Andrew Bolt has just reported that that the Victorian desal plant is going to cost over $19 Billion. Is this a misprint, or a misplaced decimal place?
MELBURNIANS will face rocketing water bills over the next 30 years to pay for the state’s desalination plant.Premier Ted Baillieu yesterday admitted the contract signed by the former Labor Government couldn’t be broken and the “white elephant’’ desalination plant could cost a maximum $23.9 billion…The desalinated water will cost up to $13.50 a kilolitre – compared to just $1 for our current supplies. A review by PriceWaterhouseCoopers shows the cost of the project will run to $19.3 billion without any water being sent to homes.
According to this site, a couple of years ago the NSW plant was only going to cost $1.9 Billion. Maybe someone can update that figure?
What is going on down there in Victoria?
Reply from TQ in comments.
I heard a story last week about a friend of a friend who has been working as a labourer on the Melbourne desal plant. Working the night shift, on a 100% loading, pulling in $1,000 a night. And more often then not, they send them all home again after an hour at work because building delays means there is nothing to do. Still pay them though.
So, yeah, payoff to the unions.
How foolish. They could have built a broadband network for that price.
Infidel Tiger
28 Feb 11 at 5:33 pm
Labor economics:
$19.3 billion better than $1.9 billion.
This is what I’m talking about when I say that these people – the ones responsible – should be jailed.
C.L.
28 Feb 11 at 5:39 pm
They could have built a broadband network for that price.
No worries, the price for the broadband network should be due to go up soon. Problem solved.
TimT
28 Feb 11 at 5:43 pm
Jesus H Christ, how can a water factory cost $19.3bn? The freaking Frogs managed to build the spectacular Millau Viaduct for 400mn Euros.
http://www.offbeatenough.com/interesting-stuff/10-tallest-bridges-in-the-world/
Infidel Tiger
28 Feb 11 at 5:49 pm
It beggars belief.
dover_beach
28 Feb 11 at 6:02 pm
It’s called “Take-or-Pay”.
Switch the thing off – if you like.
But the Victorian Catallaxians are going to send a stonking amount of money towards the hungry maw of the thing even if the pipes rust shut.
Bankers lending money against long term infrastructure like ToP commitments to lock in the repayment stream.
Myrddin Seren
28 Feb 11 at 6:06 pm
The desalinated water will cost up to $13.50 a kilolitre
And that does not even include the carbon tax add-on.
Gabrielle
28 Feb 11 at 6:12 pm
This decision alone ought to keep the ALP out of government for at least a generation, but it won’t.
dover_beach
28 Feb 11 at 6:22 pm
Maybe I’m reading the wrong press but it says
That would be in times of drought. In normal times it would not be required therefore the price/ kl would be diluted by catchment water.
But do carry on, as per usual.
rog
28 Feb 11 at 6:27 pm
Probably owned by super funds. Wonder which ones?
Flanerry’s perpetual drought panic certainly worked in some quarters.
Pickles
28 Feb 11 at 6:27 pm
DB seems to be predicting greater stuff ups from the Libs.
rog
28 Feb 11 at 6:33 pm
Thank God for the Greens’ push against building dams. How would we live without them?
Gabrielle
28 Feb 11 at 6:34 pm
Further evidence of the destructive effect on public policy by greenies opposing the construction of dams.
samuel j
28 Feb 11 at 6:35 pm
I think that if you looked a little deeper, most current opposition to dams comes from those that live in the country, especially those within the proposed catchment. It’s called “property rights”.
rog
28 Feb 11 at 6:51 pm
Not greenies, just outraged locals. .
rog
28 Feb 11 at 6:55 pm
But I guess you guys are too lazy and rely on Bolt to tell you what and how to think.
rog
28 Feb 11 at 6:56 pm
During the period when both political parties were de-engineering the public service, the Institution of Engineers Australia warned against governments becoming ‘uninformed buyers’. The Institution begged decision makers not to allow goverment to become vulnerable to the sort of problem we have now. Professional advice ignored. Consequence clearly predictable. No hindsight needed.
