treatment professionals— Decision makers— SWRO experts

Key Point

Maintain objective, questioning mentality

Cost Citation Issues

Omitted Cost Components

Insufficient Cost Components

Fluctuating Cost Components

Omitted Cost Components

Omitted Cost Components: Overview

Questions:1. Are all of the appropriate components included?

2. Are the included components disclosed?

Problems:— Most literature is vague about what a cost includes— Article length / space is limited— Author(s) may be unaware of important qualifiers

— Omissions may be intentional (i.e., make SWRO look better / worse)

Key Point

TWC should include ALL applicable components and ONLY the applicable components

Omitted Cost Components: Water Storage & Conveyance

• SWRO plants are located close to the coast— Convenience— Minimize intake and concentrate piping & appurtenances

• Coastal location issues:— End of the distribution system (typical)— Smallest distribution system infrastructure— Lowest elevation

• Implications— Pipe permeate inland to optimum tie-in point— Conveyance pipe alignment likely through developed areas— Possible storage for blending and/or equalization

Why is this important to include?

Omitted Cost Components: Water Storage & Conveyance

• SWRO plants are located close to the coast— Convenience— Minimize intake and concentrate piping & appurtenances

• Coastal location issues:— End of the distribution system (typical)— Smallest distribution system infrastructure— Lowest elevation

• Implications— Pipe permeate inland to optimum tie-in point— Conveyance pipe alignment likely through developed areas— Possible storage for blending and/or equalization


Key Point

Significant capital and O&M costs(Potential)

Omitted Cost Components: Professional Services



What is important to include?

Engineering

Design

Feasibility studies

Intake & outfall evaluation

Pipeline alignment studies

Site selection

Geotechnical studies

Piloting

Demonstration testing

Rule of Thumb:

5-10% of Construction Cost



Permitting

Applications

Reports

Baseline data collection

Environmental impact studies

Ongoing monitoring

Includes:

Field workSampling

DemonstrationTerrestrial & marine work



Public Outreach

Literature development

Informational materials

Surveys

Community forums

Legal

‘Nuff said.



Key Point

Significant capital and O&M costs


Does capacity matter?

ServiceSignificant

Economies of Scale…?

Engineering design Yes

Other engineering No

Permitting No

Outreach No

Legal No

Omitted Cost Components: Environmental Protection

Mitigation

Land acquisition

Design

Construction

Maintenance

Monitoring


Renewable Energy Facilities

Land acquisition

Design

Construction

Maintenance

Monitoring

Energy savings (if any) should be deducted from the TWC

Omitted Cost Components: Environmental Protection


Key Point

Significant capital and O&M costs(Potential)

Omitted Cost Components: Subsidies

Why is this important (or not) to include?


Background: The “Last Straw”

SWRO Project Proponent

Subsidizing Agency

Subsidy Amount

SubsidyType

West BasinMunicipal Water District

Metropolitan Water District of Southern

CA$250/AF Operating

Long Beach Water Department

Municipal Water Districtof Orange County

Tampa Bay WaterSouthwest Florida

Water Management District

$85 million Capital




Subsidizing Agency

Subsidy Amount

SubsidyType



CA$250/AF Operating





$85 million Capital

Should subsidies be included in the TWC?




Subsidizing Agency

Subsidy Amount

SubsidyType



CA$250/AF Operating





$85 million Capital

It depends.


Subsidy Problems

• Citation of SWRO costs in the literature often does not indicate whether subsidies are included

• Subsidized SWRO projects have two important costs:1. Cost to rate payers

2. Cost of resource development (i.e., TWC of seawater desalination)


Subsidy Problems




Include subsidies


Subsidy Problems




Include subsidies

Do NOT include

subsidies


Subsidy Problems





Subsidy Problems




• Complicates comparison to other water resources projects— SWRO— Conservation / loss prevention— Reuse


Subsidy Problems




• Complicates comparison to other water resources projects— SWRO— Conservation / loss prevention— Reuse

Key Point

Compare apples to apples!

