Victorian Desalination Plant, Dalyston, Victoria, Australia
#00210
Case study of
#00196 Large-scale desalination sized as drought insurance
Implementer
Victorian Government with AquaSure PPP consortium
Timeline
Since Jan 1, 2012
Location
Description
The Victorian Desalination Plant was procured at the height of the Millennium Drought via a PPP with AquaSure consortium. Capital cost blew out to ~A$4bn; on completion in 2012 it went straight into standby and delivered first water only in 2017. The contract structure obligates ~A$608M/yr in availability payments regardless of whether water is ordered, totalling ~A$18-19bn over 27 years. Since 2017, climate-driven inflow decline has driven near-annual orders of 100-125 GL/yr, reframing the plant as drought insurance — but at a contract price no replicator would choose. Sydney's plant followed the same arc: mothballed 2012-2019 at ~A$500k/day in standby charges before being restarted and now expanded.
Metrics
5Funding
Lessons learned
- Procuring during acute drought panic locked in a capital blowout and 27 years of fixed availability payments for a plant that sat idle for five years — separating the procurement decision from the drought-cycle timing is essential.
- Rigid availability-payment PPP structures bill ratepayers continuously in wet years and become politically toxic when the insurance rationale was never communicated transparently at procurement; flexible take-or-pay triggers with variable payment tiers should be negotiated instead.
- Sizing against long-run aridification trend proved correct — near-annual 100-125 GL/yr orders materialised once inflow decline became undeniable — but the contract structure negated much of the value: the lesson is to get both the sizing logic and the contract mechanism right simultaneously.
Documented Jul 24, 2026