Bennett 1

The Economic Aspect of Implementing Small-Scale Desalination

in South East Queensland1

Chris Bennett

Targeted Research Project, Stanford University in Australia 2008

Center for Marine Studies, University of Queensland

Professor Ron Johnstone

1
This study is a partner study to “The Social Aspect of Implementing Small-Scale
Desalination in South East Queensland,” Walker, W. 2008

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2. Abstract:

South East Queensland is a water-sensitive region susceptible to extreme drought;

water infrastructure is already under stress from development and conservative
predictions show that water supply will be greatly outpaced by demand in the
coming years. One solution that would supply abundant, high quality, locally usable
water is desalination, a cost-competitive technology used worldwide and in
Australia on the large scale. Yet neither academic literature nor the Queensland
government has investigated the economic appropriateness of this technology in
South East Queensland at the small-scale level; this study evaluates the potential
user market for desalination via a pilot survey of residents divided into two cohorts,
residents from North Stradbroke Island and the Brisbane area. Using general
knowledge and choice preference questions, we examine the relationship between
local water economy and willingness to use or pay for desalination services and
hypothesize that a more stressed water economy will enhance openness to
desalination. We found significant reported differences in the water economy that
correlate to the higher water stress in the Brisbane area; nearly 25% of respondents
from Brisbane compared to none from Stradbroke report to be effected by drought
75-100% of the time, and 66% of respondents from Stradbroke report they are
effected 0-25% of the time. However, in violation of the hypothesis these differences
in the user market do not translate to a difference in openness between the two
locations, as willingness to purchase desalinated services is not significantly
different in either cohort. The most significant implication of this is that increasing
water stress in the future may not immediately enhance the economic viability of
small-scale desalination. More immediately, we conclude that although drought is
currently having an unambiguous effect on the water market (amongst all
respondents nearly 75% currently use an alternative source of water), this does not
translate to a sufficient openness to allow implementation of small-scale
desalination at the moment. Although more than half of all respondents would
purchase a desalination unit, 100% of respondents are not willing to pay anything
close to the current price ranges of either conventional or renewable desalination
units. Our pilot survey results were very significantly confounded by a small cohort
and sample size (n=19 respondents), untested questions which lead to bias and
skewed results, and unrepresentative and less than random sampling. Despite these
flaws, the preliminary results and literature and industry review suggest that at the
moment, small-scale desalination is not economically implementable; a large-scale
mail-based survey should investigate choice preferences on a broader scale to get
more accurate results, and should focus on cheaper community based desalination
system costs. In addition, future research could examine policy design and potential
private-sector technological advances that would help to bridge the substantial gulf
between citizen’s economic constraints and desalination costs.

3. Background and Research Focus:

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3.1 Climate and Water Supply in Queensland now and in the future, with a focus on
North Stradbroke Island and Brisbane

3.1.1 Climate Data and ENSO Variability

As of January 2007, South East Queensland (SEQ) sat at an accumulated rainfall

deficit of nearly 1400 mm.2 This deficit is a larger part of a pattern of strong El-Nino
events (longer, more intense drought than usual) and weak La Nina events (weaker
rainfall than usual) that has transpired since 2001. Although 2008 has been the
rainiest year since 1999 at 1060 mm year-to-date, this is still only 150 mm above
average, so SEQ still sits in a significant deficit.3 In fact, as visible in Figure 1, the
current rainfall deficit has no comparison in the 20th century besides that of the
notorious 8-year long Federation Drought from April 1898- April 1903.4

2
SEQ Drought as of 2007, 1
3
http://www.weatherzone.com.au/qld/brisbane/brisbane
4
SEQ Drought as of 2007, 2

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Figure 1: SEQ
Drought
2001-2007

Significantly, there is evidence that this is not just a blip on the screen, but part of
more concerning long-term drying trend. Trends in total annual rainfall have
decreased somewhere from -20% to -40% depending on the part of SEQ, while from
1900-2006, there is no significant downward trend.5 This is largely explained by the
increase in sea temperatures in the Southern Pacific Ocean that is in turn increasing
the frequency and severity of ENSO events. At least in the short-term, it is
concerning exactly when the next severe El Nino even will strike; the 2005 and 2007
events were relatively mild, and it is not since 2002 that a significant event has
happened. Taken together, these short-term trends and risks as well as the specter
of a more significant drying trend require a substantial risk management response.
As the Queensland Government suggests, it is imperative we “properly adapt our

