Brave New Waterworld
So, I was interested to read this Twitter thread from Yishan Wong regarding desalination technology.
If you want to know the next big thing in "real atoms" investment macro-trends, I'll tell you right now.
(1/x)— Yishan (@yishan) May 11, 2021
To summarize:
1) Water is fundamental to life, and water scarcity will continue to be a critical issue.
2) The per kwh cost of producing energy by solar is now lower than from fossil fuels, and continues to fall at a rate of 50% every 4-5 years.
3) It is now cheaper to build a new solar plant than continue operating an existing coal plant.
4) The bulk of the costs associated with desalinating seawater by reverse osmosis is energy costs (30%).
5) Efficiency of reverse osmosis desalination continues to improve – e.g. by “double-acting batch reverse osmosis” (don’t ask).
Given the cost efficiencies gained, what is holding solar power back is the issue of “intermittency.” This is just a fancy way of saying that the sun is not always out (sometimes it’s night, sometimes it’s cloudy). This means solar energy may be cheap, efficient and plentiful, but it isn’t reliably available. Therefore, batteries are needed – and batteries are complicated and expensive (not to mention, environmentally problematic). (Aside 1 – Battery costs have also gone down dramatically; Aside 2 – one proposal that’s been thrown around over the years is the idea of putting solar panels in orbit – which would get rid of the intermittency issue – and then bringing the energy to earth as microwaves).
Wong’s point is that when it comes to solar-powered desalination, intermittency issues go away. You convert seawater to unsalted water whenever the sun is out, and the solar energy usage is essentially “trapped” inside tubs of water.
To put it simply – we have reached a point where we can convert seawater to freshwater very cheaply and efficiently.
So, skating to where the puck will be:
Coastal areas with lots of sunshine will be the new sources of fresh water. Arable land near coasts with sunshine will be more valuable. What will happen to the Colorado River Compact, and more generally, California’s relationship with Arizona (lots of sunshine, no water) as California (sunshine and seawater) changes from a competitor for freshwater to a supplier? How will the choice of crops grown on California farms change – given that the state has been moving away from high water usage plants.
You can foresee environmental impact (invasive species as crops change, but also economic pressures to use lower levels of water refinement in farming). This may be a good thing – you don’t need the water to be as pure as potable water when using it for agriculture, and can be produced at a lower cost. But, we know that seawater can have devastating effects on arable land, and so what is the lower threshold?
How will this new source of freshwater change the socio-politico-economic dynamics of the Middle East where there is plentiful sunshine and a culture of water scarcity? For example, drought (from global warming) has been an important factor in fomenting the civil war in Syria. Also, how will it affect the Middle East peace process, especially regarding the value of Gaza relative to the West Bank?
Additionally, just by looking at the map, there are places in the world where you can already foresee problems. Below is a map of Ethiopia.
Ethiopia is a landlocked country, but close to the sea. It is blocked off from the Red Sea by Eritrea, and from the Gulf of Aden by Djibouti and Somalia. The current population of Ethiopia is about 118 million, Eritrea is 3.6 million, Somalia 16.3 million, Djibouti 1 million. Ethiopia has experienced starvation on a harrowing scale due to drought (and the Derg military junta). If any country would know the value of having a arable water source, it would be Ethiopia. This does not bode well for political stability in the region as the value of having access to the coast increases.
Like population issues, we have become so focused on impact of drought and water scarcity that perhaps we are not thinking about the social, political, economic effects (positive and negative) that could result when we suddenly find ourselves in a world where water is cheap and available.
