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South Orange Coastal Ocean Desalination (SOCOD) Project, Ocean Desalination Costs and Recent
Public Opinions
November 2011Status Update
Karl Seckel, Assistant General ManagerMunicipal Water District of Orange County
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Goals of Current Work Tasks• Conduct studies and evaluations and report to the five
Participating Entities on the prospective nature of developing an ocean desalination project at Doheny Beach
• Assist the five Participating agencies in understanding and making decisions regarding the project
• Look for outside funding to take the burden off of the local agencies
• Use the Pilot Plant work to understand the issues prior to implementation of the full scale project
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Why Ocean Desalination?• A local opportunity• Improves SYSTEM and SUPPLY reliability• Cost competitive with imported water• Environmentally friendly concept• At this location, many factors support the project:
Right geology Existing Land Ability to use a subsurface intake Integration of the water into the existing system is easy Need for reliability improvement is there
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South Orange Coastal Ocean Desalination
Project
• 15 million gallons per day meets about 25% of the 2025 water demands for:
1. Laguna Beach2. San Clemente3. San Juan Capistrano4. Moulton Niguel WD5. South Coast WD
• All five agencies can physically receive the water into their systems
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South Orange Coastal Ocean Desalination
Project
Concept Project Layout
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Test Slant Well Schematic
Ocean SurfaceLand Surface
Fres
h Wat
er
325 feet
Test Slant Well
Infiltration
Drill Rig
Ocean BottomMain Aquifer 40 to 130 feet ±
Salt
Wat
er
23o 350 feet ±
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Slant Well TDS* and Total Iron
Land Surface
Fresh Water
Infiltration
Salt Water
“young” marine groundwater
“young-midage” brackish groundwater
Low 14-Carbon, Tritium Absent, High Ra isotopes
Intermediate 14-Carbon, Low Tritium
& Ra isotopes
Slant Well
High 14-Carbon & Tritium, Intermediate Ra isotopes
Monitoring Well
“old” marinegroundwater
Groundwater Fingerprinting and Age Dating
Radium Isotopes224Ra = 3.66 days223Ra = 11.4 days228Ra = 5.75 yrs226Ra = 1600 yrs
999
View of Slant Well and Test Facility Site Doheny State Beach
Mobile Test Facility
Test Slant Well and Temp Outfall
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Reverse Osmosis Pilot Test System
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Corrosion and Microbial Flow Test Apparatus
What is the Cost of Ocean Desalination?
• Many factors to consider• Ocean Desalination has been done all over the
world• US Examples include Tampa Bay which is up and
operating• Also includes Carlsbad which hopes to go into
construction very soon• Grant Funding or Subsidies
– MET = $250 per AF– State Grant or Loan Interest Loans (2.6%)– Feds
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South Orange Coastal Ocean Desalination ProjectProject Cost vs Projected Imported Water Cost
2010 2015 2020 2025 2030 2035 2040 2045 20500
500
1000
1500
2000
2500
3000
3500
4000
4500
5000Avoided Imported Water Cost
(MET T1 + Capacity Charge + RTS)
Iron/Manganese (Fe/Mn) Pretreatment cost at $46M. Base cost of $190M escalated at mid-point of construction = $215M. MET, MWDOC and SDGE projected rates. Inflation after 2020 at 5% and Bond interest at 5% in 2016.
With Fe/MnPretreatment
No Fe/Mn Pretreatment20
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2017Net Project Cost Capital at $215M
$1830/AF -$250/AF$1580/AF
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20
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Impacts to Retail Water Costs
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• Estimated at $6 dollars per month per household assuming the agency receives 25% of its water from the plant
• Decisions regarding the project are not expected soley on unit cost comparisons between ocean desal water and imported water
• The value of reliability provides a large benefit• We are now testing an economic and financial model to
better understand the cost impacts and potential offsets for the project.