5
SEQ Drought as of 2007, 6

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 Bennett 5

infrastructure and land uses to this environment.”6

3.1.2 Current and Future SEQ Water Infrastructure and Water Economy in the
Brisbane Area and North Stradbroke Island

SEQ possesses a highly dynamic water grid that harnesses surface water, primarily
from dams, as well as groundwater; a visual depiction of this can be found in Figure
6 in Appendix 1. The primary bulk sources of water supply include water from the
Traveston, Six Mile Creek, Wivenhoe and other dams far to the north, and especially
relevant to this paper, groundwater from North Stradbroke is a significant source as
is visible in Figure 10.7 Although it is beyond the scope of this paper to describe this
infrastructure in any more detail, the bulk supply and transport scheme involves the
distribution of water by both State and Local governments in a complicated scheme
involving more than 25 entities with transport and treatment assets.8 This
convoluted scheme results in fragmented ownership of local supply and different
water prices at different areas. Given this lack of consistency, in this study the local
water supply of both the greater Brisbane Area as well as of North Stradbroke Island
will be described briefly as they are significantly different.

Brisbane is currently experiencing significant water stress, as the Australian Natural

Resource Administration places Brisbane within 70-100% of developed water
potential.9 Since July 31 2008, Brisbane has been under ‘High’ or Level 5 water
restrictions, which require each person to use less than 170 liters/day, and actual
use has hovered below that. In addition to Brisbane city proper this applies to
Ipswich City, Gold Coast City Council, and other surrounding local regional councils.
Brisbane has subsidies in place to encourage alternative water sources, such as the
$900-$1150 subsidy for the installation of a rainwater catchment. Brisbane’s water
economy exhibits a substantial yearly connection fee (around $150 AUD) and then a
tariff structure that varies between $0.59 and $1.12 AUD/m3 depending on annual
use amount.10 On North Stradbroke Island, however, water stress is much less
significant because of the huge groundwater stores on the island, which may yield a
maximum potential use of 100,000 ML/yr. According to ANRA, extraction in 2004-
2005 was 11,290 ML of a potential 30,000 ML, only 28%.11 Accordingly, water
restrictions are more lax; prior to restrictions use was at around 300 L/day per
person, while it is currently just under Level 2 restrictions of 270 L/day.12 Water
pricing is different in Stradbroke; the base charge is more expensive at $200, and
the pricing varies between $1.28 and $1.96 AUD/m3 based on a daily tariff structure
for level of use. This more expensive rate reflects Redland’s move to full-water
pricing after the Queensland Water Commission purchased the island’s water
6
SEQ Drought to 2007, 7
7
Urban Water Supply Arrangements in SEQ, 27
8
Urban Water Supply Arrangements in SEQ, 8
9
Brisbane Area GMU
10
Brisbane Local Government
11
Stradbroke Regional Water Resource Assessment GMU
12
Redland Shire Council

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resources.13 At average use levels, a Brisbane customer will pay around $1.12/m3,
and an average Stradbroke resident around $1.28/m3 AUD. These local values differ
from national averages; in “The Price of Water- Trends in OECD Countries,” the
OECD reports that per capita water use in Australia hovers around 250 L/day, while
the average price of water in Australia in 1999 was $ 1.63 USD. 14

It is exceedingly difficult to quantify exactly how water demand will increase and
how that will effect pricing, but the Australian government has done some
predictions based on modeling expected growth against current resources. In
Stradbroke, by 2020 water demand from the rest of the Shire alone will have
increased to 30,000 ML, and additional water demand from the Stradbroke
population will likely have increased past the 2,000 ML currently used locally.15 This
demand will put stress on the sustainable groundwater yield of 30,000 ML, although
the amount of use is far below the island’s total water resources. By 2050, however,
that total sustainable limit may be reached. In Brisbane, things are much more dire;
in 2010 there will be 156177 ML allocated and a projected actual demand of
195,708 (see Figure 7, Appendix for details). This gap increases even more
significantly in 2026 and to 80 gigaliters/annum by 2041.16 In fact, this trend is in
play across all of South East Queensland; as is visible in Figure 2, at current
allocation unchecked demand will outstrip supply by 2012, and even at full water
resource allocation over-sustainable yield will be reached by 2025.17

3.2: A Brief Survey of the Desalination Industry Figure 2: Projected and

Economy Demand and Supply for
SEQ Water
13
Redland Shire Council
14
OECD, 18
15
ANRA, Regional Water Resource Assessment
16
Dennien, 5
17
Dennien, 2

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Given the current state of water stress and the prospect of water supply greatly
outpacing supply in the coming decade, SEQ will have to find another source of
water to increase that supply. There are several options but few provide a source of
relatively permanent, high-quality, local water in the way desalination does. As the
American Water Works Association explains:

“As Demand for Drinking water outstrips fresh potable water supplies in an
area, desalting brackish and other saline water may provide an attractive
alternative or supplemental water supply. Furthermore, as regulatory and
public health issues drive finished water quality goals to increasingly higher
standards, desalting technologies, developed for seawater and brackish
sources, become options for improving water quality.”18

The remainder of this background section will examine the context of the current
desalination industry.