You know, desal plants are pretty much meccano sets. I wonder if someone has done the calculation of how much it would have cost to build-it-yourself? Of course, if there is no-one left in the public sector that knows the answer to that. Too bad really. But Governments of both political persuasions have let it get to that point. Oh and no need to talk about dams – how many people in the public service would know how to design and specify a dam? About the same number as those who know how to design and specify a desal plant. If we had decided to build a dam, the headlines would be screaming about how much that had gone over budget.
Marks
28 Feb 11 at 7:16 pm
@ Marks. likely to be true, but a dam is what 3x chaper? So logically the actual amount in cost overruns would be less.
Chumpai
28 Feb 11 at 7:25 pm
I can’t possibly believe we couldn’t develop stormwater catchment for less that $19 billion!!! First it has the advantage of being inherently decentralized. And if AGW comes true then we’re going to cop a lot of Yasi type deluge.
Adrien
28 Feb 11 at 7:43 pm
Jesus H Christ, how can a water factory cost $19.3bn?
Arrrrgghhhhh, ‘s quite simple really. The Labah Paahdee’s been outta fed’ral office for eleven years and we gotta ‘n awful lotta mates da pay off!
Adrien
28 Feb 11 at 7:44 pm
The last time Gaia cried the Wonthaggi plant flooded.
Gabrielle
28 Feb 11 at 7:46 pm
How much will it cost per year if it produces NO water at all ?
OnTheBus
28 Feb 11 at 8:00 pm
“But I guess you guys are too lazy and rely on Bolt to tell you what and how to think.”
That’s a bit rich rog, you have the abc, Fairfax and the press gallery telling you not to think. In your case their message is redundant and You have no grounds to be smug.
Rob
28 Feb 11 at 8:01 pm
Rob:
There’s no reason to treat Quodge with even a modicum of respect, as everyone here pretty much treats her utter contempt.
Quodge never finished high school, unable to get pat 9th grade before everyone pulled the pin and sent him off to do less mentally demanding work.
JC.
28 Feb 11 at 8:07 pm
Whatever you say Rog, I know plen of landowners who are happy to sell some of their land for a dam, My mother is one of them. The NIMBY problem applies equally to desal plants and garbage tips. The French know how to counter: compensate and give benefits for local communities that adjoin say nuclear power stations. Lots of people would be happy to have a nuclear power station nearby for a large reduction in their electricity bills. I’d be happy. And farmers often like dams since they look great too! With more frequent floods and droughts (due to AGW) the case for dams is even stronger: to mitigate against floods and store for droughts
Samuel J
28 Feb 11 at 8:22 pm
Quote from The Age, must be true:
“Water from the plant would cost $13.58 per kilolitre (1000 litres) if the minimum 50 gigalitres (50 billion litres) was drawn in 2012/13.If the maximum of 150 gigalitres of water was ordered it would cost Melbourne Water customers around $5.09 a kilolitre.
Melbourne Water currently charges about $1.50 a kilolitre, Mr Baillieu said.
Water from the plant would cost $13.58 per kilolitre (1000 litres) if the minimum 50 gigalitres (50 billion litres) was drawn in 2012/13.If the maximum of 150 gigalitres of water was ordered it would cost Melbourne Water customers around $5.09 a kilolitre.
Melbourne Water currently charges about $1.50 a kilolitre, Mr Baillieu said.”
Judith Sloan
28 Feb 11 at 8:33 pm
Judith
it would be worth investigating.
1. how the tender went out and was bid.
2. if wage rates were comparable to other projects .. those in the private sector both with and without union workers.
I have a hunch the plant was a pay off to the unions, which is why the cost was so high.
JC.
28 Feb 11 at 8:43 pm
Do the sums based on Judith’s numbers:
50 gigalitres is 50 million kilolitres.
