How Chile wants to tackle its first desal concessions

The concessions office of Chile's public works ministry (MOP) is seeking alternatives to address cost and energy concerns before launching its first desalination concessions, particularly regarding costs and the impacts on the rates users pay. 

“It is no longer sufficient to make decisions from the central administration, but they require combination with the sub-national governments. This implies that this is no longer a project that is being inserted into a region but the opposite, and ensures the regional priorities of authorities, of communities, are being listened to and we, through public-private partnerships, provide an infrastructure provision mechanism in a defined window of time,” the head of the country’s concessions office, Juan Manuel Sánchez, said during a webinar. 

He highlighted that Chile is working alongside the Inter-American Development Bank (IDB) to plan these desal projects, which are considered key to addressing the water crisis that has been affecting much of the country for more than a decade. 

Sánchez made these comments during a desalination concession workshop organized by his office and the IDB. 

The first desal concession tender is scheduled for 2025 and it involves a US$300mn plant for the Coquimbo region. The second tender would take place the following year, entailing a US$200mn plant for the O’Higgins region. 

One of the main concerns regarding desalination is the cost, particularly in terms of energy, which represents around a third of the resulting water rate for users. 

Takashi Masumitsu, Latin America infrastructure project chief at Japanese firm Mitsui, said during the event that high capex costs are also a concern when it comes to water rates and that subsidies are necessary to soften the blow. 

He also pointed at long permitting processes as driving costs higher, saying that it can take up to six years to obtain all the required licenses. 

The CEO of Alma Water solutions, Arantxa Mencia, added that in order for a desalination PPP to work, one of the key aspects is to prevent risks related to currency exchange rates from being passed on to project developers who seek a return on their investment. 

She also recommended measuring operating costs in local currencies and reviewing them once a year to ensure they are adjusted to local inflation rates.

However, Sacyr Agua’s innovation and strategic projects director, Domingo Sarzo, said that costs for desal plants have dropped dramatically over the last years, adding that the current energy consumption needed to treat the water required for a family of four people in one year is the same as that used by a fridge. 

“The general population believes it's incredibly expensive, but they don't realize that they're paying for bottled water at a price that’s 500 times higher,” he said.