Iemmanomics of IPR 'vs' Desal for Sydney

Let’s talk about money for a bit. Let’s put on a purely economic rationalist hat (or perhaps suit and tie) and think solely about cold hard cash for a few minutes.

If I had a dollar for every time I’ve been told on this blog that ‘money doesn’t matter’, -well I might be able to afford a two litre bottle of Evian mountain spring water by now. However, the uncomfortable fact is that money does matter. Money that we spend to produce and deliver drinking water where we could have produced and delivered the same volume and quality at lower cost by other means, is money that is not available for other things (think schools and hospitals). The economists amongst us (G’day Snow) call it ‘opportunity cost’ and the social implications are worth considering carefully.

So putting aside factors such as environmental impacts of desalination brine, it behoves us to ask “which costs more, -desal or recycling?”. As I will try to explain, the answer is frustratingly complex, highly scheme-specific, city specific and depends on who’s doing the sums! However, I expect that taking a closer look at the question might help us to identify some of the snags along the way.

A story in the Daily Telegraph this week reported that “NSW Premier Morris Iemma says adding treated sewage to Sydney's drinking water supply would cost at least twice as much as his planned $1.9 billion desalination plant.” Iemma apparently stated that adding “treated sewage” to Sydney’s drinking water supplies would come at a capital cost of $4 billion to $5 billion (what's an extra billion between friends?).

Even our friends at 4350 Water suggested that Iemma might perhaps be out on a bit of a limb here. Indeed, Sydney Water published a cost-comparison just under a year ago (March 2006). This comparison estimated overall capital costs for a 500 megalitre-per-day desalination scheme at $2.5 billion and a 500 ML/day indirect potable recycling (IPR) scheme at $3.8 billion.

Iemma’s desalination discount (from $2.5 billion to $1.9 billion) is possibly explained by the fact that the scheme will now initially be built with a capacity of only 125 ML/day (expandable to 500 ML/day at a later date). How IPR went from $3.8 billion to $4-5 billion has not been explained, but presumably accounts for the massive rate of inflation currently applied to major engineering projects.

We have previously discussed why reverse osmosis treatment of seawater is always going to be more energy-intensive, and thus more expensive, than reverse osmosis treatment of municipal sewage effluent. I think that point is inarguable in the absence of some significant technological advances. However, reverse-osmosis treatment alone constitutes neither a seawater desalination scheme nor an IPR scheme, -both have many other components and are much more complex than just a shed full of membranes.

A 500 ML/day IPR scheme would indeed be a relatively expensive development in Sydney. The greatest difficulty lies with the fact that our major sewage treatment plants are at sea-level on the coastline (North Head, Bondi and Malabar), while our drinking-water reservoirs are inland and elevated. The concept of IPR requires some form of environmental detention, usually in a river, reservoir or aquifer. To transport water from the treatment plants to a drinking-water reservoir in Sydney would require pumping large volumes westwards to higher altitudes.

A second complication is that the term ‘treatment plant’ is somewhat of a misnomer for the plants at North Head, Bondi and Malabar. I think ‘sewage transfer station’ would be a more appropriate term since their function is primarily to transfer water from the sewage system to the ocean. The only treatment that takes place is rapid ‘primary treatment’. This involves collecting a few of the heavier solids by scraping them off the bottom of a tank that the water flows through on its way to the ocean outfall. Most cities would calculate the cost of a water recycling scheme starting with the assumption that the available sewage effluent would be at least secondary-treated. However the cost of treating the water from these three Sydney plants for recycling needs to factor-in the additional cost of preparing the water by secondary sewage treatment.

Sydney Water’s comparative cost analysis suggested that the overall capital costs of building a 500 ML/day seawater desalination scheme or an IPR scheme of the same size were differentiated predominantly by costs associated with transporting and connecting the water to the potable supply system. This assumed that desalinated seawater could be transferred from Kurnell to Waterloo (practically on the coast), while recycled water would need to be transferred from Malabar all the way up to Nattai (in the lower Blue Mountains, elevation 160 m) above Warragamba Dam. It seems obvious to me that Prospect Reservoir would be a closer, lower altitude and more practical location to transport the water to and I have no idea why this was not considered.

In Sydney Water’s analysis, the infrastructure costs for water treatment were also estimated to be slightly higher for IPR than for desalination. This arises largely because of the need to build a secondary sewage treatment plant (on prime real estate) at Malabar.

Furthermore, Sydney Water’s costings include the assumed need to pump water from both Bondi and North Head, all the way across the Sydney coastline to Malabar for treatment. The reason why this would be required (to produce 500 ML/day) is not clear since Malabar produces a dry weather flow of 456 ML/day and Bondi 130 ML/day. So assuming 80 % efficiency and a bit of wet weather, water from across the harbour at North Head should not be required.

Even once the plants are constructed, Sydney Water’s calculations assume a slightly higher annual operating cost for the IPR scheme ($175 million/year) compared to seawater desalination ($165 million/year). However, again these costs for IPR arise largely from the cost of secondary sewage treatment (which any other developed city would take for granted) and pumping water all the way to up to Nattai, above Warragamba Dam.

The Sydney Water cost comparison does not canvas alternative IPR options or variations. However, it does include the following paragraph towards the end:

“Finally, it is noted that the costs of desalination and IPR at a scale of 100ML/day are likely to be far more comparable. This is because at this scale there would be two sources of cost savings for an IPR project. First, at this smaller scale wastewater for an IPR project could be sourced from treatment plants in Western Sydney. These treatment plants produce a higher quality wastewater that would require less treatment for IPR. Second, due to the shorter distance from Western Sydney to the Warragamba Dam, the transfer cost would be lower than they would be for the 500 ML/day coastal plant”.

Sydney Water’s cost estimations have been revisited by the private company, Services Sydney. Even including the cost of secondary sewage treatment and pumping to Warragamba Dam, Services Sydney calculated reduced capital and annual operating costs for an IPR scheme compared to Sydney Water. While the IPR capital costs still exceeded the desal capital costs, annual operating costs were lower for IPR. So, by considering capital and operating costs over a 50 year period (with a 4% depreciation rate), Services Sydney came up with an IPR cost close to $6.1 billion and a desalination cost of $7.4 billion.

Certainly, the fact that Services Sydney have a clearly stated financial interest in water recycling should not be overlooked. However, I think this demonstrates that the figures ultimately calculated depend largely on who’s doing the sums. They also depend significantly on the assumptions made, as well as specific characteristics of the scheme and city being considered.

What figure does your calculator give?