Water desalination in the UAE: does the economics make sense?

Desert landscape in the emirate of Sharjah emirate in the UAE. The country receives very little annual rainfall and gets most of its fresh water from mega desalination plants.(Photo by Shutterstock)

I read this article on desalination in the UAE with a great deal of interest. That's because it was a huge problem when I lived and worked there. The economics of water did not make sense then; it still doesn't. It seemed that locals enjoyed the benefits of highly subsidised water, while foreigners had to pay much higher prices. My bill from the Dubai Electricity and Water Authority (known as DEWA) bill would always fluctuate depending on how much the Dubai government required that month. People who used district cooling for their power and water were worse off; this is because the demand for rental property was falling at that time.

The first article explains the latest about district cooling in the UAE. I wrote the second article in 2007 about the economics of water desalination. It seems little has changed.

by Adam Lucente for Al Monitor

June 8, 2022

Dubai's Electricity and Water Authority announced today that it plans to construct three new reservoirs to increase the emirate's water security. The reservoirs will cost around $150 million and store desalinated water, the official Emirates News Agency reported.

What is it: Water desalination is the process by which salt is removed from ocean water to create fresh water that can be treated further and be safely used for drinking. About half of the water that enters a desalination plant becomes drinking water.

Why it matters: Water scarcity is an issue throughout the Middle East, including in the United Arab Emirates. In March, the United Nations warned that the issue will worsen in the future. Part of the problem in the Middle East is the over-exploitation of groundwater for farming. The UAE is among the most water-stressed countries in the world.

Water desalination has exploded in the Gulf in recent years, and the region has the highest number of desalination plants in the world. The UAE gets 90% of its drinking water from desalination.

Desalination has the potential to help mitigate the effects of rising sea levels and produce more drinking water, but the process also poses environmental issues of its own. When fresh water is separated from salt water, the remaining waste water, with its high levels of salt, is dumped back into the ocean.

Know more: The Dubai Electric and Water Authority has set a target of storing 6,000 million imperial gallons of water by 2025.
by Lucia Dore for Khaleej Times

Economics of water distribution needs re-evaluation worldwide

DUBAI — The Middle East is second only to Africa as the poorest region in the world in terms of freshwater availability per capita, demonstrated by the fact that it has 60 per cent of the world's desalination capacity.

By Lucia Dore (Assistant Editor, Business)

Published: Tue 5 Jun 2007, 9:00 AM

Last updated: Sat 4 Apr 2015, 10:25 PM

For this reason, the issue of ensuring that the region's 350 million people have stable and scalable access to water, essential to social and economic growth, is critical.

Arguably the world's most important resource, water is priced at a deep discount to fair value. This means that the supply of and demand for the resource does not reflect its true value. Consequently, the economics of water production and distribution need to be re-evaluated, "as they are currently nonsensical across much of the globe," says a senior investment analyst at Global Investment House, Ali Al Salim, in his research paper, 'A new dawn, profiting from water'.

Because water is so cheaply priced, and often heavily subsidised, "end-user demand usually incorporates significant wastage", says Al Salim. He also says that citizens are overly sensitive to price changes, "which makes water a minefield topic for any politician to effectively tackle, especially if re-election is a priority".

The upshot is that water utilities are never able to recoup the real cost of water, "as public outrage soon triggers politicians to eradicate any excess return on investment (profits) that a utility might generate". What is ignored, however, argues Al Salim, is that these profits are necessary if utilities are to upgrade infrastructure, and invest in extending the ability to re-process water and the supplied coverage area.

A combination of demand and supply-side initiatives can bring about substantial gains in water use efficiency and reduce aggregate demand from primary sources, he says. When water is priced appropriately, this can discourage the use of water in ways that are too costly.

One way to increase the supply of water is to develop more efficient technologies for desalination, and billions of dollars of research is being spent in this regard. Wastewater management and its recycling is another area where considerable research is being undertaken and is proving substantially cheaper than outright desalination.

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