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The true cost of water from desalination?

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The following is an article by Kenneth Davison, a senior journalist for ‘The Age’, a major daily newspaper for the city of Melbourne, Australia. It is a long article, but worth the read.

Melbourne is the capital of the state of Victoria, in south east Australia.

During the significant drought of the last 15 years, Melbourne’s water supplies dropped down to approximately 15% of reserves. The existing population of approximately 4 million is expected to almost double over the next 30 years. The desalination plant will only add 30% capacity, and by some estimates will only serve growth for the next 10 years.

I have added conversions / clarrifications in italics to assist non Australian readers. I have also bolded key points for speed readers. A list of you tube links is provided at the bottom of the article with interesting comments from officials / contractors etc.

May 31 / 2010

Victorians haven’t been told the full story on how much they could pay.

The Minister for Water, Tim Holding, has misled the electorate over the price of water from the Wonthaggi desalination plant, which will have the capacity to produce up to 40 per cent of Melbourne’s water.

Two years ago the retail price of water was 85¢ a kilolitre (250 gallons) when the price reflected the cost of dam water of about 40¢ a kilolitre, so that the average household paid about $800 a year for its water. Now households pay about $1000, even though they are using less under restrictions.

Tim Holding told Parliament on November 26 last year that the ”net present cost of water” over the 30-year life of the contract with AquaSure would be $1.37 a kilolitre (250 gallons), which means the price of water to households after the retail mark-up would be $2.20 a kilolitre in 2012 for an annual water bill of $2000.

So, on Holding’s own say-so, the price of water will double – meaning that most low-income families won’t be able to maintain a garden.

But Holding (and the Brumby government) hasn’t been telling the full story. The day after Holding’s announcement in the lower house, Greens upper house member Greg Barber asked Treasurer John Lenders (who represents Holding in the upper house): ”I gather that the $1.37-per-kilolitre amount may just have been a mathematically derived figure. Can the Treasurer explain what it means in terms of the price of water?”

Lenders responded: ”While the question is probably more appropriate for the Minister for Water, it is certainly one that I will get an answer for him.”

And the result? Nothing! There is no record of a response in Hansard and no record of a written response to Barber, according to Barber’s office.

The Coalition parties have apparently taken Holding at his word. They have shown no interest in the simple arithmetic behind the real price of water and the grossly misleading statement by Holding.

They apparently believe the wholesale price of water is $1.37 throughout the 30-year life of the contract. If so, the subsidy from the Victorian taxpayer will be billions of dollars just for the wholesale price.

The latest official estimated capital cost of the borrowings to finance the desal plant is $5.1 billion. This money has to be serviced and insured against default because, according to ASIC records, AquaSure appears to be a $12 company. Holding has said the government no longer guarantees the debt, so it must have given a ”take or pay” guarantee to take the water.

But at what price? On the most conservative assumption, AquaSure will have to pay 10 per cent on its borrowings repayable over 30 years. This means the annual repayments on capital alone are $537 million a year, or $3.58 a kilolitre. In other words, the $1.37-a-

kilolitre payment that Holding announced to Parliament doesn’t even cover the cost of capital.

But there’s more. The plant will cost just over $200 million a year to run, based on paying the premium for renewable energy as specified by the government – by coincidence, similar to the $1.37 claimed as the total cost by Holding.

No wonder there has been no response to Barber’s question. A meaningful answer would have revealed the actual wholesale cost of water supplied with green energy would be $4.90 – almost four times higher than Holding told Parliament. This converts to a retail price of $7.90, meaning the average household water bill will be about $3000 after the desal water is mixed with the dam water.

The only possible way the government could get the wholesale desal price down to $1.37 a kilolitre is if the government and Aquasure have made a novation agreement whereby Aquasure has inflated the capital requirement to finance a kickback to the government (via a side agreement with Melbourne Water) in order to reduce the price of water reported to Parliament for the first few years. This payment would be recouped later in the contract. To clarify this possibility, the whole contract with the numbers should be made public.

The standard claim of the Liberal Party is that it is the best party to manage the state’s finances. The Greens are denigrated as environmentalists who can’t add up. At least the Greens are numerate enough to smell a rat and sufficiently courageous to point out the emperor has no clothes.

