Should taxpayers subsidize desalination?

Pub date November 24, 2009
WriterRebecca Bowe
SectionGreen CitySectionNews & Opinion

GREEN CITY Should the state of California hand over a multimillion dollar tax break to a company that is poised to build the largest desalination facility on the continent, just north of San Diego? That question will be decided early next year when Poseidon Resources, a water-infrastructure developer, formally submits its request for more than $500 million in tax-exempt bonds to the California Debt Limit Allocation Committee (CDLAC).

The decision will demonstrate whether California is willing to roll out the red carpet for desalination, an energy-intensive technology that has many questioning whether it’s a wise path to take. Proposals for desalination projects are cropping up across the state, including one for a smaller facility in Marin County, and water bonds recently approved by the Legislature as part of the state’s historic water package include $1 billion earmarked for water recycling and desalination.

With the state well into a three-year drought that has left some agricultural operations high and dry, calls for new reliable water sources such as desalination plants are only growing louder. But critics worry that the private operations will suck in tax dollars the way their intake pipes suck in saltwater, and they’re urging decision-makers to focus on more cost-effective strategies like low-flow showerheads, waterless urinals, drought-proof landscaping, or other comparatively thrifty ways to address water shortages. Poseidon’s Carlsbad desalination plant is projected to be the largest project of its kind in California, but it’s also just the beginning of an emerging trend.

A coalition of organizations, including the Sierra Club, Service Employees International Union, and Food & Water Watch, has been sounding the alarm that San Diego’s Carlsbad Desalination Project is a bad deal that shouldn’t be encouraged with public subsidies in the form of tax-exempt bonds. "Our group, along with most of our partners and allies, are not anti-desalination," says Renee Maas, who works for Food & Water Watch in Los Angeles. "But we think it should be a last resort," after opportunities for conservation have been exhausted.

"Aside from doing nothing about conservation and continuing to require huge amounts of energy for transmission, these plants also have no real community benefit, minimal job creation, and, most importantly, a questionable success and effectiveness," members of Service Employees International Union Local 721 wrote in a letter to the Metropolitan Water District, Southern California’s water wholesaler. "We believe we can conserve more water by installing waterless urinals across L.A. County than we would obtain from the proposed desalination plant."

Yet the facility boasts a long list of powerful endorsements, including that of Gov. Arnold Schwarzenegger, a member of CDLAC. The governor was listed as a supporter on a preliminary application submitted to the three-member committee. The two other committee members are State Treasurer Bill Lockyer and State Controller John Chiang.

The facility already has its ducks in a row, with permits approved and a contract with MWD to provide as much as 10 percent of San Diego’s water supply (MWD also agreed to $350 million in subsidies for the plant over 25 years). Poseidon expects the plant to be up and running by 2012. According to company spokesperson Scott Maloni, the project will proceed even if the state rejects its request for tax-exemption.

The plant will use ocean water as a raw ingredient to produce fresh drinking water by pushing the saltwater through reverse-osmosis membranes. With a capacity for producing an estimated 50 million gallons of drinking water a day, the hulking facility will share a site with a 52-year-old beachfront power plant equipped with an antiquated system that draws in ocean water to cool its machinery. Heated seawater issuing out the tail end of the power plant will be pumped into the desalination system and converted to tap water.

Although the plant will provide a localized freshwater source in a dry region without impacting ecologically sensitive rivers or wetlands, it comes with a steep price tag and requires a tremendous amount of electricity. Proponents estimate that the energy consumption in a single day would be the equivalent to the energy used by 16,790 homes. But Maas says even this estimate is low, because if the power plant’s water-cooling system is phased out by 2017, as state law mandates, then the desalination facility would have to start with cold water instead, requiring a substantial power boost. Poseidon spokesperson Scott Malone disputed this claim, telling the Guardian, "The plant will require 28-30 MW to operate during warm water or cold water operations."

Cost and energy consumption aren’t the only concerns advocacy groups have raised. Mark Schlosberg, a program director at Food & Water Watch in San Francisco, considers Poseidon’s last foray into desalination, in Tampa Bay, Fla., to be a cautionary tale. According to an article in the St. Petersburg Times, the plant opened five years late, cost $40 million more than expected, and hasn’t ever hit its target of supplying an average of 25 million gallons a day as originally promised. After Poseidon’s business partner for that affair went bankrupt, a public utility had to take control of the facility.

"They have a bad track record on desalination," Schlosberg said. "It never performed close to its advertised capacity."

Asked about the challenges in Tampa Bay, Maloni said, "Before Poseidon was bought out, the project was 30 percent constructed, on time and on budget. After Tampa Bay Water took over, the plant wasn’t constructed as designed and later failed to pass performance testing."

Critics have also decried the high cost projections for water. San Diego County now uses water imported from northern territories via the State Water Project, at a cost of around $750 per acre-foot (an acre-foot is 325,851 gallons), according to San Diego County Water Authority figures. Poseidon estimates that the water from its plant will cost about $1,300 per acre-foot, but has promised not to charge customers more than the price of imported water. Two years ago, Poseidon told the California Coastal Commission that it intends to absorb its losses "for an unknown number of years" until the price of imported water rises enough to equal the cost of desalinated water.

"Poseidon has entered into 30-year contracts with nine different San Diego County public water agencies that guarantee the cost of the desalinated water will never cost more than the agencies would otherwise pay for imported water," Maloni told the Guardian. "This pricing structure is possible because imported water rates are projected to increase significantly in the years to come, while the cost of desalinating water will stay relatively flat."

Shlosberg’s organization requested public records from the Tampa Bay facility so they could calculate a price estimate that they say is more realistic. Food & Water Watch hired James Fryer, an environmental scientist, to crunch the numbers. Fryer concluded that if the Carlsbad project experienced the same pitfalls as Tampa Bay, the water would cost $3,507 per acre-foot — a sky-high projection. If it ran without those bugs, it would still cost $2,175 per acre-foot, he determined.

The overarching question, in Maas’ view, is whether the state is willing to take conservation seriously enough to put water-saving measures into practice before subsidizing costly, energy-guzzling technology. "By sitting a desalination plant, it really distracts people from solutions that are more environmentally sustainable," she said. "The average water use per person per day is 200 gallons, and 60 percent of it goes to landscaping. With this desalination plant, people think, ‘we don’t have to change our habits.’"