3.2.1 State of the Industry- Existing Technologies and Worldwide Capacity

Desalination was patented in 1870 and has been around throughout the 20th century
in extremely arid areas. As Stewart Smith explains in “Desalination, Waste Water,
and the Sydney Metropolitan Water Plan,” the current global capacity of all
desalination plants is approximately 23 million cubic meters (1 m3 =1000 L).19 This
comprises over 17,000 desalination plants in 120 countries. Significantly, this
capacity is expected to double by 2015. 20 There are three general categories of
conventional desalting technologies: thermal process which use heat to purify water
such as multi stage flash and vapor compression; the mechanical process of reverse
osmosis in which you generate pressure higher than the osmotic pressure of a
solution to purify it through a membrane; finally, electrical processes such as
electrodialysis which pushes salts through a membrane using electrical potential.21
Because reverse osmosis is currently the cheapest of these processes, it makes up
the majority of global capacity and will continue to make up an even greater
proportion in the future.22 Alternative processes include solar stills, humidification
processes, and cogeneration systems that use thermal and conventional processes
(also referred to as membrane distillation.)23 Lucio Rizzuti explains that solar stills
can provide up to 6 L/m2/day, cogeneration plants allow for large production but
require significant solar energy, and humidification units produce at 2 L/m2/day.24

In Australia, desalination has been around for decades as it has found application in
some of Australia’s remote desert and island locations. In Desalination- A Survey of
Australian Plants, authors Herbert and Moffatt outline the 26 plants already in use in
18
Water Desalting Planning Guide for Utilities, 1
19
Smith, 12
20
Smith, 12
21
Smith, 13
22
Smith, 13
23
Introduction to Desalination in Australia, 5
24
Rizutti, 12

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1970. Even at the time the plants used a wide variety of technologies based on the
specifics of the site, including Thermal Distillation (the dominant technology at the
time), Multi-Stage Flash, Vapor Compression Distillation, Solar Stills, Electrodialysis,
and Reverse Osmosis.25 As of September 2000 Australia had 90 ML/day of
production, around 1% of the world’s production.26 With the installation of large-
scale plants, such as the 500ML/day Kurnell plant in Sydney27 and the 140 ML/day
SWRO plant in Perth, this has greatly increased. The Gold Coast desalination plant to
be completed January 2009 at Tungun will start with 140 ML/day of capacity. This
is part of a larger trend; the National Water Commission predicts that by 2013, 460
gigaliters will be produced per annum in Australia.28

3.2.2 Economics of the Industry

The cost of desalination in the market is evaluated in two ways. First, desalination’s
entrance into the market is related to its affordability, both upfront and over the
long term. These costs are broken down into three metrics:

Capital cost, the original cost for the establishment of an operational plant;
operating costs relate to the day-to-day running of desalination unit and
pumping plants, e.g. electricity consumption; maintenance costs relate to
materials and labor used in the periodic maintenance required.29

Among these, capital cost will be the only affordability cost discussed in depth. The
second type of cost that will be evaluated in this paper is the price of the water
produced by larger desalinating units.

There is a strong inverse correlation between the capacity of a desalination facility

and the price of the water it produces. This has important implications for the
potential viability of especially small systems. Along the conventional spectrum
from waste-water to brackish and then sea water, costs become more expensive as
reverse osmosis processes require higher energy to purify the water. Brackish
water can be produced as cheaply as $0.1/m3 regardless of capacity, while seawater
displays a more distinct inverse relationship (see Appendix 1, Figure 8).30 The
bottom price at the moment is at around $0.5 USD/m3 at conventional RO plants in
Israel, and depending on technology and location conventional RO can track
upwards of $3/m3; generally, it hovers below $1/m3 (Figure 3). Clearly, RO is cost-
competitive on large and medium scales.

