Category Archives: Risk Bearing

An Economist’s Perspective on San Diego’s Desalination Project

November 2012 was desalination month in California.  The San Diego County Water Authority approved a 30-year agreement with Poseidon Resources to buy up to 56,000 acre feet (AF) per year of desalinated seawater produced from the Carlsbad Desalination Plant.  With the annual price tag of water set at $2,041/AF to $2,295/AF (later reduced to $1,917/AF to $2,165/AF when San Diego secured project financing at unexpectedly favorable terms), there is buzz about what the deal says about the value of water.  As with any venture, the project also has critics about the cost of water, skeptics about risk allocation, and cynics about the role of a private party. Continue reading