Whatever desalination costs :)

For comparison, I think I am paying $1/kL 'retail'. Note that there are still farms using water that would otherwise be available to cities now considering desalination. So effectively you would be using one of the most expensive options available then tipping the water onto the ground.

According to this site, it costs $0.8 to $2.1 /kL (wholesale) for 'brackish water'. Desalinating seawater costs 3 to 5 times that much. Then you have to add on distribution and disposal costs.

http://www.crcsalinity.com.au/newsletter/SeaNews/dpap0102.htm

Suppose the price of water suddenly went up by a factor of 5 or 10 (a lot more for farmers I think). Would we still need new plants?

Freediver

I don't see where you conclude that the figures on that site are for brackish water rather than sea water.

This page

http://www.water-technology.net/projects/perth/

gives an estimated cost of desalinated water from the Perth plant of $1.17 per kl. Typically, in Australia, a desalinator is only providing a proportion of the water in a metropolitan area, so the increase per kilolitre in the tap is not $1.17 per kl, but rather less. For example, if a desalinator were providing one third of the total water supply then the increase in price at the tap would be one third of $1.17, or 40 cents per kl.

Sylvia.

"I don't see where you conclude that the figures on that site are for brackish water rather than sea water.

Because it says it quotes the cheapest overall price. You wouldn't base that on an option that costs 3 to 5 times as much. There are plenty of brackish water desal plants around, used by industry to provide high quality water.

"Typically, in Australia, a desalinator is only providing a proportion of the water in a metropolitan area, so the increase per kilolitre in the tap is not $1.17 per kl, but rather less.

The market price should reflect the marginal cost, not the average cost. This is basic economics. Would you make something for $2 then sell it for $1? Then maybe ask the people who can make it for 50c to bail you out?

Did you know that the price of electricity is going to go up due to climate change? This will push the price up. Desalination causes a lot of greenhouse emissions.

The price of $1.17 appears to ignore delivery costs etc and to be based on interest of 10% pa with no repayment of the capital. Even if we accept that, it is still above the retail price for households and way above what farmers etc pay.

In a totally free market (no barriers to entry, etc) with a completely homogeneous commodity product, the market price will be close to the marginal cost. This is an inevitable property of such a market, but that does not mean that that price is in some sense the 'correct' price. In practice, few markets are that homogeneous, and most things are not supplied at anything like marginal cost.

If water were to be priced at its marginal cost, that being the cost of desalination, then the water companies (which are proxies for governments) would be receiving incomes far in excess of their costs. The consumers would quite rightly take exception to that.

Given that most potable water comes from catchment areas, water supply is a natural monopoly, so free market mechanisms cannot function. The correct approach to pricing in such a situation is to determine a price that allows supply (rising with price), to match demand (reducing with price) without artificial constraints on consumption, such as water usage restrictions.

Sylvia.

This post limit is very frustrating. I posted my response to you here instead:

http://ozpolitic.com/forum/YaBB.pl?num=1166414069/33#33