GP Bullhound, a research-centric investment bank, released an Independent Technology Research Sector Update, titled Water Desalination – Deep Enough to Dive In? The report examines the current state of desalination and its evolution to becoming an integral element of any water sourcing strategy.
Paul O’Callaghan, BlueTech Research CEO was one of the industry executives interviewed for the report, which was released Monday, July 2, 2012. Here are some of its key findings.
Desalination Spawning New Opportunities
Described as a “global industry that is now mainstream and self-sustaining, spawning new opportunities,” desalination is disruptive, has brought fundamental changes to the water market, and is expected to deliver up to 120 million cubic meter of water each day in the next four years.
New Technologies Reducing Energy Requirements
Thus far, membrane technology improvements and advanced energy recovery devices deliver major drops in energy requirements, improve water treatment efficiency and costs, and are applicable for small-scale operations. “ERI single-handedly halved the cost associated with desalination and as a result were able to achieve 70% market share,” explains O’Callaghan.
Reverse Osmosis Useful and Scalable
Reverse osmosis can be used in the mega plants and the smaller ones as well. Off-grid, small and mid-sized plants taking advantage of this more affordable technology are dramatically expanding the market size. And while transport costs are an important consideration, the implementation of best-in-class desalination technologies will make it less expensive than moving the water.
“Today, the energy input to pump water from Northern California to Southern California, for example, is the same as the energy required for desalination in California. As water has to be transported ever longer distances and as new desalination plants implement best-in-class technologies, it will reach a point where it is cheaper to make it than move it,” O’Callaghan concludes.
O’ Callaghan notes that desalination energy costs at the new Carlsbad desalination project in San Diego, for example, are now equivalent on a cubic meter basis to the energy footprint of pumping water in from Northern California.
Perceptions About Desalination Changing, But Still Outdated
GP Bullhound also reports that while there have been these significant and disruptive “leaps” in technology for membranes, perceptions of desalination have not kept pace. No longer does desalination fit the earlier labels of being expensive, energy inefficient or environmentally unfriendly. Or perhaps it would be fairer to say the gap is narrowing, desalination efficiency is improving and conventional water options are requiring more energy. Technology improvements in membranes, energy recovery devices, plant design for reverse osmosis, and brine discharge address just about all of the misperceptions.
Demand for Water Up, Plant Installation Not Keeping Pace
The growing demand for water is not met with ramped-up installation of desalination plants, which is often hampered by bureaucratic hurdles, diminishing budgets, and changed spending patterns. Despite this, opportunities have opened up for a new breed of entrants with new reverse osmosis technologies and new business models. Both will require private investment.
As the market advances, opportunities that can generate more positive cash flows (e.g., the replacement market) will exist across the value chain. The application for these technologies is wide and scalable. Other technologies (e.g., de-ionisation, forward osmosis) hold promise, but scale-up times are longer.
The report details new technologies’ status of development (e.g., membranes, aquaporins, forward osmosis, de-ionisation) and new business models and routes to market (e.g., Capex and plant uptime; brackish water, frack water, wastewater and water reuse; replacement market for membranes; system integrators; asset ownership models; DBOO models; and the Seven Seas Water model).
About GP Bullhound
GP Bullhound is a research-centric investment bank with offices in London, San Francisco and Stockholm.