Water Industry News

Worldwide Desalination Market

- The desalination market 2005 - 2015 will generate expenditure in the region of $95 billion, of which around $48 billion will be derived from new capacity ($30 billion of cap-ex and $18 billion of op-ex).

- Additional capacity of 31 million cubic meters per day is expected to be commissioned during the period. This represents a 101% increase in the total active installed capacity over the period.

- The largest market will continue to be the Gulf area, where the combination of rapidly growing populations, depleted ground water resources and the retirement of capacity built during the oil boom years of the 1970s and early 1980s will require a near doubling of the total capacity. Growth in the region would be stronger but for concerns about Saudi Arabia's ability to finance its required capacity within the timeframe.

- The largest growth market will be the Mediterranean Rim, where Algeria, Libya, and Israel are anticipating capacity increases in excess of 300%. With desalination back on the political agenda in Spain, the total increase in capacity in the Mediterranean region will be 179%.

- The US market will make the break-through into large scale municipal desalination (it is currently predominantly a brackish water desalinator). Already it has nearly 2 million cubic meters of seawater desalination on the drawing board, although financing issues and the permitting process will delay the growth of the market.

- China and India are also set to enter the large-scale seawater desalination market. Both have large populations in water stressed regions, and political backing for higher water tariffs. The 650,000m3/d additional capacity these two countries are expected to bring on line by 2015 could be the start of a massive move into desalination in the longer run.

- The membrane process, particularly reverse osmosis, will continue to take market share from thermal desalination, with 59% of the total new build capacity being membrane based. This reflects growth of the market outside the Gulf region (the traditional heartland of the MSF thermal process), as well as increased use of RO technology to supplement MSF in the Gulf. In addition to these key forecasts, the report examines the drivers of the market, and the different sectors of the market. Significant points from these chapters are as follows:

- The desalination market is driven by growing demand for water and rising marginal costs of supply. Falling costs of desalination have dramatically increased the size of the potential market.

- However, the most cost effective means of tackling water stress is not desalination. It is demand management. Specifically too many water scarce regions subsidize water for use in agriculture, exacerbating the pressure on supply.

- Demand management is not always politically feasible. Other alternatives to desalination are becoming comparatively more expensive. This is particularly true of water transfer, which hitherto has been the main alternative for regions with growing populations and inadequate local resources.

- Subsidizing domestic users is widespread in water scarce countries. This creates a significant disincentive to invest in infrastructure, which affects both rich countries (eg. the US) and poor countries (e.g.. Yemen). Tariffs are the most significant issue holding back the desalination industry.

- Desalination is an environmental issue because it involves energy use and brine discharges. This has to be balanced against the environmental impact of the alternatives (eg. diverting rivers) (see section 1.6).As a whole, the desalination industry is unconsolidated, with a large number of small and medium sized players serving different niches. The strongest players can expect strong market growth as well as increases in market share.