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The cost of a cubic metre of desalinated water, and why energy prices matter
The prompt
A developer is bidding for a 300,000 cubic metre a day reverse osmosis plant on the Red Sea coast of Saudi Arabia. It will cost USD 300 million to build, and the developer uses a capital recovery factor of 8 percent a year (the yearly payment that repays the plant and its financing). The plant runs 95 percent of the time. It uses 3.5 kWh of electricity per cubic metre at USD 0.04 per kWh. Other running costs are USD 0.08 per cubic metre. What is the cost per cubic metre? What if the electricity price doubles? (Figures are illustrative.)
Your interviewer will share data as you ask for it. Ask clarifying questions, state a hypothesis, then lay out your structure out loud before you calculate.
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