Seawater desalination – the process of removing dissolved salts and other minerals from seawater, making it suitable for drinking or irrigation – has the potential to be a climate adaptation investment opportunity in certain African countries, according to a new report by British International Investment.

Climate change, economic growth, and rapid rates of urbanisation that outpace infrastructure development, mean that demand and supply of freshwater is set to become the challenge of the century. Africa is one focal point of the water crisis. Arid regions of North Africa tend to experience physical water scarcity from low water availability, whereas sub-Saharan countries mainly suffer from economic water scarcity, which is linked to poor governance, poor infrastructure and limited investments.

Unconventional water sources, such as desalination, are increasingly relevant to support water security in Africa. Desalination has the potential to increase the resilience of water systems by producing water independently of climatic and hydrological conditions. Although it largely uses seawater, desalination can be applied to a range of other water sources, including brackish groundwater, surface water, and domestic or industrial wastewater.

Seawater desalination is set to play an important role in helping to alleviate the water crisis. In Africa, the coastal population is around 20% but this varies widely from more than 70% in some North African countries to less than 10% in Eastern Africa.

Globally, around 20,000 desalination plants in 150 countries, currently provide 0.4% of water demand. These are predominantly located in the Middle East and the United States, but future plants are considered across the world. The growth forecast for desalination is around 10% between 2022 and 2027, driven by demand in North Africa and the Asia-Pacific region.

Most desalination plants are energy intensive and powered by fossil fuels. The industry has, however, evolved significantly over the last few decades. Continuous advances in technology have improved energy efficiency, reducing costs and greenhouse gas emissions. The partial use of renewable energy to power desalination has been a major advance in reducing emissions. Achieving around-the-clock renewably powered desalination would transform desalination to being a major part of the solution to water scarcity without contributing to worsen the challenges of climate change. Management of brine from the desalination process has also greatly improved.

The main desalination process involves the removal of salts, other minerals and contaminants from the source water. The desalination process can either be thermal, where water is evaporated to remove salts and minerals, or reverse osmosis, where water is forced across a semi-permeable membrane to separate out salts and minerals. Non-industrial applications require a remineralisation stage, in which minerals are added back into the water to make it suitable for municipal and agricultural use. Over the past 20 years, advances in membrane technology and energy recovery have made reverse osmosis the most cost-efficient and overwhelmingly preferred desalination technology, with thermal development declining to almost zero.

Successful examples in Spain have shown that desalination for agriculture is viable at scale, with high-value crops such as citrus and vegetables, and multiple harvests in a year. Morocco is also in the early stages of using desalination for high value crop irrigation. At current costs, desalinated water should be used to support the production of climate-resilient, high-value crops. Some government support may need to be in place for this to occur. Investors can prioritise supporting crops which deliver greater quantity or nutritional value per unit of water where feasible. For example, pearl millet associated with cowpea is an important legume in West Africa. In drought conditions, it can produce the same millet yield as millet alone, so a harvest of cowpea can provide greater nutritional benefit than millet, from the same quantity of water.

The commercial viability for agriculture in Africa may lie in scale, blended water sources and the use of renewable energy. As the capacity of desalination plants has increased over the last 20 years, costs have reduced by a third. The cost of renewable energy fell by 85% from 2010 to 2020 and tariffs of 0.01 $/kwh are now being realised in the Middle East in productive conditions. Battery storage and renewable energy costs are projected to decrease by around 50% to 60% by 2030; this could bring the price of renewably powered desalination down to around $0.4/m³. Obtaining power tariffs at this price would lead to significantly lower costs of desalinated water that could make wider agricultural use viable. Costs could further be reduced by blending desalinated water with other non-conventional water sources, such as treated sewage effluent to improve nutrient content and reduce the energy required to make it suitable for agricultural use.

Success factors

Desalination, while being a potential solution to address water scarcity, is a complex and long-term process that requires careful consideration of various factors such as commercial viability, location, water tariffs and institutional capability to ensure its success.

• Desalination should be considered as part of a portfolio within the context of a country’s wider mix of water resource management, rather than on a standalone basis. There are many options to address water scarcity, most of which offer more cost-efficient solutions and have fewer environmental concerns than desalination. For example, demand management in urban settings through use of domestic conservation measures can yield water volume savings of 20%. In agriculture, improved irrigation practices, such as switching from spray to drip irrigation can achieve 50% savings. From an impact perspective, it is therefore important to consider alternative options for reducing water scarcity, their cost efficiency, and their socio-economic impacts, before considering desalination.

• Large desalination plants must be commercially viable over a period of decades, so it is important supply and demand is projected over a comparable timescale.

• Locations for desalination should be in reasonable proximity to the raw water source and target market. Pumping costs can equal the cost of desalinated water, so it is important to minimise distance and elevation from the raw water source to the end market.

• The price for desalinated water needs to be high enough for the investors and developers to make a profit. Desalinated water is characteristically expensive compared to other water sources and it is therefore more difficult to make an acceptable return over a project’s lifetime, which can be 25 to 30 years. Unless a desalination plant is the sole source of water for a new community, a water tariff will already be in place. It should be ensured that the utility can afford to run the plant on the agreed tariff. For instance, in 2015, Ghana commissioned a 60,000 m³/day seawater reverse osmosis plant to supply local residents through the Ghana Water Company Limited. However, due to currency depreciation and difficulties to pay the water purchase agreement set in US dollars, the company struggled to finance imports of chemicals, reagents and equipment. It requested to quadruple water tariffs, but it was rejected by the regulator. As a result, the company defaulted on payments to the developer and operator, Abengoa, and shut down the plant for 18 months. The plant was eventually put up for sale. The conclusion suggests that the affordability of water tariffs should be established before signing a water purchase agreement.

