Raising cash and getting the price right

As concerns about global water supplies continue to grow, Tom Pankrantz, Corporate Projects Dirctor of Vivendi Water Systems/USFilter, outlines commercial stratagies for larger desalination and water reuse projects.

A public-private partnership is behind the new plant in Honolulu, Hawaii

A public-private partnership is behind the new plant in Honolulu, Hawaii

The ancient Greek philosopher, Aristotle, described the concept of distillation as a method of seawater desalination in the fourth century BC, and there are references to its practice by seagoing sailors as early as 200 AD. For the next 2000 years, however, economic considerations limited its use to regions of chronic and severe water shortages.

New commercial strategies and a realisation of the economies-of-scale have led to further improvements in plant economics, and an increase in the size of plants under consideration.

These improvements in desalination and reuse economics are occurring at the same time as the cost of producing water from traditional sources increases. Fresh groundwater sources have been depleted or are unavailable because of subsidence concerns, while degradation of rivers and lakes has dramatically increased the cost of conventional surface water treatment plants.

An increasing number of domestic and industrial water supply projects now consider desalination and water reuse as economically competitive, drought-proof water management options - sometimes the only option.

Low energy consumption
Thermal desalination technologies such as Multiple Effect Distillation (MED) and Multistage Flash Evaporation (MSF) rely on the use of heat to boil seawater to produce a pure water vapour which is then condensed as fresh water. Thermal processes are usually used where low-grade steam from an electric generating station is available to provide heat necessary for the thermal desalination plant, which significantly reduces energy costs.

The MSF process has been commercially available since the early 1960's and, until recently, was the only thermal process used on large (i.e. >9,000m³/day) seawater desalination systems. Vivendi Water Systems' Sidem group has developed its MED technology to take advantage of the process' inherent operating and economic advantages on larger installations. As a result, Sidem has installed individual MED units with capacities up to 22,700 m³/day.

In the MED process, distillation takes place in a series of chambers, or effects, operating at progressively lower pressures. As seawater is sprayed in a thin film over a heat exchanger tube bundle, steam flowing through the tubes is condensed into pure water. The seawater film absorbs heat from the steam, boils, and the resulting vapour is introduced into tubes in the next effect.

The process is repeated through the plant and the product water is collected and extracted. In a typical MED unit, each kilogram of input steam can be used to produce eight kilograms of product water.

MED plants operate at lower temperatures (63°-75°C) than MSF plants (100°-110°C), reducing operational problems resulting from scaling and corrosion. MED pumping and electrical power requirements are typically 33% lower than MSF, and seawater intake water requirements may be 50% lower than a similarly sized MSF.

Reverse Osmosis (RO) is a high-pressure filtration process that allows fresh water to pass through a semi-permeable membrane while restricting passage of larger salt molecules. RO membrane systems are the fastest growing segment of the desalination market and an integral part of most water reuse projects.

This rapid growth results from the inherently lower capital cost of membrane technology over thermal alternatives, and advances in membrane performance, durability, and manufacturing methods which have significantly lowered membrane prices and improved RO systems reliability.

A pretreatment system is an RO plant's biggest performance and operating cost variable, and its capital cost can exceed 50% of the overall cost of the desalination or reuse plant. Improved pretreatment alternatives now available have had a significant effect on the increase in the number of RO-equipped systems, especially on water reuse projects.

RO membranes able to prevent passage of certain individual molecules are highly susceptible to fouling by organics and suspended solids. It is important to remove these solids ahead of the RO membrane to maintain performance and prevent irreversible damage. In fact, the most critical aspect in the success of an RO system is the effectiveness of its pretreatment system.

Many RO installations now use a 'dual membrane' process where the RO membrane is preceded by a more porous, low pressure, microfiltration (MF) membrane which removes suspended solids to reduce fouling. Microfiltration systems are so effective at removing suspended solids that Vivendi Water Systems and USFilter equip virtually every new wastewater reuse system with a Memcor CMF® system.