25
Herbert and Moffatt, 12
26
Introduction to Desalination in Australia, 1
27
Smith, 9
28
Trends in Desalination, 1
29
Herbert and Moffett, 17
30
Zhou et al, 7

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Figure 3: Cost Curves for PV and Conventional RO Systems

Systems using renewable energy, most often reverse osmosis systems hooked up to
Photovoltaic panels (PV/RO), demonstrate the same trends but simply track at a
higher cost. In Solar Desalination for the 21st Century, G. Papadakis observes that:

“For large renewable plants, the cost [of desalinated water] is roughly 1.3
USD/m3. For smaller plants powered by renewables, the cost varies from
1.95 to 6.5 USD/m3, while for very small stand-alone plants the cost is
usually reported to be above 6.5 USD/m3. Recently, a value of 4.5 USD/m3
was reported for a PV driven RO plant of a production of 2.2 m3/day
(Mohamed 2005).”31

These trends are partially visible in Figure 3, which compares the previously
discussed conventional desalination cost ranges to those of PV/RO systems. The
curve continues at higher capacities; especially large renewable plants in Australia,
such as the Kurnell plant in Sydney that buys renewable certificates, are currently
operating at a competitive cost of $1.44 AUD/m3 ($0.93 USD/m3).32 On the other
end of the spectrum, prices of $4.5-6.5/m3 at very small scales are not cost-
competitive, but at this level the metric is not as meaningful; in view of reliability
issues, savings in power costs, and reduction in PV module prices, small-scale
renewable systems may be well-suited in many situations.33

At these very small scales, capital costs often become the most important constraint.
Because these prices vary based on location and company, the prices and discussion
that follows is based entirely off of industry data and case studies rather than
literature. Industry data from Citor revealed that a 2 m3/day unit costs $12,000,
with a slightly higher production value of 5 m3/day costing $15,500.34 Slightly
larger units that may be appropriate for a very small community or resort varied

31
Rizzuti, 301
32
Smith, 9
33
Fiorenza, 40
34
Citor

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between 18-35 m3/day production and had respective costs of $45,000 and
$70,000 AUD. Small-scale renewable desalination units were a tad harder to get a
quote on, but Tinox advertises a 1000 L/Day humidification unit combined with a
1.2 kW PV panel for $16,000. On a more medium-scale, the case study of the Mt.
Coot-Tah botanical gardens in Brisbane is informative. The gardens used to ship in
large quantities of recycled water, but due to rising costs they installed an innovate
solar-powered reverse osmosis system which produces sustainable water for the
site and treats its own brine through the design of salt-water evapo-transpiration
beds (see Appendix 1, Figure 9 for pictures of the unit). The overall installation cost
including engineering and construction was $427,000; the networked RO system
from Aqueous Solutions was $60,000, and the Grundfos GF80 solar panels using
MPPT cost $80,000.35 This range of prices for both stand-alone and networked
systems, both conventional and renewable, gives a representative baseline for the
current cost constraints in the desalination market.

3.3: Research Aims and Hypothesis of Our Pilot Project

3.3.1 Context via the Literature and Systems Analysis

Large-scale desalination is widely discussed in the technical and industry literature

(Koschikowski et al 2003; Bouruoni et al 2000); however, the small-scale
applications of desalination are rarely discussed. The only real sources of data on its
potential application come from industry data. However, there is reason to believe
that small scale, decentralized resource production may be the most sustainable and
cost-effective way to provide for water resources. In “Evaluating the Costs of
Desalination and Water Transport,” Zhou and Tol examine the role of transportation
costs on water price:

“The main response to water scarcity has been to increase the supply… by
transporting water from places where it is abundant to places where it is scarce.
At a smaller scale, and without a lot of public and political attention, people have
started to tap into the sheer limitless resource of desalinated water.”36

In their research, the find that although transport costs can vary anywhere from a
few cents to a dollar per m3, transport can make desalinated water prohibitively
expensive if any type of change in altitude is required, as in away from or towards a
coastal environment. They cite Kally (1993) who averages out that the transport of
100 million m3 of water/year over 200 km adds $0.21/m3 to the price of the
water.37 Clearly, this is a significant addition, and with desalinated water already
only marginally cost-competitive, local desalination may provide a more
economically sustainable option, to say nothing of the security and environmental
responsiveness that comes will local control of resources.

35
EIRT, Mt. Coot-tah
36
Zhou et al 2004, 1
37
Zhoe et al 2004, 11

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Within the context of decentralized desalination, there is a conspicuous lack of

literature or past social science research into the potential user market for
desalination, that is, the economic and social views and preferences that citizens
hold towards potential future technologies. A systems analysis of desalination that
breaks down the essential elements relevant to implementation can be found in
Figure 4. The initial implementation will require an estimation of several key
parameters- what scale it is at, what will power it, which local factors it must be
suitable to, and how future maintenance and adaptability may affect feasibility. But
the user market, the cluster of social and economic knowledge, perceptions, and
constraints that inform citizen’s decisions on or payment for a new service or
technology, is arguably the most important element and is rarely investigated.