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Input Output
Fe/Mn Treatment? YesContingency 15%Start of Construction
Energy Esc. Rate 1.8%Land Cost per AF $45General Inflation Rate
2011 - 2015 2.5%2016 - 2019 3.0%
2020 - Future 3.0%
Grant AmountBond Repayment Select →Bond Interest Rate 5.00%PV Discount Rate 4.0%
Esc. Rate After 2020 3.0%Melded Rate- % Tier 1 100%DRAFT Long Range Finance Plan $/AFAs of January Treated T1 Treated T2
2012 $794 $9202013 $833 $969 Costs per AF 2011 First Year2014 $877 $1,020 Capital Cost (2011) $160,511,197 Capital Cost $752 $930 Up to Break Even ($32,128,185)2015 $920 $1,069 Grants $0 O&M $401 $513 Break Even to End $6,981,8122016 $970 $1,123 Contingency $24,076,680 Energy $466 $492 Total Savings ($25,146,372)2017 $1,023 $1,180 Total Cost (2011) $184,587,877 Annual Cost $1,619 $1,9352018 $1,079 $1,238 Total Cost $228,209,740 Annual Cost w/ Land $1,664 $1,9832019 $1,146 $1,301 Escalated to Midpt.2020 $1,214 $1,366 of Construction
Net Present Value
South Orange Coastal Desalination Project - Economic Analysis - DRAFT VERSION 1.2
Capital Cost
O&M Costs
Project Financing
MET Avoided Costs
Project Capital Costs
Break Even2037
Start Repayment2020
End Repayment2049
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2010 2015 2020 2025 2030 2035 2040 2045 2050
$/AF
Year
Avoided Imported Water and Net Project Cost
Avoided Imported Water Cost(MET T1 + Capacity Charge + RTS)
Net Project Cost
2018
30
Example 1 - High Cost Low MET Rates
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Input Output
Fe/Mn Treatment? NoContingency 15%Start of Construction
Energy Esc. Rate 1.8%Land Cost per AF $45General Inflation Rate
2011 - 2015 2.5%2016 - 2019 3.0%
2020 - Future 3.0%
Grant AmountBond Repayment Select →Bond Interest Rate 4.00%PV Discount Rate 4.0%
Esc. Rate After 2020 5.0%Melded Rate- % Tier 1 100%DRAFT Long Range Finance Plan $/AFAs of January Treated T1 Treated T2
2012 $794 $9202013 $833 $969 Costs per AF 2011 First Year2014 $877 $1,020 Capital Cost (2011) $119,581,850 Capital Cost $498 $616 Up to Break Even ($623,440)2015 $920 $1,069 Grants $0 O&M $401 $513 Break Even to End $134,112,8282016 $970 $1,123 Contingency $17,937,278 Energy $466 $492 Total Savings $133,489,3882017 $1,023 $1,180 Total Cost (2011) $137,519,128 Annual Cost $1,365 $1,6212018 $1,079 $1,238 Total Cost $170,017,689 Annual Cost w/ Land $1,410 $1,6692019 $1,146 $1,301 Escalated to Midpt.2020 $1,214 $1,366 of Construction
Net Present Value
South Orange Coastal Desalination Project - Economic Analysis - DRAFT VERSION 1.2
Capital Cost
O&M Costs
Project Financing
MET Avoided Costs
Project Capital Costs
Break Even2021
Start Repayment2020
End Repayment2049
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2010 2015 2020 2025 2030 2035 2040 2045 2050
$/AF
Year
Avoided Imported Water and Net Project Cost
Avoided Imported Water Cost(MET T1 + Capacity Charge + RTS)
Net Project Cost
2018
30
Example 2 - Low Cost High MET Rates
Ocean Desalination Costs Around the World ($/AF)
0
500
1000
1500
2000
2500
3000
3500
4000
Courtesy of Water Desalination Report; Presented at the Texas Innovative Water Workshop, San Antonio, Texas, October 11, 2010
Major Cost Components for an Ocean Desalination Project
• The RO Treatment Plant• Pre-treatment (if necessary)• Intake System• Brine Disposal System• System Integration for the product water (pump
stations, pipelines and reservoirs)• Power costs
Major Cost Factors for Australian Plants Compared to SOCOD Project
Major Factors Driving Unit Costs Higher• Long and costly new intakes (shafts, tunnels, risers)• Long and costly new brine disposal pressurized lines • Long and costly integration – long lines and high lifts• Renewable energy projects• Alliance Delivery, Rushed Projects
Major Factors Driving Unit Costs Lower• Economies of scale (large plants)• Less stringent product water quality (boron, bromide)
Net Effect = Much Higher Unit Costs than SOCOD
Other Key Factors Affecting Costs
• Plant Size – Bigger is Better• Source Water Quality - TDS, Temperature, Solids, Silt and
Organics Content.• Product Water Quality – TDS, Boron, Bromides, Disinfection
Compatibility.• Concentrate Disposal Method;• Power Supply & Unit Power Costs;• Project Delivery Method & Financing;• Other Factors:
Intake and Discharge System Type; Pretreatment & RO System Design; Plant Capacity Availability Target.