Raising capital
As the capacity of water supply projects continues to increase, so does the required capital investment necessary to develop them.

The March 2000 World Water Forum forecast that capital expenditure needs to solve water problems would rise from $80 BN p.a. in 2000 to $180BN p.a. in 2025.

Many governmental entities are turning to public-private partnerships where financing and/or operational tasks are delegated to a private enterprise. There are specific advantages to each privatisation model, but all share some common elements. Technical, economic and compliance risks to the public are minimised and the developer usually arranges financing, minimising a community's immediate financial burden. Long-term contracts usually result in lower, fixed water rates by amortising capital costs over the contract life.

Under one of the most popular type of contractual arrangements, a private party provides the capital to design, build, and operate the treatment plant for a fixed period of time, often fifteen to thirty years. The cost of the facility is then recovered by furnishing product water or treatment capacity at a contracted price, usually on a 'take-or-pay' basis.

The design-build-operate (DBO) model streamlines a government's procurement steps and saves money by eliminating the separate stages and selection procedures for engineering, construction, procurement, and operations disciplines. DBOs are particularly popular with industrial clients, fast track projects, or projects where performance and the value of the service to be provided is more important than the details of what happens, with the various procurement steps in between.

Clients may grant their partners wide latitude in the technologies used and the ways in which they are applied. Water is usually the private-sector company's core-competency and the use of innovative and/or proprietary solutions to lower production costs is preferred. Companies specialising in water treatment also have ready-access to new technologies that will improve plant performance as they are developed.

Public-private partnerships are not a panacea. Projects must be well-structured, technically sound, and financially practical or they will not survive the due diligence process. Clients must be credit worthy and offer a secure payment mechanism, and private-sector partners must exhibit the financial and technical strength to assume responsibility for the service provided.

By thoroughly prequalifying prospective partners, the public's interest for reliable services at affordable prices can be balanced against a private-sector company's desire to generate profits and provide the needed services using a public-private partnership format.

PPP in Honolulu
One of the largest, most innovative new wastewater reuse projects utilising a public-private partnership is the 45,360m³/day Honouluili Water Recycling Plant in Hawaii, developed by USFilter, which began operating in August, 2000.

In mid-1998, city planners were faced with a federal consent decree demanding the City and County of Honolulu to recycle a minimum 37,850m³/day by July 2001. To preserve an estimated $38M of funds for other infrastructure needs, the city turned to a DBO approach. City officials estimate that if the project was to have followed a traditional path, the City would have had to subsidise $0.40/m³ due to development and production costs.

The innovative plant produces two grades of beneficial reuse water from secondary effluent supplied by the adjacent wastewater treatment plant. Ultrapure water produced by a dual membrane process combines Memcor's continuous microfiltration (CMF®) process and reverse osmosis and a tertiary-treated irrigation water is produced by USFilter/Zimpro's HydroClear® sand filtration system followed by UV disinfection.

A recent, one-year, side-by-side analysis conducted in California compared the cost of RO pretreatment systems and clearly demonstrates the advantages of a dual membrane (CMF/RO) system. The total capital and operating costs of CMF pretreatment was evaluated to be $0.23/m³, compared to a 'conventional' pretreatment system cost of $0.45/m³.

Under the Honolulu partnership, USFilter is responsible for plant operations as well as marketing and distributing product water throughout the 20-year agreement. Ultrapure water is sold to local petrochemical and power companies for use as boiler feedwater for $1.32/m³, while the tertiary-treated irrigation water is sold to golf courses, parks and agricultural uses for $0.30/m³.

In conclusion, seawater desalination and water reuse technologies can compete with traditional treatment processes and water sources to produce a dependable, high-quality product. Projects are now being planned and constructed in locations and capacities never before considered.

Governments and their private-sector partners must work together and use the new technical and financial tools at their disposal to meet these growing needs and deliver true benefits to the rate payer and the community.


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