Figure 4: Systems Analysis View of Desalination

In “Desalination, Wastewater, and the Sydney Metropolitan Water Plan,” Stewart

Smith describes one of the few studies in the past that sought to evaluate the user
market for a technology in the water sector was a survey done in July 2005, prior to
the decision to go ahead with a large-scale desalination plant, whether or not to use
recycled wastewater as a source of potable water instead. The survey had a sample
size of 600 people and asked people to rate their comfort with drinking wastewater
on a scale from very comfortable to very uncomfortable. The survey’s result, that
68% were uncomfortable, was published in The Sydney Morning Herald and
influenced the decision not to go ahead with the wastewater proposal.38 Especially
relevant to this paper, the survey also found that 65% of people supported the use
38
Smith, 10

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of desalinated water.

3.3.2 Social Profile of the Two Cohort Locations

In addition to the relevant differences in water economy and supply between

Brisbane and North Stradbroke, there are relevant differences in social context and
structure between the two locations; here we briefly examine median age, income,
education, population, and occupation. A social profile (Figure 5) of the two cohort
locations reveals a few salient differences. 39

Figure 5: Social Profile of Cohorts

Cohort: Brisbane N. Stradbroke

Median Age 35 43
Median Income ($/week) $516 $316
Median Education Level Year 12 Year 12
Total Population 1,764,132 2,196
Employment by Occupation Service Industries Trade Workers

3.3.3 Hypothesis

The purpose of dividing the pilot survey data into two geographic pools or cohorts is
to examine the relationship, if any, between local water economy and supply issues
and increased willingness to purchase or pay for desalination in homes or
communities. My hypothesis is that if the water economy is more threatened by
drought, the user market will be more open to desalination. In general, choice
preference questions can gauge this level of openness as well as other economic
barriers to implementation.

4. Survey Methods

4.1 Pilot survey design

We carried out a small pilot survey on North Stradbroke Island, Queensland over
the course of two days. Our survey method involved approaching random people at
public places in three locations, at Point Lookout, on the Point Lookout beaches, and
at Dunwich, and asking them if they would mind participating in a brief confidential
survey before handing them the 3-page questionnaire to fill out. The sample size
after two days was n=19. The only personal information we collected about the
respondents was their place of residence so we could place them in a cohort.

4.2 Structure and contents of survey

39
Australia 2006 Census Data

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Our survey consisted of 13 total questions. The first five questions describe the
respondent’s current water economy; the first two questions related to the water
supply, and the next three to the reliability and quality of that water supply. The
next four questions discuss desalination in general and seek to gauge the
perceptions, knowledge, and comfort of the respondent towards the technology.
After a preface about future water problems and scarcity increasing, the respondent
is then asked four choice modeling or stated preference type questions. These
questions evaluate whether the respondent would be willing to purchase a
desalination unit, how much she would be willing to pay for different types, and how
that decision may be effected by a subsidy. Although these types of questions are
tricky to design and interpret, they are useful in that they can estimate benefits and
costs that currently are not in the market and the associated preferences for future
strategies.40 Therefore, they can explore the user market in ways that otherwise
could not be ascertained. All questions in the survey had the respondent circle the
option that fits their opinion best with the exception of the question that required
respondents to estimate their billed water usage/day.

5. Survey Results

5.1 Results from questions assessing the current the water economy

In this question, we asked respondents to estimate their daily household usage (in
other words, estimate what their daily water bill usage would read). Brisbane
residents responded with a mean of 290 L/day, while North Stradbroke residents
reported a mean of 162.5 L/day. Despite very high variance (a standard deviation of
220 for the Brisbane group), the two reported means are ostensibly different as the
error bars show. However, performing a t-test yields a value of 1.174 and a P value

40
Bennett 2005, 2

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of 0.28, so the difference is not significant and we accept the null hypothesis.

We asked respondents to quantify the extent to which the ongoing drought has
effected the quality and reliability of their water supply on a scale from 0-100%,
with 100% being a constant, strong effect and 0% being no effect at all. Nearly 25%
of respondents from Brisbane compared to none from Stradbroke report to be
effected by drought 75-100% of the time, and 66% of respondents from Stradbroke
report they are effected 0-25% of the time. The distribution between the cohorts is
significantly different, as the error bars on the 25-50% and 75-100% categories
indicate. In a related question in the survey, 100% of Stradbroke residents reported
high satisfaction with service, while some Brisbane residents reported mid or low
satisfaction.

