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. O UR WATER CONVERSATIONS … A N INFORMAL OBSERVATION R/kl 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. Option-centred Tariff-centred Price Conservation & Efficiency- centred Perceived Value Water scarcity Water abundance
2. T HE C APE T OWN D ESALINATION P ROJECT : O PTIONS S TUDIED • Feasibility study 2012-15, for a 3x150 Ml/d SWRO plant situated in the Koeberg / Melkbos Strand area. • 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. • 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 Cost estimates 150 Ml/d 150 Ml/d 450 Ml/d 450 Ml/d (End- 2014-values) C0-located Free-standing Co-located 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
2. T HE C APE T OWN D ESALINATION P ROJECT : C OSTS B ENCHMARKED • Benchmark population: 210 SWRO projects contracted world-wide (1996-2014) • CTDP cost estimates converted to USD at R11.56 25 th - 75 th Percen9les of the popula9on Two Umgeni Water 150 Ml/d The CTDP SWRO Projects, free-standing consultants’ cost CTDP 150 Ml/d co-located: CTDP 450 Ml/d estimations (and 94th co-located: percen9le decisions that 88th percen9le CTDP 150 Ml/d relied upon them) free-standing: 98th percen9le should be revisited. (Capex per design capacity) Source: DesalData
2. T HE C APE T OWN D ESALINATION P ROJECT : C OSTS B ENCHMARKED • The typical range of desal water exit price: 450 Ml/d 150 Ml/d $0.60–$1.20/m 3 • Determinants: Capex, Opex, cost of capital, CTDP: Free- standing loan repayment tenor. CTDP: Free- ($2.07/m 3 ) standing CTDP: Co- ($1.56/m 3 ) • CTDP exit price located ($1.43/m 3 ) CTDP: Co- estimated using the located ($1.35/m 3 ) consultants’ capex and opex, 94% plant availability, 8% interest and a 20-year loan tenor. Source: DesalData
3. T YPICAL E NERGY I MPACT : C ITY OF C APE T OWN C ASE S TUDY 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/m 3 (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 10 6 kWh) (City of Cape Town Electricity Services, 2013) Calculating the energy required to desalinate 45% of City of Cape Town demand: 45% x 1000x10 3 m 3 x 4.5 kWh/m 3 x 365 days = 739 x 10 6 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. P ROCUREMENT AND C ONTRACTING O PTIONS Model Ownership: Design: Construction: O&M: Comment EPC / Client Engineering Developer Client A conventional model. Not ideal for the technically DB / DBB consultant complex environment of desalination. Low-cost initially, but client risk is significant on technical and demand elements. Could impede finance on bigger projects. DBOM Client Developer D e v e l o p e r Developer Technical risks placed with developer, demand risks with consortium consortium consortium client, for period of 20 years, typically. Increasingly popular with large-scale SWRO projects. BOT / Developer Developer D e v e l o p e r Developer All risk with developer. Ownership transfers to client after DBOOT / consortium consortium consortium consortium 20 years, typically. BOOT BOO Developer Developer D e v e l o p e r Developer All risk with developer. No transfer of the asset. consortium consortium consortium consortium IWPP Developer Developer D e v e l o p e r Developer A BOT for a water and power co-generation facility. Mostly consortium consortium consortium consortium found in the MENA region. 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- operate-transfer” (All similar) BOO: “Build-own-operate” IWPP: “Independent water and power project” MENA: “Middle East, North Africa”
4. P ROCUREMENT AND C ONTRACTING O PTIONS Who should own Operations and Maintenance? 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. 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. T HE M ATTER OF D EMAND -S IDE R ISK Question: What should be done with the desal plant after the drought has been broken? 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Perth II Perth I Responding to the Millennium Drought Adelaide Gold Coast of 1997-2009, Australia built six XL Melbourne Sydney SWRO plants: Jan 2009, Gold Feb 2007, Perth I Coast (Tugun), 133 (Kwinana), 143 Ml/ Ml/d, ~USD838m d, USD347m Apr 2010, Sydney (Kurnell), 250 Ml/d, ~USD865m Sep 2011, Perth II (Southern), 140 Ml/d, ~USD592m Dec 2012, Melbourne Mar 2012, Adelaide (Wonthaggi), (Port Stanvac), 274 444Ml/d, Ml/d, ~USD900m ~USD1.8bn Source: DesalData
5. T HE M ATTER OF D EMAND -S IDE R ISK 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 operational immediately”. • 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. • A productive plant attracts and develops local suppliers and a pool of skilled resources, diminishing the need for imports.
6. O VERVIEW OF THE EXISTING DESALINATION INVENTORY Size Est. Operational RO Plant Name Intervention required ? (Ml/d) Cost Sedgefield Replace desalination beach well with 1.5 No R10m (emergency) SW fishbone system Retro-fitting RO intake filters R8m Knysna responding to feed-water variation, or 1.5 (emergency) BW or move intake points to sea R20m Mossel Bay 15 No Bulk storage sufficient (emergency) SW Plettenberg Bay / Position of wells in estuary proves a Bitou 2 Yes R20m challenge in feedwater quality (emergency) SW Brine outfall not built (funding ran Lamberts Bay 1.7 No R20m out)
5. C ONCLUDING R EMARKS , Q UESTION • The 2014 cost estimates for the CTDP should be scrutinised for reasonableness • 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. QUESTIONS? Presenter: Dawid Bosman / Senior Manager: Strategic Advisory, TCTA dbosman@tcta.co.za / +27-83-447-1232
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