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Investors are diving into desalination

Marketplace Staff Jan 21, 2008

Investors are diving into desalination

Marketplace Staff Jan 21, 2008


TESS VIGELAND: Schools may be out for the holiday today, but here’s a pop quiz for you. Where does your tap water come from? If you didn’t immediately answer, you have company. Most of us take our drinking water for granted, but the smart money doesn’t. Predictions of drought and dwindling supplies are turning investors’ attention to the oceans as a reliable drinking source.

Desalination isn’t cheap, but as Sarah Gardner reports from the Marketplace Sustainability Desk, companies are diving in.

JOHN F. KENNEDY: If we could ever competitively, at a cheap rate, get fresh water from salt water, that it would be in the long-range interest of humanity, which would really dwarf any other scientific accomplishment.

SARAH GARDNER: Turns out John F. Kennedy wasn’t just intrigued with flying to the moon. He also poured federal dollars into finding an affordable way to de-salt ocean water. Turns out landing on the moon was easier.

TOM PANKRATZ: The biggest rap against desalination has been the energy requirements.

That’s Tom Pankratz, an industry consultant. He says flushing the salt out of ocean water still takes boatloads of energy. That’s why desalinated water costs at least three times more than water from traditional sources, and why it’s often seen as a technology of last resort for parched countries like Saudi Arabia or Israel — but that’s changing.

PETER MACLAGGAN: We’re standing here on the shore of the largest reservoir in the world.

When Peter MacLaggan looks at the Pacific Ocean he sees a business opportunity. MacLaggan is an exec with Poseidon Resources, a company betting on a drier future. Poseidon is spending $300 million to build a desalination plant here in Carlsbad, Calif. If all goes according to plan it’ll churn out enough drinking water for 300,000 residents every year.

MACLAGGAN: Fifty, 100 years from now I don’t think that the coastal communities of Southern California are going to be importing water anymore, and the reason way I say that is I don’t think there’s enough water to go around.

Poseidon, and others investing in ocean-as-tap water, expect this industry to more than triple its global output over the next decade. They say a growing world population is sucking up water at an alarming rate, and the oceans offer an unlimited supply. William Brennan runs equity funds that invest in the water industry.

WILLIAM BRENNAN: In the United States especially, if you take a look at the Southwest and the Midwest part of the U.S., they right now are probably about 50 years into a 500-year drought, and they know that the water situation will only become worse.

Right now hundreds of small companies you’ve never heard of are gearing up to sell more desalination technology. Big global conglomerates see future profits in seawater too, like Siemens in Germany and GE here in the U.S. GE is selling a filtration technology called ZeeWeed, says GE’s Jason Kizer.

JASON KIZER: It removes all sorts of non-dissolved constituents such as bacteria, viruses, algae — all the critters that come along with ocean water.

Construction on the Carlsbad plant is slated to start later this year. Environmental groups recently filed a lawsuit over the plant. Poseidon insists the litigation won’t “significantly disrupt” the project’s completion date. Seventeen more desalination plants have been proposed along the California coast, but investor William Brennan says the industry still needs to cut costs.

BRENNAN: The biggest challenge that we see right now for the industry is to increase energy efficiency of the process faster than the price of generating electricity from fossil fuel rises.

Poseidon has agreed to sell cities its water for the same price they pay for regular water. It’s bet? That the price of all water is going up. Poseidon is predicting it’ll increase at least 5.5 percent a year. As of today though, I think the glass of ocean water I tasted at the Carlsbad site is the priciest H2O I’ve ever had.

GARDNER: It, it doesn’t have much taste does it?

MACLAGGAN: No, I think it tastes great.

Well, one thing it doesn’t taste is salty.

In Carlsbad, Calif., I’m Sarah Gardner for Marketplace.

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