Desalination may sound like the California answer to water scarcity. With drought stressing the Colorado River and other water supplies, the promise of a new supply from the Pacific Ocean seems politically irresistible. But San Diego’s experience should give Californians pause.
The San Diego County Water Authority is paying roughly $3,200 per acre-foot for water it doesn’t need, then selling some of it to Riverside County for $1,350. Officials call it innovative water management. It’s not. It’s an effort to minimize losses from an expensive desalination investment.
Now, as drought tightens across the seven states that share the Colorado River, Upper Basin states are calling on California to cut its diversions in exchange for more desalination facilities. Before the West bets its water future on desal, California’s 11 years of experience with “the largest, most technologically advanced and energy-efficient seawater desalination plant in the nation” offers a reality check.
In 2012, drought was building, and San Diego CWA largely relied on a single wholesaler, the Metropolitan Water District of Southern California, for its water purchases. A new desal plant to be built in Carlsbad offered relief. It signed a 30-year contract locking it into purchasing a minimum volume of water regardless of whether cheaper alternatives became available. Subsequently, water demand across Southern California dropped sharply. This year, the contract requires San Diego CWA to purchase roughly 32,100 acre-feet that it cannot fully use—at a cost exceeding $130 million.
If you paid $20,000 for a boat and then never use it, you might sell it for $10,000. Selling is the right decision, but it’s not a win. Yet that’s what some are calling a comparable strategy.
Now, other western states are pointing to the water surplus as proof that desalination works and even pushing for federal subsidies to build more plants along the California coast. Earlier this year, San Diego CWA signed a memorandum of understanding with the federal government and water agencies from Arizona and Nevada, agreeing to “explore the potential of interstate transfers and exchanges and the actions required to implement such actions.” The Utah Senate is actively exploring the investment of state funds in desalination via partnerships with California.
Desalination advocates point to Israel, where they argue newer plants produce water for $500 to $600 per acre-foot. That comparison is misleading because California already has plants operating at several times that cost. Israel’s lower costs reflect cheaper power and simpler geography, advantages California doesn’t have. Desalination is energy-intensive: Every acre-foot of water requires enough electricity to power a typical home for several months, so higher electricity costs in California raise the price substantially even before accounting for costs related to land, permitting, and labor.
Even California’s planned Doheny plant, projected to produce water at $2,058 per acre-foot in its first year of operation, achieves that price only because federal and state grants cover roughly $40 million of its $140 million construction cost, with additional subsidized federal loans and operating incentives making up much of the rest. Desalination may have a role as a backup supply in extreme drought. But it is far too expensive to serve as a primary solution.
Other western states have an incentive to see California rely on desal. Proposals tied to the Colorado River would have California replace its rights to the river with desalinated seawater, freeing up water for upstream use. In February, Governor Gavin Newsom wrote to fellow governors in the Colorado River Basin , noting that California is “excited to partner” on shared infrastructure investments.
The economic reality is that most upstream water users—farmers—could not afford to pay even a fraction of the cost of desalination. Crop revenue per acre-foot sets a hard ceiling on what any farmer can pay for water. Upper Basin agricultural users at the center of the Colorado River swap proposal, like Utah alfalfa farmers, on average earn less than $250 per acre-foot of water used—more than 10 times less than the cost of Carlsbad desal. It’s like spending $250 on fabric to make a shirt that you sell for $25.
There are better ways to get water where it’s needed. In 2025, for the same total price, San Diego CWD bought roughly five times as much water from the Imperial Irrigation District as from Carlsbad. Instead of spending political capital lobbying for desal subsidies, states should be aiming to remove barriers to these types of transfers. Currently, state and federal policy makes water transfers slow, expensive, and legally uncertain.
San Diego hasn’t proved that desalination works. It’s proved that drought panic and a big contract can cost you $130 million a year in water you don’t need. The rest of the western U.S. should heed the lesson.
Sara Sutherland is a senior research fellow at the Property and Environment Research Center (PERC), a Bozeman-based research center that applies market-based solutions to conservation problems. She is also a lecturer in agricultural and resource economics at UC Davis. Eric Edwards is a PERC senior fellow and an associate professor in agricultural and resource economics at UC Davis.