Water desalination on the public's dime? A Poseidon adventure.

Desalination is held in great promise for a thirsty world where more than a billion people don't have adequate access to clean water and where California, Georgia and the American Southwest face revolving water-supply emergencies. As we've reported before at Circle of Blue, the U.S. General Accounting Office predicts that at least 36 states will face water scarcity within the next five years.

But when our colleague Dr. Peter Gleick crunched the numbers of the ambitious Poseidon water desalination project in Carlsbad, Calif., he found they are adding up to a massive public subsidy at the expense of more cost-effective water-efficiency improvements. It's a project, he says, that could sully other efforts:

…the first effort to build a major desalination facility for urban water supply in California, by the private group Poseidon Resources, is poorly designed, badly financed, and environmentally unsatisfactory. It is going to become the new case study in how NOT to do desalination, replacing the previous case study (also of a Poseidon effort) of how not to do desalination – Tampa Bay, Florida.

What is the latest problem? The money. The desperate drive to do a desalination project in California is leading to a set of financial travesties. Despite their initial claim that Poseidon would bear all of the financial burden and risk associated with the private plan to desalinate ocean water at an old power plant in Carlsbad and sell it to public water agencies, Poseidon now says it needs massive public subsidies.

It's not about proving or disproving desalination as one solution to a global water crisis, or about bringing water to the residents of San Diego County. It's about proving its financial and long-term viability. It's also about the risk of hasty decisions for an ever water-craving planet. As Gleick puts it: "Everyone I talk to in private knows this, but no one seems willing to say it in public. Let me: The Emperor (or in this case, the god Poseidon) has no clothes."

Read the rest in his column, "Doing Desalination Wrong: Poseidon on the Public Dole."

For more on U.S. water challenges, see "Water Issues Dividing and Challenging the U.S."

 

Follow J. Carl Ganter on Twitter: www.twitter.com/circleofblue

Comments

[sandiegodesal]

Furthermore, the state’s annual allocation of federal tax-exempt PABs can be used for the financing of infrastructure (i.e. pollution control, solid waste and water supply projects). In this case, the allocation of PABs will help lower the Carlsbad project’s debt-service costs, which in turn will lower the cost of water to ratepayers. This is a direct public benefit derived from a private activity.
Moreover, California’s 2009 pool of federal tax-exempt PABs is $3.4 billion. In non recession years the demand for PABs dwarfs the state’s allotment, but not this year. Affordable housing and other markets have stalled and so there are very few alternative demands for the bonds. The state is sitting on an excess of PAB capacity and we have a unique chance to utilize these bonds to drive down the cost of a new drinking water supply for 300,000 San Diegans. This is a direct public benefit.
While I respect and encourage a wide spectrum of Californians to engage in a healthy public discourse over water supply issues like seawater desalination, I hope all interest groups will debate honorably by relying on sound science and the facts. There should be no tolerance for divisive fear mongering.

[sandiegodesal]

Dr. Gleick’s basic premise that Poseidon’s investors are being subsidized by the public is a mischaracterization. It’s not Poseidon that is the beneficiary of the Metropolitan Water District’s financial incentive program; it is the ratepayers – my ratepayers - who are the beneficiaries. Where else is MWD going to get 56,000 acre feet of new, drought-proof water supply for $250/ acre foot? In the real world, the answer is nowhere. In the theoretical, Gleick prefers that MWD redirect the money to finance waterless urinals - an appetizing idea, however it doesn’t produce a single drop of new water. MWD’s Seawater Desalination Program is a sound financial investment for MWD, its member agencies and their ratepayers, which is why MWD has previous approved similar financial incentive contracts for three other seawater desalination plants (and numerous other local water supply projects) in Southern California, all without uproar from Dr. Gleick and the usual suspects.
Dr. Gleick’s take on Poseidon’s application with the state for Private Activity Bonds (PABs) is an equally transparent attack. Gleick call PABs the project’s “second subsidy”, but those with a financial background understand that PABs are not a subsidy at all. Gleick writes, “[PABs] are supposed to pay for low-income housing, not private water developments”. This is patently false. Dr. Gleick surely knows that the developers of affordable housing are private, for-profit companies, thus the name “Private Activity Bonds”.

[sandiegodesal]

Dr. Peter Gleick’s most recent blog is riddled with err and innuendo. To Gleick’s credit he discloses upfront that his support for desalination is only theoretical, because in reality Dr. Gleick has never encountered a desalination plant he liked; at least not one that had a real-world chance of being built.
Now that the desalination Carlsbad facility has overcome the odds and is starting construction, the fringe element of the environmental community is desperate and Dr. Gleick unfortunately has chosen to join the cacophony.
As the General Manager for the Valley Center Municipal Water District, a public water agency located in North San Diego County - one of nine public water agencies that have signed 30-year contracts to purchase water from Poseidon Resources’ Carlsbad Desalination Plant - I don’t have the luxury to operate in the theoretical. I have the legal responsibility of providing my ratepayers with a safe and reliable water supply.
In this regard, I take issue with Dr Gleick’s misrepresentation of the project’s financing. His writings on the topic are either a blatant attempt to smear Poseidon and the desalination project or a reflection of his naiveté when it comes to financing large-scale capital projects.