The record that produced no water: Gulf desalination tariffs since 2018

The fall is usually told as a technology story. It was mostly a finance story, and it reversed an earlier rise. In September 2008 MEED reported Gulf water and power tariffs higher than ever. Sumitomo was the low bidder at Ras al-Zour at US$1.1035 a cubic metre. Costs had risen more than 93 per cent in three years, and on Shuweihat 2 water passed a dollar a cubic metre for the first time.⁸

Then the procurement changed. Saudi Arabia’s Water and Electricity Company took a new mandate, board and management in late 2017. It was renamed the Saudi Water Partnership Company in May 2018.⁴ Reverse osmosis was also decoupling from power stations, so water plants could be built and bid on their own. In Abu Dhabi that shift followed the Barakah nuclear plant, which weakened the case for cogeneration.⁹

Five landmark awards used one structure: a build-own-operate contract of 25 to 35 years, with a single state offtaker buying all output.⁵⁶⁷ One evaluated number decided the winner: the levelised water cost.

Rabigh 3’s low bid came first, in August 2018, at SR1.99, or about US$0.53.⁴ It drew 55 expressions of interest and five bidders.¹⁰ Shuqaiq 3 followed in December at SR1.95, with the top four bids inside half a cent of each other.⁴⁵ Abu Dhabi awarded Taweelah in January 2019.¹¹ MEED put that tariff at US$0.49, though neither EWEC nor the developer published a figure.⁴ In March 2020 SWPC published all four bids for Jubail 3A, the lowest at SR1.54861.¹² Six months later Dubai announced US$0.277 for Hassyan.¹ The winner was Utico, at 27.762 US cents.¹³

MEED named the drivers in January 2022: energy efficiency, historically low interest rates, economies of scale and cheaper plant configurations. Low-priced renewables explained Taweelah and Hassyan specifically.¹⁴

Procurement design did real work. The Saudi procurer capped compensated energy at 3.5 kWh a cubic metre, against operating plants that could easily exceed four. The mechanism was symmetrical: a developer bidding 3.2 is paid for 3.2, overruns are not compensated, and half of any saving goes back to the procurer. The prices were also achieved against harder water, not easier. Saudi plants must handle up to 43,500 ppm of dissolved solids, where open seas run at 35,000 or below.⁴

The plants that were financed perform. Taweelah passed 30 consecutive days of final performance tests. It desalinated 204 million imperial gallons in a day, about 2 per cent above planned capacity.¹⁵ In 2021 the Saline Water Conversion Corporation set a Guinness World Record for desalination energy use, at 2.271 kWh a cubic metre.¹⁶

The record was never built. Dubai signed a 35-year agreement with Utico worth about US$408 million in March 2021.⁷¹⁷ By July 2022 the developer had still not reached financial close, against an original target of July 2021.¹³ The contract did not survive. DEWA re-tendered the plant and took two bids in May 2023, the lowest at US$0.389 for the original 120 million gallons a day.¹⁸² ACWA Power was named preferred bidder at US$0.36536 for a larger plant of 180 million gallons a day, a third above the record.² Full completion is now due in the first quarter of 2027, about three years later than the date announced with the record.¹⁹¹ No water has ever been produced at US$0.277.

Competition has thinned since. Jubail 4 and 6, two plants totalling 600,000 cubic metres a day, drew a single bid in September 2024 from a field of nine prequalified bidders.²⁰ Bahrain’s first independent water project drew two, one of which was disqualified.³

The private half of the partnership has changed character too. ACWA Power is roughly 44 per cent owned by the Public Investment Fund.²¹ TAQA is now wholly owned by Abu Dhabi Power Corporation, a unit of the sovereign fund L’imad.²² When a sovereign fund’s vehicle wins a 25-year contract from a state offtaker regulated by a state authority, the label survives and the substance shifts.²¹

One honest gap. No analyst, regulator or academic in the public record argues that these tariffs were priced below cost. The evidence for that reading is circumstantial, and it is the failure of the lowest bid to raise money.

The lowest bid is only a price if the bidder can close on it. Dubai lost about three years by taking one that could not.¹³¹⁹ The lesson is about balance-sheet screening and financial-close deadlines, not tariff caps.

MEED argued in early 2022 that most of those drivers were close to exhausted. Little was left to gain from scale. Utilities would want future plants to buy renewable power from the grid rather than build their own, and project finance was unlikely to get cheaper.¹⁴ Tariffs have risen since. Mhamed Biygautane of the University of Melbourne reads the same market politically. Water is being reclassified, he argues, from a tradeable utility service into a national security asset. Operators still pitching 25-year ownership structures will find the market has moved.²¹

Bahrain sets the boundary. Its 2026 tender drew a lowest bid of US$0.73, for a plant about a third the size of Dubai’s.³² The offtake credit was weaker and government debt sits around 133 to 142 per cent of GDP.²¹ Read with Dubai, that says how much of the record was scale and sovereign credit rather than membranes. The portable part of this story is not the price. It is the energy cap: bid your kilowatt hours, keep half of what you save, and pay for what you waste.⁴