Economies of Size in Municipal Water-Treatment Technologies: A Texas Lower Rio Grande Valley Case Study

As the U.S. population continues to increase, the priority on planning for future water quantity and quality becomes more important. Historically, many municipalities have primarily relied upon surface water as their major source of drinking water. In recent years, however, technological advancements have improved the economic viability of reverse-osmosis (RO) desalination of brackish-groundwater as a potable water source. By including brackishgroundwater, there may be an alternative water source that provides municipalities an opportunity to hedge against droughts, political shortfalls, and protection from potential surfacewater contamination. In addition to selecting a water-treatment technology, municipalities and their associated water planners must determine the appropriate facility size, location, etc. To assist in these issues, this research investigates and reports on economies of size for both conventional surface-water treatment and brackish-groundwater desalination by using results from four water-treatment facilities in the Texas Lower Rio Grande Valley (LRGV). The methodology and associated results herein may have direct implications on future water planning as highlighting the most economically-efficient alternative(s) is a key objective. In this study, economic and financial life-cycle costs are calculated for a “small” conventional surface-water facility (i.e., 2.0 million gallons per day (mgd) Olmito facility) and a “small” brackish-groundwater desalination facility (i.e., 1.13 mgd La Sara facility). Thereafter, these results are merged with other, prior life-cycle cost analyses’ results for a “medium” conventional surface-water facility (i.e., 8.25 mgd McAllen Northwest facility) and a “medium” brackish-groundwater desalination facility (i.e., 7.5 mgd Southmost facility). The combined data allow for examination of any apparent economies of size amongst the conventional surface-water facilities and the brackish-groundwater desalination facilities. This research utilized the CITY H20 ECONOMICS and the DESAL ECONOMICS © © Excel® spreadsheet models developed by agricultural economists with Texas AgriLife Research and Texas AgriLife Extension Service. The life-cycle costs calculated within these spreadsheet models provide input for work which subsequently provides the estimations of economies of size. Although the economies of size results are only based on four facilities and are only applicable to the Texas LRGV, the results are nonetheless useful. In short, it is determined that economies of size are apparent in conventional surface-water treatment and constant economies of size are apparent in brackish-groundwater desalination. Further, based on modified life-cycle costs (which seek to more-precisely compare across water-treatment technologies and/or facilities), this research also concludes that reverse-osmosis (RO) desalination of brackish-groundwater is economically competitive with conventional surface-water treatment in this region