50 million times $13.58 = $679 million.
$679 million times 30 years equals $20.37 billion
150 gigalitres at $5.09 over 30 years equals $22.9 billion
Doesn’t make much difference as to whether it produces lots of water or not a lot of water – still costs about the same.
boy on a bike
28 Feb 11 at 8:57 pm
Give or take a billion, that is.
boy on a bike
28 Feb 11 at 8:57 pm
PS – that assumes a constant cost of water from the plant over those 30 years. Betcha there is a price escalator in the contract too.
boy on a bike
28 Feb 11 at 9:00 pm
From the Age article:
In other words, John sez: this is Baillieu’s fault.
Thanks for the annual $694mil bill whether it pumps water or not, John.
Gabrielle
28 Feb 11 at 9:05 pm
I heard a story last week about a friend of a friend who has been working as a labourer on the Melbourne desal plant. Working the night shift, on a 100% loading, pulling in $1,000 a night. And more often then not, they send them all home again after an hour at work because building delays means there is nothing to do. Still pay them though.
So, yeah, payoff to the unions.
Tim Quilty
28 Feb 11 at 9:16 pm
Tim
It’s just fraud, that’s all it is.
JC.
28 Feb 11 at 9:20 pm
Or shall we just include as another part of the stimulus? Lol
JC.
28 Feb 11 at 9:22 pm
Well at least Melbourne people can feel good knowing that it is the environmentally friendly way to go and they are not stealing water from mother natures rivers.
Or some such delusional green bull. Now they’ll need to build a big nuke plant to power the money sucker.
Chris M
28 Feb 11 at 9:26 pm
Hey that’s $1.36 per litre, same as petrol.
Well done Labor, even Coke can be bought cheaper than your salty water.
Chris M
28 Feb 11 at 9:28 pm
Nah, it’s $1.36 for one thousand litres. Close, but no cigar.
boy on a bike
28 Feb 11 at 9:49 pm
I’m glad you’re all assuming that the minimum amount of water will be needed every year, because we’ll never have drought again.
Just a thought: How much does the state lose per year in taxes on agricultural production in a fully blown drought?
m0nty
28 Feb 11 at 10:47 pm
I’m glad you’re all assuming that the minimum amount of water will be needed every year, because we’ll never have drought again.
Ever heard of dams, m0nty? How about building one or two of them? When was the last time a new dam was built to service an Australian metropolitan area?
daddy dave
28 Feb 11 at 11:10 pm
I give up, m0nty. How much?
Gabrielle
28 Feb 11 at 11:10 pm
I give up, m0nty. How much?
m0nty (with eyes popping and arms flailing wildly): “BILLIONS, Gab! BILLIONS AND BILLIONS!!!!!!!!”
daddy dave
28 Feb 11 at 11:17 pm
LOL!
Gabrielle
28 Feb 11 at 11:20 pm
Somehow, I think that given the cost it is very unlikely that desal water would be used for agricultural purposes.
PS what is Rog on about? Has Rog been possessed by a Homer virus?
Entropy
1 Mar 11 at 6:55 am
Thanks BoaB, lack of sleep here…
Chris M
1 Mar 11 at 7:39 am
It costs about $2 B to build it. The rest is operating costs for the duration of the contract plus a nice guaranteed profit for the consortium.
But don’t blame the consortium. Blame the government. They panicked and the DSE had no plan B. A dam was not even considered as an option.
Anon
1 Mar 11 at 10:04 am
So the $1.9 Bil for the NSW plant is only a rather small part of the story? I wonder what kind of surprise lies in store for the people of NSW on that score!
Rafe
1 Mar 11 at 10:31 am
Chumpai: “but a dam is what 3x chaper? So logically the actual amount in cost overruns would be less.”
Well, here’s the problem in a nutshell. IF the Vic Government had been an informed buyer, then they would not have bandied that figure round. If that was what they were told pre-tender, and they believed it, then no wonder the contractors came in and took not only an arm and a leg, but also the heart, lungs and liver.