• Investors should be comfortable that substantial institutional capability exists given the size and complexity of desalination projects. Projects often involve multiple government bodies and several hundreds of million dollars of investment. They have a greater chance of success and of achieving high impact where relevant local stakeholders can demonstrate institutional capability and a track record of successful implementation with similar projects. Favourable environments may have desalination development programmes, or sufficient capability within the utility and public sectors to support a desalination project through development phases.

African country assessment

The report highlights four African countries experiencing high levels of water stress and have long coastlines. This makes them potential markets for positive impact of desalination.

Egypt

A growing population with a higher standard of living, climate-change concerns and upstream developments on the river Nile are contributing to escalating water scarcity in Egypt. The country fell below the (500m³/capita/year) threshold for absolute water poverty in 2022. Egypt has the largest potential desalination spend of the four focus markets. It has decades of experience with desalination, but until recently, this has been for captive supply to tourist resorts. Egypt now plans for desalination as one pillar of its strategy to secure water for municipal supply and irrigation. The forecast growth of industrial zones around Alexandria, Nasr City and Port Said will provide another opportunity for desalination, as Egypt strives to become the leading industrialised nation in the region.

To meet these demands, Egypt’s ambitious desalination programme will see 6.5 million cubic metres (MCM)/day of desalination capacity built by 2050. A lack of institutional robustness and confidence in project bankability has hindered private finance for water infrastructure in Egypt. However, the government’s new public-private partnership (PPP) drive for desalination plants makes the institutional environment more attractive for private finance. Developers of the scheme’s desalination plants will need a proven track record in renewable energy generation. The desalination programme is also part of a wider raft of projects to improve the efficiency of the water sector, which will expand water reuse, line and cover canals and water channels and improve irrigation methods.

Morocco

Moroccan water utilities will require an estimated annual investment of $943 million until 2030 to meet the needs of its growing population. Desalination will play an important role, with plans to increase capacity from 132 MCM/year to 1,000 MCM/year as a part of Morocco’s 2020-2050 national water strategy. Large desalination plants have historically been sponsored by the public sector under build-own-transfer contracts. This structure is likely to continue, bolstered by the country’s 2020 PPP law which will allow regional utilities to use PPPs. Morocco’s Ministry of Agriculture is pioneering the use of desalination for agriculture in Africa. Agriculture accounts for 86% of Morocco’s freshwater withdrawals and the Ministry of Agriculture has already procured two desalination plants and issued tenders to further increase capacity. New capacity is also expected for municipal use, as $6.8 billion of the National Priority Programme for Drinking Water and Irrigation’s budget will be spent on bulk supply infrastructure, including desalination.

Namibia

Currently, the only large-scale desalination facility in Namibia is the 20MCM/year Erongo Desalination Plant, which was originally constructed in 2010 to supply Orano’s Trekkopje Uranium Mine. The plant now predominantly supplies other local mines, industry, and communities via NamWater, the state utility provider. The country has piloted several mini solar seawater and brackish water reverse osmosis plants for rural communities and agriculture, which could see further implementation. Small-scale units have also been constructed by local industry for captive supply. Namibia is the only focus market which does not identify desalination in its national water strategy. Aging and incomplete infrastructure is the national water utility’s greatest threat and the focus of investment in Namibia’s water sector. The government does, however, want to fast-track new municipal water supply and its new PPP initiative is considering a new desalination plant in the Erongo region. The development would provide bulk water for the capital, Windhoek, neighbouring coastal communities and potentially Botswana’s capital 1,400km away, Gaborone.

With its world class renewable energy supplies, Namibia is well positioned for renewably powered desalination and is also poised to become one of the world’s largest green hydrogen producers. The country aspires to develop three hydrogen valleys: in the southern Kharas region, central region and northern region of Kunene. This could provide large demand for industrial desalination, as desalination is required to provide the 10 tonnes of purified water needed for every tonne of green hydrogen. Production is expected to begin in 2026 at the country’s first large-scale, vertically-integrated green hydrogen project in the Tsau/Khaeb National Park. Some $9.4 billion, the equivalent of Namibia’s average annual gross domestic product, has been invested. The project will eventually see 300,000 tonnes per annum of green hydrogen produced, requiring 3MCM/year of pure water. Oversizing the plant to provide desalinated water for wider municipal benefit may be considered as part of this project.

South Africa

The high cost of desalination and critical state of South Africa’s water infrastructure has dominated discussions about the mass rollout of the technology. Existing desalination plants are predominantly used for tourism and industry. There is appetite for desalination for municipal use, but a 2018 study commissioned by South Africa’s Department of Trade and Industry found that desalination may not be appropriate given the fiscal climate. Desalination does, however, feature in the country’s National Water and Sanitation Master Plan, developed in response to the sector’s estimated annual capital funding gap of $2.3 billion.

Several recent developments indicate growing opportunities for private investment in the water sector. In August 2020, the government set up the Infrastructure Fund, which has a budget of $6.8 billion over the next 10 years and will blend its own financing with private capital. The new National Water Resources Infrastructure Agency (NWRIA) will combine the function of the Department for Water and Sanitation and the Trans-Caledon Tunnel Authority. The NWRIA is expected to raise private finance paid back through bulk water user charges, emulating a successful method used by the Trans-Caledon Tunnel Authority to raise commercial finance. The government has also announced plans to create a municipal PPP unit focused on build-operate-transfer projects for desalination, as current financing mechanisms are a barrier to investment.