California Thirsty Politics

Israel has made the desert bloom, but the task hasn’t always been an easy one. For decades, the country suffered chronic water shortages brought on by intermittent droughts amid rapid population growth—a problem only partly ameliorated by aggressive water pricing and conservation. In 2009, after five consecutive dry winters, the government water authority restricted outdoor gardening and agricultural irrigation.

By the end of this year, Israel will have completed three massive desalination plants in Ashdod, Hadera and Sorek that combined are capable of producing 100 billion gallons of potable water each year from the sea. More such projects are in the works. Next year desalination will provide about half of Israel’s water—not including the roughly 80% of recycled wastewater that goes mainly to agriculture—up from zero in 2004 and about 10% in 2009. The drought ended in 2012, and Israel doesn’t need to worry much about the next one. In a mere five years, desalination has turned a scarce resource into a commodity that may soon be exportable.

On the far side of the world, in another state often portrayed as a promised land of milk and honey, Californians are suffering perhaps the worst drought in a millennium. Desalination to the rescue? Carlos Riva, the CEO of Boston-based Poseidon Water, hopes so. But the same political and regulatory forces that have already exacerbated the state’s water shortage are standing in the way. Mr. Riva’s diplomatic way of putting it: “Water is a simple molecule, but a complex commodity.”

Most of the bureaucratic effort in California is going into cutting consumption. The U.S. Bureau of Reclamation has turned off the spigot of water trickling from the Sierra Nevadas to farmers in the Central Valley. Gov. Jerry Brown last month ordered urban water agencies to cut usage by 6% to 36% (based on per capita consumption) and threatened $10,000 fines against noncompliant residents and businesses. All this while the untapped Pacific Ocean glitters nearby.

Desalination technology that is “mainstream outside the U.S.,” Mr. Riva says, is proving exasperatingly difficult to bring to thirsty California.

“The water industry is probably one of the last industries that is still held in traditional municipal hands,” Mr. Riva notes. As a result, the “market is ultraconservative because there’s nobody in the municipalities that has any motivation to take the risk with new technology.”

Poseidon does have a $1 billion desalination plant slated to open this fall in Carlsbad, north of San Diego. Upon completion it will be the largest in North America, capable of producing 54 million gallons of water each day. Construction began in 2013, but first Poseidon spent six years battling 14 environmental lawsuits.

For instance, the Surfrider Foundation charged that the plant’s open-ocean intakes might harm marine life, though a judge ruled that Poseidon had reasonably mitigated the threat. Mr. Riva says the intakes “entrain two to three fish eggs or larvae” for every thousand gallons of water sucked in. “Not to make value judgments about fish, but these aren’t from any protected species,” Mr. Riva says. “They’re anchovies and things like that.” He adds that environmentalists believe that “all fish life is precious, and you have to do everything to save it.”

Obtaining the dozen or so permits required to build the plant was vexing as well, since regulatory authority over water in California is spread among state, federal and local agencies—the Bureau of Reclamation, the State Water Resource Control Board and the California Coastal Commission, to name a few.

“Because there are multiple agencies,” says Mr. Riva, there are “multiple opportunities for intervenors to delay.” The CEO is careful in his choice of words to avoid giving offense. However, what he appears to mean is that environmental obstructionists waged war on numerous fronts. Not totally without success, either: To obtain final approval from the Coastal Commission, Poseidon had to agree to restore 66 acres of wetlands and buy renewable energy credits—green indulgences.

Urged on by the Surfriders, the Coastal Commission is now gumming up Poseidon’s plans to build a second plant, which has been in the planning stages for 15 years, south of Los Angeles in Huntington Beach. Though Poseidon had obtained almost all required government permits by 2012, Mr. Riva says, the commission’s approval is pending the results of an independent panel convened to study alternatives to open intakes that would better protect fish eggs and larvae. Poseidon has proposed adding one-millimeter screens, which seems to be the simplest and most cost-effective strategy.

