Private ownership is expected to account for 51 percent of large-scale pipeline development, unlocking greenfield opportunities for companies across the desalination value chain.
BOSTON, US — The global desalination sector is transitioning into a new phase defined by increased private sector ownership and proliferating greenfield opportunities in new markets and geographies, according to a new report from Bluefield Research. Nearly 8 million m3 per day of privately-owned desalination capacity have been installed globally since 2009, representing 35 percent of total additions during that period. Of the 25 million m3 per day of large-scale desalination projects currently planned or under construction, Bluefield estimates that 51 percent will end up under private ownership.
Indicative of this shifting landscape, a burgeoning group of over 100 private players are expanding their ownership footprints to encompass new geographies– sub-Saharan Africa, Asia, Latin America. At the forefront are a group of pure play water companies, such as Hyflux, IDE Technologies, Mekorot, Aqualyng, Seven Seas Water, Consolidated Water, and Poseidon Resources.
“Over the next five years, desalination strategies will undergo a major transformation,” said Reese Tisdale, President of Bluefield Research. ”The status quo of relying on new-build desalination from public utilities in the Middle East will not sustain all the EPC firms and component suppliers active in today’s desalination market; as a result companies are hunting for greenfield opportunities in new markets and industries to supply.”
As part of the report’s outlook, Tisdale noted that these pure-play water companies, which possess the core competencies to build and operate desalination systems, are parlaying their expertise into greater ownership positions globally. Pure-plays are creating economies of scale across the value chain, and their desalination systems, in some cases, are producing water at US$0.50–US$0.60 per m3 produced, some of the lowest costs globally. This is forcing established engineering, procurement, and construction (EPC) firms such as Abengoa, Acciona Water, Cadagua, Malakoff, Suez, and Veolia to reshape their strategies.
Geographically, the Middle East remains the desalination sector’s epicenter, representing 64 percent of total installed capacity since 1980. However, the past ten years have seen desalination technology deployment expand to more than 65 countries and across a mix of industry verticals, including agriculture, mining, power generation, and oil & gas. Further, new markets including China and India are in their infancy with desalination targets in place. China is less than 30 percent toward reaching its 3 million m3 per day target by 2020.
Global Desalination Market Trends & Ownership Strategies, 2014-2018 is the first desalination report released by Bluefield Research, a new market insight firm tracking greenfield opportunities in the burgeoning but complicated water sector. The 160-page report is aimed at guiding decision-makers with an in-depth analysis of the rapidly-changing desalination landscape, including key policy drivers, water supply and demand trends, technology shifts, and developing trends in project ownership. The report highlights greenfield opportunities and profiles the competitive strategies of 65 desalination project owners.
In addition to the role that private water is playing in today’s desal market, Tisdale noted that Bluefield Research is tracking emerging trends in industrial water risk. Demonstrated by a spate of recent activity in water-stressed industries such as mining, power, and oil & gas, Bluefield anticipates companies such as BHP Billiton, Rio Tinto, Total SA, Eskom, and AES Gener to broaden their desalination footprints. In recent months, AES Gener has gone so far as to move into water supply beyond its own needs, representing a shift in its strategy and an indicator of new opportunities in key markets.
“More than ever, industrials are under pressure to secure alternative water sources and this is a positive sign for suppliers. Industrial systems are frequently absent the typical bureaucracy and politics of municipal water and offer higher margins,” added Tisdale. “In markets like Chile, China, India, and South Africa, we’re seeing more large-scale desalination built for the exclusive use of industry. As water stressed emerging markets continue to develop their economies via power generation build-out, oil & gas exploration, and, in some cases, mining, we expect that development to create robust demand for desalination.”