Outline (Total 8 content slides, 15 min.) 1. Our conversations about - - PowerPoint PPT Presentation

Outline (Total 8 content slides, 15 min.)

• 1. Our conversations about water (1)
• 2. The Cape Town Seawater Desalination Project (3)
• Options studied, costs benchmarked
• 3. Typical energy impact: Cape Town case study (1)
• 4. Procurement and contracting options (2)
• EPC, BOOT, DBOM, alliance contracting
• Who should own operations and maintenance?
• 5. The matter of demand-side risk (2)
• 6. Overview of the existing desalination inventory (1)
• 7. Concluding remarks, questions.

• 1. OUR WATER CONVERSATIONS… AN INFORMAL OBSERVATION

R/kl Conservation & Efficiency- centred Option-centred Tariff-centred Price Perceived Value Water scarcity Water abundance These conversations:

• Can only exist when our water supply is not assured.
• Often distract us from having much more productive

conversations, such as the economic and environmental impact of having assured water.

• Feasibility study 2012-15, for a 3x150 Ml/d SWRO plant

situated in the Koeberg / Melkbos Strand area.

• 2. THE CAPE TOWN DESALINATION PROJECT: OPTIONS STUDIED
• Three options explored: C0-located with Koeberg NPS, or at

sites North and South of Melkbos, both West of R27.

• Rationale for the project:
• An additional, climate-independent water resource.

Cost estimates (End- 2014-values) 150 Ml/d C0-located 150 Ml/d Free-standing 450 Ml/d Co-located 450 Ml/d Free-standing Capex R4.6 bn R8.3 bn R11.6 bn R15.3 bn Opex R387 m/a R387 m/a R1.2 bn/a R1.2 bn/a

• N-W areas of CoCT most remote from existing water

resources, and a node of rapid development

• Improves grid reliability and redundancy , allows

postponement of some BWAS elements

• 2. THE CAPE TOWN DESALINATION PROJECT: COSTS BENCHMARKED
• Benchmark population: 210 SWRO projects contracted world-wide (1996-2014)
• CTDP cost estimates converted to USD at R11.56

CTDP 450 Ml/d co-located: 88th percen9le CTDP 150 Ml/d co-located: 94th percen9le

25th - 75th Percen9les of the popula9on

CTDP 150 Ml/d free-standing: 98th percen9le

Source: DesalData

The CTDP consultants’ cost estimations (and decisions that relied upon them) should be revisited.

(Capex per design capacity)

Two Umgeni Water 150 Ml/d SWRO Projects, free-standing

• 2. THE CAPE TOWN DESALINATION PROJECT: COSTS BENCHMARKED

Source: DesalData

• The typical range of

desal water exit price: $0.60–$1.20/m3

• Determinants: Capex,

Opex, cost of capital, loan repayment tenor.

150 Ml/d 450 Ml/d

CTDP: Co- located ($1.43/m3) CTDP: Co- located ($1.35/m3) CTDP: Free- standing ($1.56/m3) CTDP: Free- standing ($2.07/m3)

• CTDP exit price

estimated using the consultants’ capex and

• pex, 94% plant

availability, 8% interest and a 20-year loan tenor.

• 3. TYPICAL ENERGY IMPACT: CITY OF CAPE TOWN CASE STUDY

Scenario: Cape Town builds a 450 Ml/day seawater RO plant, to achieve a 45% reliance on climate independent water (Approximately on par with the Perth, WA). Input parameters: Quantum: Source: Specific energy consumption: 4.5 kWh/m3 (conservative) (Global Water Intelligence, 2016) Average water demand: 1000 Ml/day (City of Cape Town, 2016) Population served: 3,500,000 (City of Cape Town, 2016) Electrical consumption: 10,670 GWh (or 106kWh) (City of Cape Town Electricity Services, 2013) Calculating the energy required to desalinate 45% of City of Cape Town demand: 45% x 1000x103 m3 x 4.5 kWh/m3 x 365 days = 739 x 106 kWh per annum Hence, the energy impact is 739 ÷ 10,670 = 7%

Conclusions:

• The City of Cape Town could source 45% of its water requirement from the

sea, through an additional energy consumption of about 7%.

• A 450 Ml/d SWRO plant would provide each person with 128 litres of fresh water per day, consuming about 0.6

kWh extra, per person. This is equivalent to each person running a typical household fridge for two hours per day (Per capital electricity consumption in CoCT is about 8.35 kWh/day).

• 4. PROCUREMENT AND CONTRACTING OPTIONS

Model Ownership: Design: Construction: O&M: Comment EPC / DB / DBB Client Engineering consultant Developer Client A conventional model. Not ideal for the technically complex environment of desalination. Low-cost initially, but client risk is significant on technical and demand

• elements. Could impede finance on bigger projects.