In this first question in the survey, we simply gauge whether or not respondents

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obtain an alternative source of water besides from the grid. The most significant
source of alternative water was bottled water, followed by water from a rainwater
catchment. Amongst all respondents, nearly 75% (14/19) currently use an
alternative source of water. Of those people who owned a rainwater catchment,
75% were from Brisbane.

5.2 Choice Preference questions assessing openness to a potential desalination market

After providing background information about anticipated water scarcity and

quality issues and telling the respondent to ‘assume that a desalination unit could
provide you a sustainable and cheaper water supply source in the future,’ we ask
whether the respondent would be willing to pay for such a unit. At first look it seems
that Brisbane residents may be more willing to purchase a desalinated unit, since
significantly more answered yes. However, this merely reflects the larger Brisbane
cohort size. Proportionally, 61% of Brisbane residents would purchase a unit while
half of Stradbroke residents would, which is not a significant difference.

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This graph is displayed as the total pool of respondents because the two cohorts
were almost uniform. Of the 13 respondents willing to pay, the majority (8/13)
would not pay more than the bottom price range of $1000-$5000 for a small in-
home unit, while the others would pay slightly more. Not one respondent answered
in the highest cost range bracket. The results for WTP for a solar desalination unit
were almost identical. Besides the slightly higher cost ranges to reflect the cost of
solar panels and the fact that one more person (9/13) chose to pay in the lowest
cost bracket of 4000-8000 instead of in the 8000-12000 bracket, the data showed
the exact same distribution. Also not shown is the graph for the final choice
preference question, which assessed the extent to which a subsidy would affect the
person’s likelihood to purchase. There is no significant trend between the cohorts;
83% of Stradbroke residents were somewhat effected while Brisbane residents had
the most respondents unaffected and greatly affected. As one would expect, nearly
80% of the total pool of respondents reported they would be at least somewhat
more willing to purchase a unit.

6. Discussion

6.1 Evaluating the Trends and Hypothesis

First, in the background it was clearly established that across the board, SEQ is
already experiencing water stress. The results indicate that the drought is clearly
affecting the user market; 12/19 respondents report that the drought effects a
quarter or more of the quality of their water service, and 14/19 respondents
currently use some form of alternative water. The data shows an unambiguous
trend here.

Brisbane and N. Stradbroke Island have different water economies, with Brisbane’s
more exposed to water stress. Brisbane has a slightly lower price for water but
substantially more restrictions on water use and programs to encourage water
awareness and alternative sources. The results from reported water use and
perception of drought show at least some significant differences in the user market
for water between N. Stradbroke Island and Brisbane. As noted in the results, there
is a substantially different distribution between the respondent’s perceptions of
drought in the two locations, with Brisbane residents reporting higher drought
effect, and perceived satisfaction and reliability is also higher on Stradbroke. These
trends jive with the intuitive fact that Brisbane residents would be more affected by
drought because they are forced to lower their level of water use. Brisbane residents
report more use of water than Stradbroke residents, although this is not significant
because of high variance. This result is puzzling, however, since local government
reports that Brisbane is currently using just under its restriction of 170 L/Day and
Stradbroke users are using nearly 100 L/Day more. There are three possible
explanations: first, the question methodology is flawed and so the results are
meaningless (this will be discussed later); second the means are not representative;

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or third, Brisbane users have a tendency to overestimate use while Stradbroke

residents have a tendency to underestimate because of water awareness. Some
combination of the first two explanations seems more likely than the third. In any
case, the data shows that Brisbane’s water economy is more threatened by drought.

The choice model questions, as visible in the results section, illustrate that
willingness to pay is strongly clustered in the lowest cost range across the data for
both conventional and renewable power small-scale desalination units. This is
significant is exposing a large economic cost impediment at the moment to the
implementation of small-scale desalination. The median cost range for conventional
desalination, $1000-$5000, is around $10000 below the actual cost of such a unit at
the present time as estimated with industry data (Citor). The median cost range for
a renewable desalination from $4,000-$8,000 is again around $10000 below the
actual cost of such a unit (Tinox). The significance here is that regardless of the
specific technology there is a relatively constant $10000 price gap between industry
and the cost constraints in the market, and that 100% of respondent’s willingness to
pay estimations fell below the actual cost of such a technology at the moment. The
final choice model question, whether or not a subsidy would encourage purchase,
did not show any significant relationships between the cohorts or in general. But it
did show most respondents would be somewhat more willing, which is important to
consider given the current cost gap.

