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Future for Desalination


Desalination projects worldwide are set for expansion. Projects in South and West Australia are set to greatly increase capacity over the coming years and China is also planning to expand its programme. It is predicted that the desalination market will triple in value to $30bn a year by 2016, with many water investment funds likely to benefit.
The process of distilling water to remove salt and other minerals to make it “potable”, or safe to drink, is known as desalination. It can be a solution to water stress issues in countries that can afford the infrastructure and energy required to run the plants. Newer "Reverse Osmosis" technology however, requires less energy, and is becoming more popular worldwide.

Environmental Issues
The energy intensive process of desalination can make it more expensive than alternatives, though costs are predicted to fall over coming years. Energy issues can put pressure on countries aiming to become more energy efficient
, and overcoming this issue can add to the cost of the process. The Thames Water desalination plant is to have solar panels installed, and Australian plants are powered by nearby renewable energy sources.
  
A Scientific American article highlights the environmental issues of desalination. The desalination process leaves a waste product of highly concentrated salt water which is often released back into the sea causing damage to marine ecosystems. The suction of water from the sea can also cause harm to marine wildlife, but this can be avoided and Australian desalination plants absorb water slowly enough to allow fish to escape.

An important aspect of water management into the future will be reducing demand for water, together with increasing supply. Agricultural, indusrial and domestic water usage will need to be reduced to overcome water scarcity. There are also other, less energy-intensive methods of increasing water supply such as the recycling of water, which is used in Australia, or more efficient extraction from groundwater reserves. The transportation of water from other sources may also be a more cost effective option for countries at a high altitude, or far from the sea.

Current Desalination Projects
The Middle East has large desalination programmes that benefit from dry conditions and a supply of oil for energy. Israel, Saudi Arabia and UAE are home to some of the largest plants,

 Desalination plant in Taijin China
with more being planned for development into the future. China currently has 65 desalination plants, though its largest plant in Tianjin, an article from the Guardian suggests, has had profitability issues. America also has a large desalination programme with projects being planned in California and elsewhere. The UK has one desalination plant in Beckton, owned by Thames Water. Desalination may become more cost effective into the future, through direct technological advancement for example by Seimens, or if energy costs fall.


Impact on Water Investment Funds
Companies directly involved in desalination include Severn Trent, ITT Corporation, and Veolia which “has built 15% of the world's desalination capacity”. These firms are held by some of the funds in the Worldwise Investor Water theme, and although they have other operations, they are likely to benefit from desalination projects. If desalination becomes one of the major sources of freshwater then water costs may rise. Water shortages are expected to become more common over the coming years, with a UN report prediction that more than half of the world’s population will be at risk by 2030 as a result of climate change, population stress or water mismanagement. Desalination is likely to be an option for countries experiencing this water stress, and investment funds that have a stake in it could benefit.

Fund context:

Pictet Water have Hyflux in their investable universe, a desalination company that makes 60% of its revenue from the Middle East and North Africa, and will benefit from the increasing popularity of desalination in this area. Sarasin Sustainable water also highlight Hyflux from their investable universe as being active in this region, as well as companies that manufacture components such as Toroshima Pumps.

Veolia and Suez Environnement, which are in the top 10 holdings of most of the Worldwise Investor Water theme funds, are also involved in desalination projects, particularly in Australia. Some Environmental and Multi-Thematic funds such as Cheviot Climate Assets and Pictet Environmental Megatrend also have water as an investment theme, and hold companies involved in desalination.

Related funds:

Quilter Cheviot Climate Assets
Pictet Environmental Megatrend Selection
Pictet Water
Sarasin Sustainable Water

Useful links:

Worldwise Investor: Water Theme
Worldwise Investor: Water Scarcity Creating Investment Opportunities
Worldwise Investor: UK Water Wastage
Worldwise Investor: American West Faces Water Scarcity

National Geographic: Could Seawater solve the Freshwater Crisis?
NY Times: Desalination in Australia
Economist: Desalination: drops to drink
China Daily: China's future -desalination

Tags: UK, Global | Water |

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Louise Fallonall articles

Louise Fallon starting working for Worldwise Investor as an intern over the summer and has written a number of articles during that time.

Louise is studying for a degree in Mathematics and Economics BSc at London School of Economics and Political Science, and graduates next summer.


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