The panel concluded after its first phase, Mr. Riva says, that the only other option is what’s called a seabed infiltration gallery, built about 1,000 feet offshore. He explains: “You build these copper dams, then excavate the seabed, put in these drains and pipes, and put other filters on top of that, and then pipe the water back to shore.” While technically feasible, it’s a complicated engineering feat, so now the panel is examining the environmental impact and economic practicability.

Building an infiltration gallery, Mr. Riva says, would take five to seven years and cost multiple times the price of the rest of the facility—so he expects the review will show it isn’t doable. But could the commission be using this process to deal the Huntington Beach project death by regulatory review? “If people just don’t want it, put us out of misery,” he quips.

Environmentalists are also howling that desalination is too energy-intensive. Mr. Riva thinks these complaints are bogus: “We use less energy than one of the data centers that are being built, and nobody claims that they are somehow immoral.” Plus, as he points out, the only reason anybody is even discussing desalination in California now is because it is becoming so much more efficient, thanks to technological breakthroughs like energy-recovery systems, which conserve energy the way hybrid cars do. The Carlsbad plant will use less than half as much electricity per unit of water produced as desalination plants did in the 1980s.

Such improvements are fueled by the free market. “The operators are driven to find ways to reduce the energy because that increases the profitability of these projects,” Mr. Riva says, adding that Poseidon has a profit motive to implement more-efficient filters, pumps and control systems that will reduce the cost of water—an incentive the government doesn’t have.

Mr. Riva, who used to run a biofuels company, says he considers himself an environmentalist. “But I think the concept of environmentalism has been hijacked by extreme views,” he says. “We’re bending over backwards to protect the environment here.”

Meantime, local residents and politicians in San Diego and Orange County have voiced ostensibly more justifiable concerns about desalination’s high costs. Poseidon is a closely held private company but specializes in public-private partnerships. As Mr. Riva explains, “our model is to say: We will take on the risk of development, financing, building and operation, and in exchange you take the market risk of buying our water.” This isn’t too different from how public utilities contract for electric generation.

Under the terms of the purchase agreement, the desalinated water will cost San Diegans between $2,014 and $2,257 per acre foot (roughly 0.6 to 0.7 cents per gallon), or about twice as much as importing water from, say, the Sierra Nevadas. “We have a 30-year contract,” Mr. Riva rejoins. “Depending on escalation rates of the imported water and CPI [consumer-price index], then the expectation is that sometime in the middle of the first decade, our water will be less expensive. There will be a crossover point.”

Even so, desalinated water from Carlsbad will cost more than twice as much per unit as it does in Israel. There are multiple reasons for this. Electricity is more expensive in California than in Israel and most of the rest of the U.S. because of a state mandate requiring that pricey renewables make up a third of electric generation by 2020. Labor is more expensive in California, too. Cumbersome regulatory requirements jack up construction costs. Israel’s Sorek plant will produce about three times as much water as the Carlsbad facility yet cost half as much to build. Both plants were designed by the same company: Israel Desalination Enterprises (IDE) Technologies.

Poseidon’s Carlsbad desalination plant will augment the San Diego region’s water supply by about 7% while increasing customers’ bills by $5 to $7 a month. Although residents will have to pay for the additional supply even when they don’t need it, Mr. Riva asserts that the “reliability justifies a premium.” That is, many San Diegans may consider it worth paying a bit more per month to keep their verdant yards during droughts—or have a backup water supply if an earthquake destroys canals or aqueducts that import water from the north.

‘We’re talking about one of the only things that is really necessary for life. Your kids may think their phone is, but it’s not,” he says. “This is an absolute necessity in San Diego, which is a desert for life.”

The same is true of California as a whole. More than a dozen desalination projects have been proposed along the coast, but prospective developers are waiting for Poseidon to run the regulatory gantlet before moving ahead. Meanwhile, Mr. Riva says Poseidon is considering developing projects in Texas where water is also scarce—and, one presumes, where the governmental burden is lighter and environmentalists are fewer. If Poseidon can make desalination work in California, it can work anywhere.

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