Let me tell you (and this is only semi-informed) about ten years ago, I priced for a client a small desal plant. For comparison, I took a large US plant which cost about twice as much as dam water (including the necessary treatment of dam water to the same potable standard) and a small regional plant which was about three times as much as dam water. Allowing for technological improvements over the past ten years, one would expect a premium of maybe fifty percent over dam water – and that would have been reasonable since with plenty of water in the ocean, that fifty percent premium paid for a lot of security that you don’t ever get with a dam.
So, even a semi-informed opinion would come up with an initial negotiating postion with contractors of “let’s start at 1.5 times the cost of dam water – and work DOWN“.
Like I said in my original post, this situation of a government not being an ‘informed buyer’ and therefore paying dearly was clearly signalled to Governments both Liberal and Labor right throughout the country. Professional advice ignored, $22+Bn bill as a result. Geez Kennet saved a heap by getting rid of those public sector folks, eh?
Marks
1 Mar 11 at 7:16 pm
Yeah, that’s the answer to all these government stuff ups, more public servants.
Infidel Tiger
1 Mar 11 at 7:50 pm
Ok, Marks, we’ve apparently stripped the capacity out of the public service. But collectively we still have the knowledge. You’ve just shown us that we shouldn’t be paying more then 150% of the cost of dam water. How hard is it for the public service to crowd source this stuff. There are plenty of well informed people in civil society ready to supply what is needed.
Tim Quilty
1 Mar 11 at 11:13 pm
IT: Krugman was seriously pushing that idea lately: more public servants means more cost controls. Also: the US military cannot cut any fat.
.
1 Mar 11 at 11:58 pm
Tim,
You are quite correct that there are people out there able to provide the information.
However, if you were a consultant ‘out there’ and you got a 1% fee of $23Bn or a 1% fee of $2Bn, which way would you go?
Infidel Tiger, I assure you, it is not in my personal interest for governments to have the work done in house – I make much more on those occasions when I work externally for them, in between working in mining. All I know is that in many cases governments are no longer informed purchasers and pay through the nose as a result. eg one consultant I worked for as a subby put up a proposal for a $4m job (cheaper than the other consultants at the time). I pointed out to the people I was subbying for, that the same result could be achieved for about $50k. Their response: “4% of $4m is better than 4% of $50k”. *wink wink nudge nudge*.
Your taxes at work. Just don’t complain how high they are if you are not prepared to be an informed buyer.
Marks
2 Mar 11 at 1:08 pm
Simple solution – the government should buy less stuff. ie, return purchasing decisions to the individual, because the state will always be too stupid to do it properly. If I remember correctly, Samuel Pepys complained about the same sort of thing in the 1600s.
boy on a bike
2 Mar 11 at 1:15 pm
Well, of course you can already purchase water individually at Woolies and Coles.
Now that is only a thousand times as much as it cost when the public servants ran the water industry in Victoria. But hey, many people are prepared to pay that much – not counting the time to get it home either.
As long as people don’t whine about the price I am happy.
Marks
2 Mar 11 at 7:21 pm
OK, Marks, but let’s do away with the whole contractor gravy train. Put all this stuff up online to be open sourced. People who know what they are talking about could tear apart these stupid moves by governments and come up with better plans.Think of it as part of the volunteerism in our society. We could even have ratings system where the value of comments was weighted by past history and peer views.
I guess we’d have to block Graeme Bird from participating, though.
Tim Quilty
2 Mar 11 at 10:06 pm
Seriously good idea TQ.
Also there are plenty of really competent retired experts (and I mean people with depth and breadth professionally speaking) who are not needing to grovel for crumbs and would give some pretty good critiques of government policy.
Marks
3 Mar 11 at 3:33 pm
That’s a good idea Tim.
.
3 Mar 11 at 3:49 pm