There are other big issues that haven’t been explained. Why was Chloe Munroe, former deputy secretary of Treasury – which approves public private partnership deals – and more recently the secretary of Holding’s department responsible for water policy and water trading, appointed as chairman of AquaSure after AquaSure won the tender?

Further, Munroe is a commissioner of the National Water Commission, which advises governments including Victoria’s on water trading, and more recently has been appointed to the board of Hydro Tasmania, which could sell water to Victoria more cheaply than AquaSure.

Munroe’s appointments represent fundamental conflicts of interest.

Kenneth Davidson is an Age senior columnist.

Youtube videos of interest:

Lead Contractor agrees construction cost is 4.8 billion, not 3.5 billion.

Promotional video by Thiess (Contractor)

Victorian Government project launch

Visit our websites:

www.justwatersaversusa.com, www.graywatergardening.com

View our videos:



Written by Waterharvesting

June 13, 2010 at 12:57 am

Water Harvesting – it’s more than just Rain

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This blog is about extending the concept of water harvesting from simply rainwater harvesting, to harvesting all the water across the home.

Rainwater is extremely valuable, especially as water utilities start raising the price of water to cope with infrastructure upgrades required now, not just the future.

Relying on rainwater alone to help reduce water consumption in the home is risky business (unless you live a cool, moist environment). Over 60% of water use in the average American home is in the garden, and rainwater collection (and storage) can help supply this water.

However if you live in an area that has rainfall for 6 months of the year, and dry for the remaining six months, relying on a rainwater harvesting system can be very expensive.

Lets say your garden area requires 3,000 gallons of water per month for irrigation. Lets assume you have a six month dry period (It could be worse – San Diego has a 9 month dry period).

To ensure garden water supply from rainwater harvesting alone, the tank / cistern would need 6 x 3,000 gallons, or 18,000 gallons capacity.  Apart from the expense involved (many thousands of $$), tanks / cisterns this size require a huge area, and land is expensive.

So the purpose of this blog is to explore the many different methods of water harvesting, such as rainwater harvesting, graywater (also know as gray water, greywater and grey water) re-use, reclaimed water, alternate water supplies; and most importantly place these methods into the appropriate context.

I promise to be straightforward and forthright in this blog. Water politics is not just confined to America, it is a world-wide phenomenon.

Water is a vital resource, second only to air, and as a result is big money. Vested interests include (but aren’t limited to):

– Water Utilities / purveyors
– Water fixture manufacturers
– Water treatment manufacturers and irrigators
– Water re-use designers and manufacturers (be kind – I am one of these!)
– Environmental quality jurisdictions
– Federal / State / City / Country code officials, planning consultants, and inspectors
– Plumbers / irrigators / landscapers

– and the most important stake holder of all; YOU.

I now have over 7 years of water re-use experience in Australia, and 2 years experience here in the US – at local, state and federal levels. Based on what I have learnt so far, the challenges facing America far outweigh those experienced in Australia.

The water / money relationship is much bigger in the US, and the stakeholders above all recognise the issues are serious, they just havent worked out how to work together on it yet. It is likely they will not come to agreement willingly, after all money is involved.

In the end, YOU, the consumer of water will ultimately drive how water is delivered to your home, how much you will pay for it, how you will use it (and re-use it, hopefully over and over again). You may not have control over how much you pay per gallon for water supply and sewerage disposal, but you will be able to control how much you potable water you consume.

Of even more concern to the regulators, is that YOU also decide whether to adhere to codes after the house is built, and they know code violations are everywhere. A pragmatic approach would be to develop codes that were sensible to the typical consumer, or change core infrastructure to cope with code violations.

In future posts, I will provide examples of how pragmatic solutions are rarely, if ever, found in the water regulation industry.

This primary focus of this blog is to raise awareness of what can be done, and what the impediments are.  But it would be stupid of me not to promote two of my websites:

To read more about rainwater harvesting vs graywater go to: http://www.besthomewatersavers.com/pages/Rainwater-Guide.html

Written by Waterharvesting

June 12, 2010 at 7:40 am