Cost-Benefit Analysis of Desalination: A Power Market Opportunity

Abstract

Water desalination can offer a potential solution for water scarcity. Additionally, desalination technologies that mainly consume electric energy, such as reverse osmosis, can expand the market for electric utilities. Despite such benefits, the main question around desalination remains to be its economic competitiveness. To evaluate the cost-effectiveness of water desalination, this paper calculates two well-known engineering economic metrics: net present value (NPV) and levelized cost of water (LCOW), as applied to large-scale water desalination loads. The paper offers insights on the economic competitiveness of water desalination, compared to its alternatives, i.e., fresh surface and groundwater. The use of NPV is viewed as a planning tool, and LCOW is viewed as an operations tool, which has some significance in project planning. The paper discusses the nexus between operations and planning and offers some contemporary insight into the deployment of desalination worldwide. Additionally, the paper offers analysis on the economic benefits of integrating water desalination load in power systems, both from the point of view of desalination plant owners and electric utilities.

Keywords:

• economic analysis, electric energy market, flexible load, levelized cost of water (LCOW), net present value (NPV), power system planning, power system operation, reverse osmosis, water desalination, water scarcity

Additional information

Funding

This work was partially supported by the Kuwait Foundation for Advancement of Sciences under Grant # PR18-15EC-01. Support from the General Secretariat of the Supreme Council of Planning and Development of Kuwait is also appreciated.

Notes on contributors

Farshad Mohammadi

Farshad Mohammadi received his B.S. degree in electrical engineering from S&B University, Zahedan, Iran, with First Class Honors in 2010, and the M.S. degree in electrical engineering from Amirkabir University of Technology, Tehran, Iran, in 2013. He is currently a Ph.D. candidate in the department of electrical and computer engineering at the University of Utah, Salt Lake City, UT. His main research interests include electrical and energy systems engineering, renewable energy resources, energy storage systems, smart grid, optimization, and electricity market. His research interests are power generation scheduling, energy storage systems, desalination, power generation economics, power generation reliability, stochastic processes, power markets, and power transmission.

Mostafa Sahraei-Ardakani

Mostafa Sahraei-Ardakani received the Ph.D. degree in energy engineering from The Pennsylvania State University, University Park, PA (2013). He is currently an Assistant Professor at the University of Utah, Salt Lake City, UT. His research interests include energy economics and policy, electricity markets, power system optimization, power system resilience, and interdependent infrastructure systems. His fields of interest are power generation dispatch, stochastic processes, power transmission economics, flexible AC transmission systems, load flow, power markets, stochastic programming, desalination, power generation reliability, power system security, power transmission control, storms, wind power plants, cost reduction, integer programming, linear programming, load flow control, power generation economics, power grids, seawater, water resources, and weather forecasting.

Yousef Al-Abdullah

Yousef M. Al-Abdullah received the Ph.D. degree in electrical engineering from Arizona State University, Tempe, AZ (2016). He is a research scientist with the Kuwait Institute for Scientific Research. His current research includes desalination, power generation dispatch, power generation scheduling, power markets, cost reduction, seawater, water resources, energy consumption, environmental economics, integer programming, power generation economics, power grids, power system reliability, power system security, pricing, stochastic processes, power generation reliability, stochastic programming, approximation theory, flexible AC transmission systems, load flow, power system economics, power system interconnection, power transmission, and power transmission lines.

Gerald Thomas Heydt

Gerald Thomas Heydt is from Nevada. His doctorate is from Purdue University, West Lafayette, IN (1971). He is a Regents’ Professor at Arizona State University, Tempe, AZ. Dr. Heydt is a member of the National Academy of Engineering. His fields of interest are desalination, power grids, cost-benefit analysis, power markets, probability, seawater, cost reduction, damping, electricity supply industry, power distribution, power engineering education, power generation dispatch, power generation scheduling, power system security, power system state estimation, power transmission economics, static VAR compensators, water resources, Gaussian processes, IEC standards, Monte Carlo methods, autoregressive processes, compensation, correlation methods, and demand-side management.