The encyclopedia · Strategy & Leadership · Strategic decision · 2002–2019
Israel's BOT desalination plant made seawater cheaper than anyone's
Ashkelon, the world's largest desalination plant in 2005, delivered water at a record-low NIS 2.60/m³ under a build-operate-transfer deal.
VID Desalination Company · IDE Technologies · Veolia Water
The solution
Israel's chronic water scarcity led to a Desalination Master Plan in 2002. The Ashkelon plant, owned and operated by the VID consortium (IDE Technologies 50%, Veolia 25%), began operations in August 2005 as the world's largest seawater desalination plant, producing 100 million cubic meters a year under a build-operate-transfer contract.
At NIS 2.60 per cubic meter it was called the world's lowest price for desalinated water. The plant supplied Israel's National Water Carrier, and the second stage brought output to full capacity by December 2005.
The World Bank later credited the BOT design: the concessionaire bears all cost overruns and operating risks, with swift penalties if contracted quantities are not delivered, so firms minimize total lifetime cost — and prices kept falling as more plants were built.
Why it worked
- Paying per delivered cubic meter aligned profit with output.
- Private risk-bearing cut the state's exposure to overruns.
- Large baseload plants captured scale economies.
- Sequential tenders forced prices down plant by plant.
What can be applied
For scarce infrastructure with mature technology, a BOT with a fixed take-or-pay price transfers risk to whoever controls cost, and successive projects drive prices down.
Aftermath
Five mega plants followed along the Mediterranean coast with total capacity of 585 million cubic meters a year; prices fell from about US$0.78 per cubic meter at Ashkelon (2005) to US$0.54 at Sorek (2013). By the late 2010s desalination supplied about 85% of domestic urban water and 40% of total consumption.
Sources
- World's Largest Desalination Plant Begins Operation In Israel
- Ashkelon desalination plant begins operations
- Water Scarce Cities: Thriving in a Finite World — Large-Scale Desalination Public-Private Partnership for Potable Water Independence
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