EPC: “Engineering, procurement and construction”, DB: ‘Design-build”, DBB: “Design-bid-build” (All similar) DBOM: “Design-build-operate-maintain”. BOT: “Build-operate-transfer”, DBOOT: “Design-build-own-operate-transfer”, BOOT: “Build-own-

• perate-transfer” (All similar)

BOO: “Build-own-operate” IWPP: “Independent water and power project” MENA: “Middle East, North Africa”

BOT / DBOOT / BOOT Developer consortium Developer consortium D e v e l o p e r consortium Developer consortium All risk with developer. Ownership transfers to client after 20 years, typically. BOO Developer consortium Developer consortium D e v e l o p e r consortium Developer consortium All risk with developer. No transfer of the asset. IWPP Developer consortium Developer consortium D e v e l o p e r consortium Developer consortium A BOT for a water and power co-generation facility. Mostly found in the MENA region. DBOM Client Developer consortium D e v e l o p e r consortium Developer consortium Technical risks placed with developer, demand risks with client, for period of 20 years, typically. Increasingly popular with large-scale SWRO projects.

• 4. PROCUREMENT AND CONTRACTING OPTIONS

The trend, even amongst very advanced water agencies and utilities (PUB, Water Corporation, SA Water, etc.) is to leave operation and maintenance (O&M) to the developer consortium, and focus instead on bulk distribution and water services. Who should own Operations and Maintenance? Question: As cities become increasingly reliant on desalination (and reuse) for a substantial share of their water resource, are the agencies, and by implication the State, not outsourcing an element of their core business? Key considerations:

• Complex, proprietary processes and technologies in desal (Airline example)
• O&M generally more lucrative than design and build. Will this inflate Capex?
• The viability of a knowledge-transfer element in a shorter-term DBOM?
• Who owns the intellectual property?

• 5. THE MATTER OF DEMAND-SIDE RISK

Question: What should be done with the desal plant after the drought has been broken?

Feb 2007, Perth I (Kwinana), 143 Ml/ d, USD347m Jan 2009, Gold Coast (Tugun), 133 Ml/d, ~USD838m

Responding to the Millennium Drought

• f 1997-2009, Australia built six XL

SWRO plants:

1997 1998 2000 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2015 2014 2016

Perth I Gold Coast Sep 2011, Perth II (Southern), 140 Ml/d, ~USD592m Apr 2010, Sydney (Kurnell), 250 Ml/d, ~USD865m Dec 2012, Melbourne (Wonthaggi), 444Ml/d, ~USD1.8bn Mar 2012, Adelaide (Port Stanvac), 274 Ml/d, ~USD900m Sydney Perth II Adelaide Melbourne

Source: DesalData

• 5. THE MATTER OF DEMAND-SIDE RISK

Answer: Operate at full capacity, while continuously improving operational

• efficiency. Apply a system tariff approach.

Rationale:

• 2017 study by Blersch & Du Plessis (SAICE): “The maximum increase in yield was

found to occur when the seawater desalination plant is used as a base supply, operational all the time. There was little benefit, in terms of system yield, in using the desalination plant as an emergency supply source only. Unit reference values for the desalination plant decrease as the percentage supply from the plant increases, meaning that the lowest possible cost per cubic metre of water supplied is when the desalination plant is used as a base supply. … from an economic perspective, the optimal solution would be to have one large desalination plant

• perational immediately”.
• A productive plant attracts and develops local suppliers and a pool of skilled

resources, diminishing the need for imports.

• Assured water is more expensive, but has greater value in the economic realm.

Recover additional cost from those users who are willing and able to pay.

• 6. OVERVIEW OF THE EXISTING DESALINATION INVENTORY

RO Plant Name Size (Ml/d)

Operational ?

Intervention required Est. Cost Sedgefield (emergency) SW 1.5 No Replace desalination beach well with fishbone system R10m Knysna (emergency) BW 1.5 Retro-fitting RO intake filters responding to feed-water variation,

• r move intake points to sea

R8m

• r

R20m Mossel Bay (emergency) SW 15 No Bulk storage sufficient Plettenberg Bay / Bitou (emergency) SW 2 Yes Position of wells in estuary proves a challenge in feedwater quality R20m Lamberts Bay 1.7 No Brine outfall not built (funding ran

• ut)

R20m

• 5. CONCLUDING REMARKS, QUESTION
• The 2014 cost estimates for the CTDP should be scrutinised for

reasonableness

QUESTIONS?

Presenter: Dawid Bosman / Senior Manager: Strategic Advisory, TCTA dbosman@tcta.co.za / +27-83-447-1232

• The matter of outsourcing O&M on desalination should be given careful

thought: What is the core of our business?

• The value proposition of desalination is not linked to drought response, but

to assurance of supply, and the recognition that some users will want to pay for that attribute.

• When the plant is built, keep it running.