A Stake in Two Boom Industries

Between now and 2030, roughly $25 billion must be invested to ensure Australia has adequate electricity. A similar amount must be spent upgrading the nation's water infrastructure. Globally, the International Energy Agency estimates US$20 trillion (yes, trillion) must be spent between now and 2030 just on electricity infrastructure to ensure the world has enough power. Clearly, supplying sufficient energy and water for the world's population is shaping up as a major challenge for the 21st Century. In some places, these two needs can be satisifed through one combined solution: solar-powered desalination.

The costs of both desalination and concentrating solar power are falling rapidly. A US National Renewable Energy Laboratory study concluded concentrating solar power is on such a rapid downward price curve it should cost no more than about 7c Australian per kilowatt hour by 2015 -- the same as nuclear power. As increasing numbers of concentrating solar power plants are built, powerful cost-reducing advances are expected from research and development, manufacturing economies of scale and increased power plant sizes.

Concentrating solar power is on a rapid downward price curve (costs in US dollars)	Larger plants, research and development and manufacturing economies will help drive down costs
Source: "Assessment of Parabolic Trough and Power Tower Technology and Performance Forecasts," Sargent & Lundy, 2003	Source: US Renewable Energy Laboratory

At the same time, the costs of desalination are falling. The left-hand chart below shows how costs of multi-stage flash desalination have been falling since 1950, and similar cost reductions have occurred in other desalination technologies. Meanwhile, the cost of extracting marginal natural water supplies (rivers, acquifers and the like) has been going up due to increased extraction rates (see right hand chart, below).

Multi-stage flash has been falling rapidly in price since 1955	Rising global water consumption is driving up marginal cost
Source: "Desalination Markets: 2005-215," Global Water Intelligence	Source: "Desalination Markets: 2005-215," Global Water Intelligence

Extrapolating these trends of falling desalination costs and rising global average marginal extraction costs presents a provocative answer: desalination and marginal natural water extraction costs could converge as soon as 2020. That's not too far off from conclusions reached by the Western Australian government. In a 2004 study, researchers for the state concluded seawater desalination could be as cheap as natural water sources in WA by 2030.

Falling desalination prices, rising natural extraction costs and agricultural water prices could converge as soon as 2020	Seawater desalination could be cheaper than conventional sources by 2030
Source: Global Water Intelligence, Acquasol estimates	Source: "South West Water Resources," Western Australian government

In the Stern Review, UK government economist Nicholas Stern estimates that markets for low-carbon products (such as solar desalination) could be worth US$500 billion or more by 2050.

Australia enjoys an enormous opportunity to leverage the country's natural factor endowments of coastline and sunshine into a world-beating industry for the 21st Century -- if it decides to take the step.