Desalination of sea water to meet the industrial and residential water requirements has been in vogue for many decades now. However, the cost of water secured through this source has been very expensive, preventing large-scale adoption of reverse osmosis (RO) technology, commonly used in such plants. In recent times, costs are dropping significantly because of economies of scale, improvement in technology, thereby improving viability of desalination plants. This holds significant promise for both industries as well as municipal bodies to meet their water shortages.


While harnessing sea water could potentially end water scarcity forever, the costs have been prohibitively expensive in the past, preventing widespread adoption. Middle East has been the leader in this technology, as the vast arid landscape has left limited options for these countries; today, approximately 50 per cent of the earth's desalination plants are located in the Middle East. The increasing size of the desalination plants has improved economic viability of this technology.


In India, most new power plants are coming up in coastal areas, mainly to meet their water requirements through desalination. This has increased demand for desalination, and simultaneously rapidly increased competition in the desalination industry. This has resulted in steep drop in the price of membranes, a key component in desalination plants accounting for almost one-third of the total plant cost, by a more than 50 per cent drop in the last decade.


Increasing scale of desalination plants, steep drop in membrane costs, and enhanced life of the membrane have together resulted in lower capital expenditure, as well as operating costs per MLD capacity for a new plant. Today, a new plant can produce water at approximately 3-3.5 paise per litre; while it is still higher than 1-1.5 paise per litre from traditional sources, it is vastly cheaper than 7 paise per litre that consumers pay for water through tanker lorries.


While the industrial sector has been quick to adopt the desalination route to meet their water shortages, municipal bodies, as well as central and state governments have shown lukewarm interest till date. Chennai Metrowater is the only municipal body in the country to have an operational desalination plant in the country, which meets approximately 7 per cent of the city's water needs. Co-opting private sector participation through Public Private Partnership projects and BOOT model plants would attract significant capital to this sector. Increasing cost of power, which accounts for 30 per cent of operating costs, and huge power deficits are serious concerns. A combination of solar energy units to power desalination plants can work eminently well.

(The author is ex-Director Ratings, CRISIL, and Co-founder, RiverBridge Investment Advisors Pvt Ltd.)

(This article was published on February 19, 2012)
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