Economic evaluation of desalting sub-system as a part of the total water system

Abstract

This paper shows that a higher unit cost for water from a desalination plant as compared with other sources could be justified. The economics of desalination is considered from the total water system of which the conversion plant may be only a component. The concept of limited planning horizon is discussed and the water system is synthesized in relation to the long term demand function. The alternative of a mix between the surface water collection systems and desalination is introduced. The traditional two alternative competition is shown to be just a special case of the general mix alternative. The optimum mix is determined on the basis of minimizing the present worth of costs in relation to demand. The variation of cost parameters with plant capacity is considered in determining the optimum capacity and life of each component. Through the use of continuous discounting (interest) and exponential approximations for the demand functions, the effects of the rate of return and rate of growth in demand on the optimum plant characteristics are shown in a direct, simple manner. This could form a basis for a consideration of the uncertainties associated with forecasted data and cost functions. With respect to the individual water supplies, capital cost allocation over the plant's life is made in such a way as to be proportional to the demand pattern. Accordingly, the concept of an equivalent marginal water pricing is formulated. This price is then minimized. The optimum life, investment and capacity are thereby determined.