Desalination an answer to China's water needs
Power generation for the mainland's growth will need lots of it and one way is to get it from the sea but this is not a cheap option
Desalination is viewed by some as a panacea for China's water shortage. It, however, consumes a lot of electricity, placing a strain on the country's power sector that ironically is being held back by its water shortage.
"Water shortage is definitely a serious issue in China," said Tim Luckock, a partner at British law firm Norton Rose, who is involved in the legal aspects of planned desalination plants in the mainland.
China's annual renewable water resource per capita was slightly over 2,000 cubic metres between 2003 and 2010, above the water stress level of 1,700 cubic metres when periodic or limited water shortages can be expected, said an HSBC report.
Three municipalities, Beijing, Shanghai and Tianjin, and three provinces, Jiangsu, Hebei and Ningxia, are running deficits, withdrawing more water than can be replenished, said HSBC.
The cheapest way to ease China's water shortage is conventional waste water treatment, which cleans existing water, and there are many treatment plants in the mainland, Luckock said.
The other way is desalination, obtaining water from the ocean and removing the salt.
"Desalination is a very small part of the water market in China at the moment, but it has very big potential," he said.
"There are opportunities for foreign investors to invest in desalination plants in China. The attractive element for investors is the scale of the desalination plants," Luckock said.
For example, Sydney has a US$2 billion desalination plant that can supply up to 20 per cent of the Australian city's water, Luckock said. "There is potential for similar investor size in China."
There are small desalination projects in the mainland, including Caofeidian in Hebei province and the Tianjin Dagang desalination plant, said Luckock, who is involved in the legalities of those plants.
In November, the Caofeidian plant started operation with a capacity of 50,000 cubic metres per day, according to the website of Aqualyng, the Norwegian desalination engineering firm that built the plant.
The total investment in the plant is 430 million yuan, with Beijing Enterprises Water Group, a Hong Kong-listed firm, owning a controlling stake in this project.
Hyflux, a Singapore company, operates five desalination plants in China in joint ventures with Chinese companies, including the 910 million yuan Tianjin Dagang desalination plant, China's largest seawater desalination plant with a daily capacity of 100,000 cubic metres, according to Hyflux's website. Its desalination plants in China also include two in Guangdong province.
"There has been a mixed view by the Chinese authorities on desalination to date. Desalination is six to seven times more expensive than conventional water treatment and 70 per cent of the cost of desalination is power," said Luckock.
Today, 97 per cent of the mainland's electricity requires water to generate it, said the HSBC report.
"Without a vast improvement in water efficiency, some power plants potentially run the risk of becoming stranded assets."
According to the National Energy Administration, China plans to raise its power generation capacity from 967 gigawatts in 2010 to 2,470 GW by 2030.
China will add 1.2 billion GW of water-reliant power by 2030, equivalent to adding nearly six times India's present installed capacity and more than the combined total installed capacity of the US, Britain and Australia, said HSBC. "This expansion will further stress water resources unless efficiency is greatly improved."
The World Resources Institute agreed that desalination consumes more energy and bears a much higher price tag.
But the US environmental think tank said the unit water cost of desalination is cheaper than China's South-North water diversion project, a multibillion-yuan proposal to divert water from the Yangtze River to northern China.
Some mainland coastal cities, including Tianjin, Qingdao and Dalian, have included desalination into their middle- to long-term plans, the institute added.