Reflections from Ozwater 2025’s panel on recycled water economics
At Ozwater’25 in May, I had the privilege of joining a panel of experts to explore the economics of recycled water. Adam Lovell (WSAA), Greta Zornes, Ph.D. (CDM Smith) Charlie Littlefair (South East Water) and I tackled one of the water sector’s most pressing challenges: how do we make the economic case for recycled water schemes that deliver genuine community value?
The conversation around recycled water economics is fundamentally shifting. As Adam Lovell noted, we’re witnessing an expansion from traditional applications to a “broad church” of water reuse options – from grey water systems to purified recycled water (PRW) for drinking. With 35 cities across 10 countries already implementing PRW, and 70 more on the journey, around 30 million people globally are now safely consuming recycled water.
Two distinct policy problems
My presentation explored the principles of recycled water economics by unpacking two fundamentally different policy problems, both of which drive recycled water project investment decisions:
- Problem 1: Securing urban water system bulk supply to meet growing demand in a world where surface water resources are fully allocated, and new dams face strong opposition.
- Problem 2: Reducing damage to urban waterways from discharging partially treated wastewater, where strict environmental standards reflect genuine community expectations.
Each problem requires its own economic framework and business case approach.
Problem 1: Bulk supply – levelling the playing field
For urban bulk supply, surface water resources are fully allocated, and society increasingly resists the environmental and cultural damage from new dams. This means future urban water supply must be manufactured, through desalination or recycled water.
The key is treating these manufactured water sources as equally valid substitutes and assessing them within a whole-of-system supply-demand framework. We need to apply consistent decision criteria – net present value and benefit/cost ratio – and allow recycled water to compete on its merits. Yet, over the past decade, recycled water has often been excluded from consideration altogether. See the Water Services Association of Australia (WSAA) report on urban water supply options for Australia (Marsden Jacob Associates carried out the cost analysis and initial drafting of this report).
Problem 2: Waterway protection – the ‘beneficial use or bust’ reality
Discharging partially treated effluent to waterways is increasingly unacceptable, and regulatory standards have resulted in only two acceptable disposal pathways being available:
- Secure reliable, long-term customers for beneficial reuse (for example, large-scale irrigated agriculture, industry, public open space).
- Invest in higher-cost advanced treatment technology to achieve the recycled water quality necessary for using recycled water as environmental flows.
This is where many recycled water business cases get stuck: they assume that even after having done all the hard work to lock in long-term, large-scale customers, that isn’t enough – the price paid by the customer needs to cover all the costs of supplying the recycled water.
However, the business case should always focus on solving the core policy problem first – in this case, preventing damage to urban waterways. Identifying a beneficial reuse source that prevents waterway damage solves the core policy problem. Pricing is a secondary consideration, not the foundation of the business case.
Making the economics work in practice
Charlie Littlefair demonstrated how South East Water’s recycled water project experience puts these economic framing principles into practice.
The Dingley Recycled Water Scheme, supplying recycled water to Melbourne’s world-renowned sand belt golf courses, achieved a benefit-cost ratio of 2.2. Benefits included:
- Golf tourism (39.9%).
- Amenity value of higher quality greenspace (23.5%).
- International/domestic golf tourism (25.8%).
Only 7.6% of benefits came from reduced potable water use.
Similarly, the Western Port Recycled Water Scheme demonstrated how recycled water can defer high-cost capital works for 10 to 20 years while providing climate-resilient irrigation supply, delivering both immediate cost savings and long-term strategic value.
The technology evolution
Dr Greta Zornes highlighted how technological innovation is reshaping the economics of recycled water. Industry-standard direct potable reuse (DPR) treatment trains are emerging, with advanced multi-barrier systems becoming mainstream. These advances will help regulators validate the performance of recycled water treatment systems and keep a lid on infrastructure costs, which is vital for the cost side of the recycled water benefit/cost ratio equation.
Overcoming implementation barriers
Our panel discussion was lively, with many challenging questions from the floor. Topics ranged from outsourcing the job of convincing politicians that recycled water is perfectly safe to addressing salt management in inland schemes and pushing back against red herrings that sidetrack robust recycled water business cases.
The path forward
A key insight from our panel was this: schemes can be economically viable but not financially viable. The issue of who funds the ‘public good’ benefits remains central to successful implementation.
As Charlie Littlefair wisely advised, always have “good projects” with robust business cases ready to go. Funding programs come and go – we need to be opportunistic while maintaining rigorous economic frameworks.
This session demonstrated the power of bringing together utility, policy, economic and technical perspectives. These collaborative discussions are essential as we navigate the transition to manufactured water supplies that serve growing populations while protecting our waterways and environment.
By Joel Byrnes
Dr Joel Byrnes specialises in economic analysis and business cases for water infrastructure investments. Marsden Jacob Associates provides economic advisory services to Australia’s water sector, helping navigate complex approval processes for recycled water projects through robust economic frameworks.
The Ozwater’25 panel took place on Tuesday 20 May 2025. It was presented by the Australian Water Association Water Recycling Specialist Network and introduced by Pam Kerry from South East Water, with the panel discussion moderated by Kathy Northcott from Veolia
May 30, 2025