In evaluating the hypothesis, the only test we have available from the data is the
choice model question on willingness to purchase since that is the only question that
displayed a variation between cohorts. As discussed in the results section, 61% of
Brisbane residents would be willing to purchase and 50% of Stradbroke residents
would be willing to purchase, which is not significant. This contravenes the
hypothesis and implies that increasing water stress does not immediately open up
the user market to desalination, at least in the economic sense. This result forces us
at least for now to expect the null hypothesis that there is no positive correlation
between increasing stress and economic openness to desalination. However, even
this should be viewed skeptically; the result also violates what would expect from
the social and economic context of the two cohorts; the social profile (Figure 5)
reveals that Brisbane residents have higher income which we would expect might
increase their willingness to purchase and the amount they would be willing to pay,
and are also more knowledgeable and comfortable with desalination as a technology
(see W. Walker, 2008).

6.2 Flaws and Error in Methodology

First, there were abundant flaws in the sample size and representativeness of our
data. After two days, our size was n=19, however this means that our means are
probably enormously skewed. Therefore, our extremely small sample size goes
hand in hand with wholly representative data, which casts doubt on the accuracy of
all of our means. The second immediate effect this had on the data was establishing
poor cohorts, both in individual as well as in relative size. The size of our Brisbane
cohort at n=13 was more than twice as high as the Stradbroke cohort at n=6. This

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 Bennett 18

made comparisons unrepresentative and especially in the case of the Stradbroke

data again increased the proliferation of error.

Second, there are a host of issues relating to poor survey methodology, both in the
way the survey was written and in the way we collected data. The way we collected
data tended to proliferate error in that we approached specific subsets of the
population who happened to be in public, either beach and at other tourist locations.
This meant the process wasn’t random. The survey was written poorly, and that led
to systematic errors in some of our respondent’s answers. For example, we included
leading information before the willingness to pay questions, the choice preference
questions had poorly designed (too low and too large) monetary ranges, the
presence of an open-ended question on water usage resulted in inaccurate data, and
some of the wording was unclear.

Third, there are potential problems relevant specifically to choice modeling that our
survey design did not adequately account for and which shed doubt on all of our
willingness to pay type questions. Small sample size proliferates error more so in
choice modeling type questions than in other types of questions. The Queensland
EPA recommends that any survey employing choice-modeling questions consist of a
sample size of 1000 or greater in order to cut down than the higher than usual error
latent to these type of questions.41 M. Hanemann discusses an additional conceptual
flaw with these types of questions; he argues there is a subtle difference between
willingness to pay and accept questions which effects the results one gets from the
question. While our question on willingness to purchase may be considered
willingness to accept since the respondent isn’t required to think of a monetary
compensation, the other CP questions require the respondent to consider the
immediate cost, which means the results are probably not comparable.42 As B.
Jorgensen explains, there is also an issue of social psychology at play, and
specifically social guilt or moral satisfaction may cause the respondent to over-
estimate how much she would be willing to pay. This in general lends to a significant
“unsystematic variability,” which may increase error.43

Fourth, there are some relevant social and economic confounds that may effect the
results. As alluded to at the end of the discussion section, there are distinct levels of
knowledge of desalination in general and comfort towards the technology between
the two cohort locations (see W. Walker 2008). This, instead of background
economic and cost constraint issues, may influence the overall willingness to
purchase a desalination unit; a significant confound and relates to whether or not
the hypothesis can even be tested by such a question accurately.

6.3 Future Directions

41
Bennett, 2
42
Hanemann, 3
43
Jorgensen et. al. 2004, 3

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 Bennett 19

The most immediate implication of this pilot study on a future research direction is
to use the research focus and the design flaws identified to create a more
comprehensive survey to accurately evaluate the desalination’s economic user
market. The survey should include carefully designed CP questions, more questions
on networked or community desalination focusing on willingness to pay for various
prices of water in $/m3, and should take place on a much larger scale via mail.
Further, given the significance of the current cost gap for small-scale desalination’s
implementation and scalability, both government subsidies and promotion of the
private sector’s development of desalination technologies should be explored to
help bridge that gap sooner, rather than later. Water is arguably South East
Queensland’s most important resource, and acting ahead of time to guarantee its
supply in the future requires that we examine the feasibility of desalination now and
into the future.

7. References

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Nov. 2008 Orignally enquired at: <http://www.citor.com.au/seawater-
kits.asp>.

"Available Rebates 2008/09" Services: Rainwater Tanks. Brisbane City Council. 11

Dec. 2008
<http://www.brisbane.qld.gov.au/BCC:BASE:1024166448:pc=PC_2670>.