Key Reasons for Cost Disparity Between High-End & Low-end Cost Projects
• Desalination Site Location– Costly Plants Have Overly Long Product Water Delivery Pipelines
• 120 MGD Melbourne Plant – Cost of Plant/Delivery + Power Supply Systems = US$1.7 BB/1.1 BB (50 miles)
• 66 MGD Sydney SWRO Plant – Cost of Plant/Delivery System = US$560 MM/US$490 MM (10 miles of underground tunnel under Botany Bay).
• Environmental Considerations– Complex Intakes & Diffuser Systems
• Phasing Strategy– Intake and Discharge System Capacity;– Pretreatment & RO System Design;
• Labor Market Pressures• Method of Project Delivery & Risk Allocation
Be Careful When Comparing Costs!
• Projects Differ By:– Source Water Salinity and Temperature;– Product Water Quality;– Unit Cost of Construction, Labor and Permitting;– Cost of Capital;– Unit Cost of Power;– Source of Equipment Supply;– Project Completion Schedule.
• Projects Have to Be Normalized for These and Other Factors for Accurate Comparison.
Lewis ConsultingPublic Opinion Survey
October 2011MWDOC Service Area
500 Orange County Registered Voters
Considering only the utilities that you pay for, which would you say is the best value for the amount of
money you pay?
3%
22%
4%
2%6%
27%
9%
8%
7%
0% 11%cable satellite TV
Water
Sewer
Landline Telephone
Cellular/Wireless Telephone
Gas
Electric
Trash Collection
Internet access
Other
Don't know/not sure
During the past year, would you say your household's water usage has been increasing, staying the same or
decreasing?
15%
63%
20%
0%
Increasing
About the same
Decreasing
Don't know/Not sure
What was the primary motivation for you to cut back on water usage?
11%
20%
2%
33%
6%
4%
14%
7%
3% Saving Money
Water agency notices to conserve water
Messages from the media
Right thing to do/just to conserve/good for the environ-mentRising water rates
Cooler/wetter weather
Fewer people in Household/ Child(ren) moving out
Other
Don't know/not sure
Do you believe the cost of water is expensive, fair or reasonable, or inexpensive?
28%
60%
6%6%
Expensive
Fair/reasonable
Inexpensive
Don’t know/Not sure
0%
10%
20%
30%
40%
50%
60%
55%
40%
5%
San Diego’s Opinion about Cost of Water
Too
Exp
ensi
ve
Fair/
Reas
onab
leInexpensive
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Which of the following 7 options do you believe would be most effective in solving water shortages?
39%
53%30%
29%
8%7%
6%
3%
Ocean desalination
Be more efficient with water
Use recycled water
Increase storage
Raise water rates
Import more water
Permanent water restric-tions
Don't know/not sure
When thinking about increasing Orange County's water supply, do you think Ocean Desalination is a
good idea or a bad idea?
63%
18%
18%
Good Idea
Bad Idea
Don't know/ not sure
0% 5% 10% 15% 20% 25% 30%
Desalination
Mandatory Conservation
Voluntary Conservation
Conservation
Recycled Water
Reservoirs/Storage/Wells
Import More Water
Improve Quality
24%
13%
4%
11%
10%
11%
27%
13%
9%
8%
9%
13%
18%
13%
11%
4%
9%
9%
9%
13%
10%
17%
15%
12%
6%
10%
Most Critical Thing that Can be Done to Ensure Safe and Reliable Water Supply for San Diego County
2005
2006
2009
2011
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If the election were held today, would you vote yes or no on the $11.4 Billion, Safe, Clean and Reliable
Drinking Water Supply Act of 2012?
37%
37%
26%Yes
No
Undecided/Don’t know
Would you consider voting yes if the amount of the bond was lower?
28%
63%
9%
Yes
No
Undecided/Don’t know
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Questions?
Thank you!