Getting ready for the desal rebound
Published on by Edyta Bednorz, Global Water Intelligence - Brand Marketing Executive in Business
Following several years of contraction, the global desalination market is set to grow at a compound annual growth rate of 8.1% between 2014 and 2021, driven by increasing urbanisation and water scarcity, growth in industrial desalination, and the effects of climate change. These long-term trends will help stimulate growth through the next decade and beyond, but it will still take until 2021 for demand for new desalination capacity to exceed its 2007 peak.
Regional trends
The greatest demand for desal over the next five years will continue to come from core markets in the Middle East and North Africa, which account for five of the top ten markets over the period. Another important market will be the US, particularly with continued pressure from climatic events such as persistent drought in California and in the interior of the country, which will help to buoy both seawater and brackish water desalination. Elsewhere in the Americas, mining in Chile and - depending on oil prices - nanofiltration for sulphate removal in Brazilian offshore fields will continue to provide opportunities. India and China's continued population growth and industrial development will see them capture nearly two thirds of the contracted capacity in the Asia Pacific region over the forecast timeframe. This is in comparison to countries such as Australia, which have seen some alleviation of intense drought and a slowdown in the mining and unconventional oil and gas sectors due to falling commodity prices, thus weakening future demand for water treatment solutions. Thawing relations between the West and Iran may also allow several large-scale projects to come to fruition, leading to a more optimistic outlook for the region.
Market dynamics
The rapid growth and subsequent contraction of the desalination market in the light of the global financial crisis has created a fiercely competitive market, with some tenders attracting more than a dozen bidders. Different companies have adopted different survival strategies. The largest companies, with access to in-house equipment supply chains and R&D (Veolia, GE Water, Suez Environnement) have found growth in industrial markets - the oil and gas sector in particular - to compensate in part for the tough conditions in the municipal desalination market. Others (such as IDE, Abengoa, and Hyflux) have relied on owner/operator contract models at the plants that they build to ensure an ongoing revenue stream. The thermal desalination sector has been particularly tightly fought, with Doosan squeezing Fisia and Veolia's Sidem division. Price competition and reduced order volumes have had an impact on the equipment supply sector, although membrane suppliers - who benefit from replacement sales into the installed base - continue to thrive. The growth of the market is likely to lead to some relief on squeezed margins, staving off any forced consolidation that might have otherwise been expected to take place. However, an improvement in the opportunities available is likely to spur more M&A interest in the sector. The crowded bidder market is likely to attract new entrants looking to buy established reference lists through the purchase of less successful companies, rather than negotiate directly with equipment suppliers and subcontractors - although this remains an option, particularly in markets where longestablished general contractors have a tight grip, such as the Middle East.
Technology trends and development
Capital expenditure on seawater RO will continue to dominate the global landscape, even in the GCC region, which has historically relied on thermal desalination While thermal technologies are expected to maintain a presence in the GCC, the majority of procurement bodies are now opting for membrane solutions, even in countries with large-scale facilities and a historically more conservative approach to technology, such as Saudi Arabia, the UAE, Qatar and Oman. The key factor in the Middle East is pressure on domestic oil use and a rising awareness of the need for improved energy efficiency. Meanwhile, demand for brackish water desalination systems will grow steadily but on a smaller scale, with the US remaining the most important market. Significant expansion is expected in the use of brine concentration and volume reduction technologies for industrial usage, where capex is set to grow from $348.0 million in 2014 to $631.5 million in 2020. Prominent industries include upstream oil & gas and power generation, where these technologies have been used to treat produced water and other highly contaminated streams, such as those from flue gas desulphurisation wastewater. Demand for zero liquid discharge solutions is driven by tightening environmental restrictions, while process water needs are also growing. Growth in the oil & gas industry assumes a rebound in the price of oil, which would spur further exploration of unconventional resources. The growth in industrial desalination is borne out by the uptick in spending on brine concentration technologies, and this looks set to rise consistently, even with severely reduced input from the oil & gas industry, which has traditionally been its largest customer. Decreasing the cost of brine concentration, either by using alternative construction materials or by utilising alternative processes that require less energy, is spurring new innovation in this sector. A plethora of new and emerging technologies are under varying stages of development and commercialisation, and are aimed at improving various aspects of brine management. The upstream oil & gas industry has served as a valuable testing ground, but these technologies have the potential to address problems across diverse sectors. Another area of innovation is advances in pretreatment, which are critical for the operation and health of RO systems in that they prevent membrane damage from suspended solids, whilst mitigating biological fouling and scaling. Pretreatment systems represent a large capital and operating expense, and can greatly affect the performance of a plant, as well as membrane lifetime. They are unique to the nature of the contaminants found at a particular location and time, and therefore no one solution is a perfect fit for all systems. Two particular areas of interest are dissolved air flotation (DAF) and micro-/ ultrafiltration (MF/UF). DAF systems are becoming increasingly popular in areas with potential for contamination by biological agents such harmful algal blooms (HABs). These sporadic and unpredictable events can vary from a small nuisance to concentrations where an SWRO plant may have to be taken offline temporarily. Low-pressure MF/UF is also gaining traction in the pretreatment arena, and growth is expected in both the utility and industrial sectors as the desalination market recovers. Many players have emerged, each with their particular areas of expertise, and have created a growing and diverse field, both in membranes and complete pretreatment systems. Desalination using renewable energy sources is also increasingly an area of interest and research. Methods exist or are being developed to couple existing desalination technologies with direct and indirect solar, wind, and geothermal energy sources, with varying capacity ranges. The variable nature of the energy source is a major hurdle to overcome, but investors and solutions providers realise that reduced energy costs and a ‘green' brand are both publicly and financially profitable.
April Global Water Intelligence magazine