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Opinions of Sunday, 8 April 2007

Columnist: Adomakoh, Joseph Smith

The Quest for lasting Solutions to Ghana's Water & Electricity Problems

Introduction

The water and electricity crisis in Ghana is emerging as a major obstacle to the government’s economic development plans and therefore, requires an aggressive attention of the powers that be, to resolve it before it is too late. This is because a reliable source of clean water and energy supply are essential to the commercial attractiveness of the country and the economic prosperity of all Ghanaians. And, to say that Ghana is now a major beneficiary of Foreign Direct Investment (FDI) is an understatement as, FDI has become an important element in the county’s economic development process. Thus, given that FDI decisions to choose a country is influenced by among other things, the solidity of infrastructure developments, the situation in Ghana could seriously hamper the government’s efforts to woo FDIs, if not dealt with immediately. Nonetheless, having said that it must also be pointed out that the ongoing crisis in Ghana is not an isolated case but, part of a worldwide dilemma, given the following reasons.

Worldwide Water Problem

According to the UN and other water pundits, water availability on the planet earth is approximately 104 million cubic kilometers. Of this, 97 percent is salty. Further, an astounding 70 percent of the remaining fresh water is hidden deep underground in aquifers or frozen in glaciers or ice caps. Thus, by implication, all life on earth depends on less than 1 percent of the total water volume. Unfortunately, the fresh water available to mankind is not evenly distributed throughout the world. Often, it is unavailable where it is needed, resulting in large arid regions. Even more pronounced, water scarcity is exacerbated in many parts of the world including Ghana, by growing populations, greater per capita-water demand, and the diminishing freshwater sources (due to drought conditions, desertification and other degradations of ecosystems). Hence, nations across the world have become desperate and are trying to find water by any means necessary to meet water/electricity demands of their citizens; which brings me to the subject matter of this feature article.

Suggested Solution to Crisis

Although the solution to the ongoing crisis seems arduous, the good news is, Ghana is blessed with over 200 miles of coastline and an unlimited supply of seawater. Recognizing such limitless potential, it is imperative that government directs an initiative with immediate effect to develop a seawater desalination project in Ghana, to provide an essentially inexhaustible supply of potable (drinkable) water without depleting the country’s valuable natural wetlands and aquifers. This can be achieved by constructing a Seawater Reverse Osmosis Desalination Plant (SWRO) or similar technology that will convert seawater into fresh water and generate electricity at the same time. Briefly, Desalination is the process of removing dissolved minerals (including but not limited to salt) from seawater, brackish water, or treated wastewater. Currently, there are three primary forms of desalination technology available namely, reverse osmosis distillation, (RO) electrodialysis (EDR), and vacuum freezing (VF). Of the three, reverse osmosis (RO) is the most effective and efficient conversion process and, the only way to produce the ultra-pure water essential in a variety of growing industries such as the semiconductor, pharmaceutical and electronic display markets. RO requires no dams or reservoirs, is drought proof, unaffected by local hydrological activity, and circumvents water rights disputes and the destruction of habitats. Also the duration for plant construction is under 3 years. Another added value is that, the thermal power used to operate the SWRO plant in the water conversion, provides a heat source which can simultaneously generate electricity to augment the country’s energy needs, as in the case of Saudi Arabia discussed below.

Countries using Desalination

For the record, nearly 2% of the world’s drinking water is produced by desalination, supplied by more than 17,500 plants in more than 125 countries including, Saudi Arabia, Israel, Turkey, Spain, Japan and the US, among others, and, are producing approximately 37,750,000 m³/d or 8.3 billion imperial gallons per day. Desalination was previously regarded as a prohibitively expensive solution; but dramatic cost reductions have led potential customers to view it more favorably. Also, technological innovations have greatly increased the energy efficiency of the desalination process and have thereby, reduced running costs drastically. In particular, improved energy utilization allows desalination to really become a competitive method against other water treatment approaches, even if the high energy consumption still remains a serious issue.

By-and-large, Saudi Arabia is the world’s largest producer of desalinated water, operating about 30 plants, and producing a daily total of more than three million cubic meters of desalinated water and over 5,000 megawatts of electricity. This accounts for more than 50 percent of the Kingdom’s drinking water supply and, around 20 percent of power generation in the Kingdom. In 2006, the Saudi government hinted that it is planning on expanding the existing plants to include additional needs, estimated at six million cubic meters per day of water and 30,000 megawatts more of power generation capacities over the next 20 years due to population increase and urban development.

In 2005 the Government of Israel completed its Ashkelon Desalination Plant, which is considered the most modern Desalination Plant in the world, and was declared the ‘Desalination Plant of the Year” at the prestigious Global Water Awards in 2006. The seawater reverse osmosis desalination plant, was built by IDE (Israel) and VEOLIA (France) and, is the world's largest and most advanced desalination plant of its kind, with a daily production capacity of 320,000 m3 of drinking water, i.e. 108 million m3 a year, the annual water consumption of a population of 1.4 million.

In April 2006, Veolia Water, the company that built the Israel plant, was awarded the contract for the turnkey supply of a new seawater desalination plant in Bahrain. The contract, worth USD 336 million (i.e. about € 275 million), was won following an international call for tenders. Start-up of the plant will take place from April 2007, with the first two units, till November 2007. The plant will have a drinking water production capacity of 273,000 m3 per day, making it the largest desalination plant in the world using the thermal process known as "multiple effect distillation" (MED). MED is based on the evaporation and condensation of seawater in a series of chambers under vacuum. The Bahrain plant will be combined with Al Hidd power plant, from which it will recover the low pressure steam to feed the 10 desalination units. Thus to say the least, in the search for efficient solution to the world’s clean-water crisis, SWRO/MED purification technology, appears to meet the challenges of the worldwide water and energy crisis, better than anything else on the market.

Financing Plan

Assuming the government decides to go this route, it can finance the project using a hybrid of equity (40%) and debt (60%) to fund the project which may cost approximately, $350 million. Normally, the company which wins the contract to design, construct and operate the plant comes in at 40% equity and the host government then finances the balance by borrowing from the international capital markets through the issuance of a limited recourse debt/bond in a special financing arrangement, that may require a third party guarantor - the World Bank. The terms of the bond contract can reflect a tenor of 2 + 16 years, at a margin of no more than 145 basis points (bp), with a 10 year interest rate hedging strategy to mitigate any possible interest rate risk. This investment strategy will be attractive to the investment communities of both domestic and the global markets and especially to pension funds and insurance companies.

The Way Forward

Government must set up a time bound Blue Ribbon Commission with immediate effect, to fact find the benefits of SWRO/MED project in Ghana including, conducting a Feasibility study (technical and economic), Environmental impact studies, Selection of Site location, Project assessment for investors, Basic engineering/technology, Elaboration of plant specifications, Evaluation of bids, Assistance in contract negotiation and Organization of operation and maintenance, among other things.

It is strongly recommend that government gives a serious consideration to this suggestion and solve the water/electricity problems in toto; and, give Ghana a chance to effectively compete in the highly competitive global market. Thank you.

Joseph Smith Adomakoh, Jr. Wall Street, New York, NY

Views expressed by the author(s) do not necessarily reflect those of GhanaHomePage.