The deal to crank up Adelaide’s desalination plant to make more water available to farmers in the drought-stricken Murray-Darling Basin makes no sense.
It involves the federal government paying the South Australian government up to A$100 million to produce more water for Adelaide using the little-used desalination plant.
The plant was commissioned in 2007 at the height of the millennium drought. It can produce up to 100 gigalitres of water a year – enough to fill 40,000 olympic sized swimming pools. But has been used sparingly, operating at its minimum mode of 8 gigalitres a year, because of the expense of turning seawater into freshwater.Vmenkov/Wikimedia, CC BY-SA
Adelaide has continued to mostly draw water from local reservoirs and the River Murray, which on average has supplied about half the city’s water (sometimes much more).
But with federal funding, the desal plant will be turned on full bore. This will free up 100 gigalitres of water from the Murray River allocated to Adelaide for use by farmers upstream in the Murray Darling’s southern basin.ABARES, CC BY-NC
The federal government expects the water to be used to grow an extra 120,000 tonnes of fodder for livestock. The water will be sold to farmers at a discount rate of A$100 a megalitre. That’s 10 cents per 1,000 litres.
The production cost of desalinated water is about 95 cents per 1,000 litres when there’s rainwater already stored, according to a cost-benefit study published by the SA Department of Environment and Water in 2016. That means the total cost for the 100 gigalitres will be about A$95 million.
So the federal government is effectively paying A$95 million to sell water for A$10 million: a loss to taxpayers of A$85 million.
- ^ Vmenkov/Wikimedia (commons.wikimedia.org)
- ^ CC BY-SA (creativecommons.org)
- ^ ABARES (www.agriculture.gov.au)
- ^ CC BY-NC (creativecommons.org)
- ^ 120,000 tonnes of fodder (www.abc.net.au)
- ^ water in Adelaide (www.sawater.com.au)
- ^ 95 cents per 1,000 litres (www.environment.sa.gov.au)
- ^ CC BY-ND (creativecommons.org)
- ^ no more than 25 megalitres (www.abc.net.au)
- ^ A$450 to A$600 a tonne (www.dairyaustralia.com.au)
- ^ Australia's drought relief package hits the political spot but misses the bigger point (theconversation.com)
- ^ $1,000 a megalitre (www.bom.gov.au)
- ^ Drought and climate change are driving high water prices in the Murray-Darling Basin (theconversation.com)
Authors: Lin Crase, Professor of Economics and Head of School, University of South Australia