When Does Desalination Make Financial Sense?

Comparing desalination against the full cost of the alternatives, not against decades-old assumptions

Desalination can enable communities to tap into alternative water sources such as seawater or brackish groundwater, offering a lifeline in water-scarce regions. Yet many communities have historically shied away from this option because they viewed it as too expensive. While desalination may have been prohibitively expensive then, advances in membrane technology and improved energy efficiency have significantly reduced costs. It’s a much more viable way to secure a reliable supply in regions facing water scarcity.

For communities considering desalination, the more useful question is how its long-term costs compare with the other water supply options available.

The Cost Comparison Many Communities Should Be Making

Communities need to compare the cost of desalinating water with other viable alternatives and the cost of doing nothing if no other reliable water source exists.

Alternatives might include importing water from farther afield, expanding water transmission pipelines, constructing new reservoirs, developing additional groundwater supplies or drilling deeper wells, or purchasing emergency water supplies during periods of shortage. Each option has costs that may include construction, transmission, treatment, transport, permitting, land acquisition, and long-term operations.

A meaningful comparison should therefore consider not only the current unit cost of water, but also:

• The infrastructure required to access and deliver the source
• Expected operating and energy costs
• Future rate or price escalation
• Maintenance and replacement requirements
• Source reliability during drought or periods of peak demand
• The expected useful life of the supply
• The financial consequences if that source cannot meet future demand

Perhaps the greatest yet often overlooked cost is that of doing nothing. When water supply is unreliable or insufficient, it can affect economic development. Without sufficient water capacity, housing developments stall, industrial growth slows, and residents and businesses might face water restrictions. Those consequences belong in the financial analysis just as surely as construction and operating expenses do.

Financing Models Are Changing the Conversation

While the upfront capital investment for major water infrastructure projects can be significant and a barrier to access, newer financing models can change how a utility evaluates the cost and risk of adding new supply.

Seven Seas Water Group’s Water-as-a-Service® (WaaS®) does not require the customer to fund plant construction upfront. Rather than communities financing, designing, constructing, operating, and maintaining the plant themselves, Seven Seas finances, designs, builds, owns, and operates the treatment infrastructure, with the customer purchasing water under a long-term agreement.

For finance directors, one key distinction is cost predictability. A project should not be evaluated only on whether one option is cheaper on day one, but on how accurately the utility can forecast what that option will cost five, 10, or 20 years later.

Seven Seas agreements can include pricing adjustments tied to the Consumer Price Index rather than exposing the customer to the full variability of construction, maintenance, and operating costs. That creates a very different risk profile from owning and operating a facility directly.

What the Financial Case for Desalination Looks Like in Practice

Seven Seas’ own projects illustrate why the economics have to be evaluated within the context of the alternatives available to each community.

The City of Alice’s brackish groundwater desalination plant provides a more reliable local water supply at a lower expected cost than its previous surface water supply.

The city of Alice, Texas, traditionally relied on fresh water piped in from Lake Corpus Christi to Lake Findley, located closer to the city. From there, the city treated the water and supplied it to customers. However, growing concerns over rising raw water costs and the long-term viability of surface water supplies encouraged city water managers to explore alternatives.

The financial comparison helped make the case. According to Alice City Manager Michael Esparza, the city had paid an average of approximately $3.85 per 1,000 gallons for its existing treated surface water over the previous seven to eight years. Its new brackish groundwater supply was expected to cost approximately $3.65 per 1,000 gallons, providing a more reliable local water source at a slightly lower overall cost.

The answer lay in the aquifers beneath their feet. A brackish water desalination project was developed through a Water-as-a-Service® agreement, giving the city a reliable, independent water supply without requiring the city to invest capital upfront.

Reverse osmosis desalination systems can provide an alternative water supply when traditional sources become costly, constrained, or unreliable.

The economics are particularly clear in Sint Maarten. Faced with prolonged shortages, population growth, and an underperforming desalination facility, the government partnered with Seven Seas to add capacity and rehabilitate existing infrastructure without an upfront government capital investment. Seven Seas redesigned the Cay Bay facility, restoring production capacity while reducing its power costs by more than 30%. Combined with additional capacity, the efficiency gains significantly lowered the island’s cost of water while providing a reliable 6.4 MGD supply.

Neither of these projects establishes a universal price for desalinated water, nor should it. They demonstrate why the economic case depends on what desalination replaces, the efficiency of the system, how the project is financed, and the value the customer places on a dependable long-term supply.

Questions Decision-Makers Should Ask

Choosing a new water supply involves far more than comparing construction costs. Decision-makers must carefully evaluate each option’s long-term performance and lifecycle costs, as well as its ability to support growth, withstand periods of scarcity, and provide predictable costs over time. Key questions include:

1. What is the long-term cost of our current water supply? How much will water cost over the next 20 to 30 years, and how certain are those projections?
2. How much additional capacity will we need? Will our existing source support population and industrial growth?
3. What alternative water sources are available? What will it cost to develop them, and can they provide a reliable long-term supply?
4. How predictable are future water costs? Will prices increase gradually under a defined pricing structure, or are they likely to fluctuate depending on operating costs and changing market conditions?
5. What are the financial and economic implications of delaying investment? Could insufficient water capacity limit development, increase emergency supply costs, or stifle economic growth?
6. Who carries the long-term performance and operating risk? If costs rise, equipment fails, or the plant requires major maintenance, which party bears those expenses?

The financial case for desalination will look different in every community. The important shift is to stop evaluating it against assumptions formed decades ago, or against the current price of a water source that may not meet tomorrow’s needs.

Every community’s water needs are different. Seven Seas Water Group helps utilities evaluate desalination alongside other supply options to determine the most reliable and financially sustainable path forward. Contact our team to learn more about our water treatment solutions and Water-as-a-Service® delivery model.