Bennett, J. “Choice Modeling: A Step-by-Step Guide.” Economics Techniques Series:

Fact Sheet No. 1. The Economics Branch, Policy Division, Queensland EPA.
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Census Data. 8 Feb. 2006. Australian Bureau of Statistics. 3 Dec. 2008

<http://www.abs.gov.au/websitedbs/d3310114.nsf/home/census+data>

Dennien, B. (2005). Delivering Brisbane’s Water Services. Brisbane, Australia:

Brisbane Water. [Powerpoint]

"Desalination in Queensland: Final Report" Urban Water Use Reports. Department

of Natural Resources and Mines. 02 Dec. 2008
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nationqldpart1.pdf >.

"Emerging trends in desalination: A review " Waterlines report No 9 - October 2008.

Australian Government: National Water Commission. 12 Dec. 2008 <http://
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review-.asp>

Environmental Infrastructure Research Program (EIRP): Mt. Coot-tha Botanic

Gardens Applicant 27. Australia. Queensland Government. Local Government
and Planning. Brisbane City Council 1-8.

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 Bennett 20

Hanemann, W. Michael. "Willingness to Pay and Willingness to Accept: How Much

Can They Differ? " The American Economic Review 81.3 (1991): 635-647.

Herbert, L.S. , and D.H. Moffatt. Desalination- A Survey of Australian Plants.

Australian Water Resources Council Research Project No. 68/6. Canberra:
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Jorgensen, Bradley , Geoffrey Sytme, Leigh Smith, and Brian Bishop. "Random error
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approach to the reliability of contingent values" Journal of Economic
Psychology 25 (2004): 41-59.

Lucio, Rizzuti, Hisham M. Ettourney, and Andrea Cipollina. Solar Desalination for the
21st Century: A Review of Modern Technologies and Researches on
Desalination Coupled to Renewable Energies. Hammamet, Tunisia: Springer,
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"Queensland Water Resources Overview" Australian Government: Australian

Natural Resource Atlas. 10 Dec. 2008
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ml#cat_20-50>.

"Queensland Water Resources Overview" Groundwater Management Unit: North

Stradbroke Island. Australian Government: Australian Natural Resource
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stradbroke-island.html>.

Smith, Stewart. "Desalination, Waste Water, and the Sydney Metropolitan Water
Plan." Parliament of New South Wales Briefing Paper Vol. No. 10. (2005) 28
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<http://www.parliament.nsw.gov.au/prod/parlment/publications.nsf/key/
Desalination,WasteWater,andtheSydneyMetropolitanWaterPlan>.

Technical Data Sheet MiniSal 1000 System. Tinox Water Management. 9 Dec. 2008
<http://www.tinox-watermanagement.de/ie1024/prod1024.htm>

The Water Desalting Committee of the American Water Works Association. Water
Desalting Planning Guide for Water Utilities. John Wiley and Sons, 2004.

The Price of Water: Trends in OECD Countries. Paris, France: Organization for
Economic Cooperation and Development, 1999.SEQ Drought to 2007

"Urban Water Supply Arrangements Report " Water Reform. 10 April 2008.
Queensland Water Commission. 4 Dec. 2008
<http://www.qwc.qld.gov.au/Urban+Water+Supply+Arrangements+Report
>.

"Water Efficiency and Restrictions" Water Efficiency Information. Brisbane City

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 Bennett 21

Council. 11 Dec. 2008

<http://www.brisbane.qld.gov.au/BCC:BASE::pc=PC_2095>.

"Water Fact Sheets" Council Service: Water and Waste. Redland Shire Council. 8 Dec.
2008
<http://www.redland.qld.gov.au/Council/factSheets/Water/Pages/default.a
spx>.

"Water and Sewerage Charges" Brisbane Water. Brisbane City Council. 11 Dec. 2008
<http://www.brisbane.qld.gov.au/BCC:BASE::pc=PC_1399>.

"Worst drought ever for Brisbane dam catchments" Forecasts: SEQ Drought. 14
August 2007. Queensland Government: Natural Resources and Water. 11
Dec. 2008
<http://www.climatechange.qld.gov.au/forecasts/seq_drought.html>.

Zhou, Yuan, and R. S. J Tol. "Evaluating the Costs of Desalination and Water
Transport" Water Resources Research 41 (2005). Brisbane Council Specific-
Rainwater catchments and Price of Water

Appendix: Additional Figures

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Figure 6: Current SEQ Water Infrastructure

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Figure 7: Expected Brisbane Water Budget

Figure 8: Cost Curves for Conventional Desalination for different sources

Figure 9: Solar Panels and RO Unit at Mt. Coot-tah Botanical Gardens, Brisbane

Center for Marine Studies, Autumn 2008