12.7. An Overview of Treatment and Sanitation Costs

The economic costs of providing a household with modern water and sanitation infrastructure services are the sum of seven principal components:

1. Opportunity costs of diverting raw water from alternative uses to the household (resource rents) 2. Storage and transmission of untreated water to the urban area 3.Treatment of raw water to drinking water standards 4. Distribution of treated water within the urban area to the household 5. Collection of wastewater from the household (sewerage collection) 6. Treatment of wastewater (sewage treatment) 7. Any remaining costs or damages imposed on others by the discharge of treated wastewater (negative externalities). Table 12.5 use some rough calculations to illustrative average unit costs for each of these seven components. The cost estimates in Table 12.5 include both capital expenses and operation - maintenance expenses. Annual capital costs are calculated using a capital recovery factor of 0.09, assuming a real discount rate of 6% and an average life of capital equipment and facilities of 20 years. The unit costs of these different elements could vary widely in different locations. For example, in a location with abundant fresh water supplies. Opportunity cost of raw water supply and Damages associated with discharge of treated wastewater costs may, in fact, be very low or even zero (Whittington et al., 2009).

Table 12.5 Cost Estimates Improved water and Sanitation Services (Whittington et al., 2009)

On the other hand, some cost components are typically subject to economies of scale, particularly storage and transmission treatment of raw water to drinking water standards (item 3), and treatment of sewage. This means that the larger the quantity of water or wastewater treated, the lower the per-unit cost. Other cost components are subject to diseconomies of scale. As large cities go farther and farther away in search of additional fresh water supplies and good reservoir sites become harder to find, the unit cost of storing and transporting raw water (item 2) to a community increases. There are also tradeoffs between different cost components: one can be reduced, but only at the expense of another. For example, wastewater can receive only primary treatment, which is much cheaper than secondary treatment; but the negative externalities associated with wastewater discharge will then increase (Whittington et al., 2009).