The Victorian Government’s decision to invest in desalination has been, without question, highly controversial. High capital and operating costs associated with the Wonthaggi Desalination Plant, along with environmental concerns, have made the decision generally unpopular. They also raise the question: why did the Government invest in desalination when cheaper, more environmentally friendly options were available?
The Wonthaggi Desalination Plant was commissioned by the Bracks Labor Government in 2007 with the aim of securing Victoria’s water supplies against future droughts and demand pressures from Australia’s expanding population. The plant has the capacity to produce 150 gigalitres of desalinated water per year – which equates to approximately one third of Melbourne’s water supply. However, it’s now almost three years since the plant was completed, and aside from producing test volumes of water to prove that it actually works, it hasn’t yet contributed towards the water supply.
The construction of the plant has and will continue to come at a significant cost to households. Under the current 27-year contract for the plant, the Government must pay $620 million per annum over the next five years. This amount is paid from revenue collected from household water bills (and past bill increases introduced to meet the costs of the plant). The impact of the costs of the plant have been widely felt and this is without the plant having produced a meaningful drop of water.
So what can the costs of the desalination plant be attributed to?
Components of the overall cost include money spent on the design and construction of the plant as well as the financing and ongoing maintenance of the plant. In many cases these costs came in higher than budgeted for and can reasonably be justified. The capital cost of the project was initially estimated to be $2.9 billion, although due to industrial arrangements and delays in construction, the final capital cost was significantly higher (the cost has been reported as $5.72 billion). On the operational side, the Government pays an “operational service fee” to ensure the plant is available, even when it doesn’t produce any water. In the 2014 financial year this fee was $254.34 million.
The high costs of the project and household discontent with high water bills led to a recent plan to spread the costs of the plant from 27 to 60 years. This is touted to bring about a 6 per cent decrease in wholesale prices next financial year. Spreading the cost of the plant over a longer time period, however, means that more must be borrowed in the short-term and, as a consequence, the interest cost will be higher. This is particularly a concern for young people – who must already repay the lion’s share of debt incurred by a Government they did not vote for – as they will end up paying much more over their lifetimes.
Also of concern are negative environmental effects resulting from the future operation of the plant (if the plant ever does contribute meaningfully to the water supply). The amount of energy consumed by the desalination process has been argued to undermine efforts to reduce carbon emissions. There are also issues surrounding the harmfulness of active chemicals used and the potential destruction of marine environments.
Given the significant financial and environmental costs of such a large desalination plant the Government should have instead invested in less expensive and more environmentally friendly water infrastructure investment options.
Foremostly, the government could have built a smaller desalination plant. Desalination technologies, as rain-independent sources of water, provide an insurance policy against long and continuing drought. A desalination plant may therefore protect our physical and economic survival in a disaster situation. However, a plant with the capacity to produce 150 gigalitres (150 billion litres) per year provides an unneeded level of security. If the decision to build the plant could be revisited, no doubt a smaller plant would have been built.
Of course, investment in desalination was one of many water infrastructure investment options capable of securing Victoria’s water supplies against drought and increasing demands from a growing population. Other possible investment options included, and continue to include, the construction of another dam and investment in storm water harvesting systems.
The obvious choice was to build another dam. Dams are an attractive investment option due to the low kL cost of water storage and transfer from catchment areas. It was arguably the Government’s failure to invest in dams following the construction of the Thompson Dam in 1983, which contributed towards the water shortages and restrictions during the most recent drought period.
Political opposition to the construction of an additional dam on the grounds of environmental concerns was misguided. While the building of a dam undeniably causes environmental harm, it is inevitable that economic and population growth will cause some disruption to the environment and harm to nature.
Furthermore, did opponents really believe the construction of a dam would cause more environmental damage than the alternatives? If people foresaw the harms caused by the construction and future operation of the desalination plant, they might have been slower to oppose the dam on environmental grounds. The sensible approach would have been to minimise harms caused by building a dam in a less environmentally sensitive location.
The Government should have also considered investment in, and subsidisation of, storm water harvesting systems as an alternative to investment in desalination. In built-up cities like Melbourne, significant volumes of storm water could be harvested from large, widespread impervious surface areas. In addition, the low per kL costs of harvesting storm water make storm water harvesting an attractive option.
It is clear that against other water infrastructure investment options the decision to build the Wonthaggi Desalination Plant was unwise, particularly given the environmental and financial costs of the plant.
If we are to consider investing in water infrastructure to secure Victoria’s water supplies for future generations we should prioritise alternative investment options.