InsufficientCost Components

Insufficient Cost Components: Overview

Examples:— Water quality— Plant capacity— Financing— Project delivery method— Siting issues— RO system recovery— Others…

“Insufficient” Cost ComponentsProject characteristics that are inherently included in TWC

estimates, but about which insufficient qualifying information is provided to enable an equitable comparison

between different SWRO projects

Key PointComparing apples to apples

can be difficult!











can be difficult!

?



can be difficult!





?


Insufficient Cost Components: Water Quality

Santa Cruz, CA2.5 mgd SWRO

Tampa, FL25 mgd SWRO

Operating Costs

Seawater Quality35,000 mg/L

68 oF (summer)

Seawater Quality28,000 mg/L

85 oF (summer)

SWRO Pressure = f(Salinity, Temp.)

Operating Cost = f(SWRO Pressure)

Higher Salinity, Lower Temps. Higher Pressure Requirements

Higher Pressure Higher Cost


Operating Costs

Source: AWWA Manual of Practice M46: Reverse Osmosis and Nanofiltration

Power ⅓ to ½ of the TWC of a SWRO Project


Key Point

Be aware of water quality differences before comparing SWRO project costs.

Insufficient Cost Components: Plant Capacity

Capital Cost


(US)



Capital Cost


(US)


What capacity?— Maximum output?— Average output?— Peak day?— Peak hour?

There is no international standard for the expression of water treatment

plant capacity.


Capital Cost


(US)


Gallons or Imperial Gallons?

Difference of 20%.


Capital Cost


(US)


Key Point

Be aware of inherent uncertaintyin SWRO capital cost expressions.

Insufficient Cost Components: Financing

The Breakdown…

• Borrow $250,000

• Term = 30 years

• Rate = 6 percent

• Annual compounding


The Breakdown…

• Borrow $250,000

• Term = 30 years



Annual payment: $18,150

Total amount repaid: $544,500 or 2.178x Principal


The Breakdown…

• Borrow $300 million

• Term = 30 years



Annual payment: $21.8 million

Total amount repaid: $653.4 million

Key Point

TWC must include debt service.


Gaming the System at the Planning Level

Assumed Useful Life

AnnualPayment

Total Amount Repaid

Spin

30 Years $21.8 million $653.4 millionFavorable

operating costs

20 Years $26.2 million $523.2 millionFavorable capital cost

For a Principal of $300 million…

Key Point

An appropriate facilities useful life must be assumed.

FluctuatingCost Components


Characteristics:— Subject to change over time— Complicate efforts to compare SWRO projects costs over time and

disparate locations around the globe

Fluctuating Component





Metal Commodities

• Used in corrosion-resistant alloys

• Examples: Ni, Mo, etc.

• Changes during project development can be problematic for financing based on initial estimate prior to price spike

• Price and availability can vary by country





Metal CommoditiesKey Point

Project changes, as appropriate, particularly for equipment

replacement.





Metal Commodities

Oil

• Similar issues as for metal commodities, albeit for different equipment: pressure vessels, elements, etc.

• Example– 50 mgd SWRO plant

– Thousands of elements

– 20% rise in oil prices millions of dollars in

increased element replacement costs





Metal Commodities

Oil

Key Point

TWC figures should incorporate appropriately conservative

replacement costs.





Metal Commodities

Oil

Power

• Huge influence on TWC

• Cost can vary widely around the globe, complicating comparisons





Metal Commodities

Oil

Power

Key Point

Identify the assumed power rate of costs cited in the literature to translate to other potential SWRO projects that are

otherwise similar.





Metal Commodities

Oil

Power

Exchange Rates• Exchanges rates vary over time

• Inflation in various countries changes at different rates





Metal Commodities

Oil

Power

Exchange Rates

Key Point

Exchange rates at the time of project development, as well as inflation, must be taken into account even

before assessing theequitability of TWCs.

Summary

• SWRO costs cited in the literature often lack important qualifying information

• It is difficult for readers to properly assess TWCs in the literature

• It is critical for desalination experts and water treatment professionals in general to have a good understanding of SWRO cost components

Key Point

The magnitude of the TWC of any SWRO project will ultimately be far less important than the price consumers are willing to pay

when there are no other viable alternatives.

Thank you for your attention.

A Presentation By:

Brent Alspach1525 Faraday Ave.

Suite 290Carlsbad, CA 92008

(760) [email protected]

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