Cost-Benefit Analysis of Desalination: A Power Market Opportunity

Abstract

Water desalination can offer a potential solution for water scarcity. Additionally, desalination technologies that mainly consume electric energy, such as reverse osmosis, can expand the market for electric utilities. Despite such benefits, the main question around desalination remains to be its economic competitiveness. To evaluate the cost-effectiveness of water desalination, this paper calculates two well-known engineering economic metrics: net present value (NPV) and levelized cost of water (LCOW), as applied to large-scale water desalination loads. The paper offers insights on the economic competitiveness of water desalination, compared to its alternatives, i.e., fresh surface and groundwater. The use of NPV is viewed as a planning tool, and LCOW is viewed as an operations tool, which has some significance in project planning. The paper discusses the nexus between operations and planning and offers some contemporary insight into the deployment of desalination worldwide. Additionally, the paper offers analysis on the economic benefits of integrating water desalination load in power systems, both from the point of view of desalination plant owners and electric utilities.