Opportunity Cost Of Water Research Articles

Contribution of non‐conventional pumped‐storage hydropower plant configurations in an isolated power system with an increasing share of renewable energy

This paper analyses the contribution of non-conventional pumped-storage hydropower plant (PSHP) configurations like variable-speed pumping and hydraulic short-circuit, to reducing the scheduling cost and wind curtailment of an isolated power system with a high penetration of renewable energy. Their impact on the system's CO2 emissions and generation mix is analysed as well. For this purpose, the next-day generation scheduling of the power system of the Great Canary island is computed on a rolling horizon basis for an entire year, considering conventional and non-conventional PSHP configurations and an increasing installed wind power. Different types of start-ups of the thermal generating units and the opportunity cost of water (water value) are considered in the day-ahead generation scheduling. The water value is daily updated by using a two-stage stochastic optimisation model with a two-week planning horizon. The results obtained show how these non-conventional pumped-storage hydropower plant configurations help not only to reduce the power system scheduling cost but also to integrate more wind energy.

Water allocation in Australia’s Murray–Darling Basin: Managing change under heightened uncertainty

Historically, water resource policy in the Murray–Darling Basin (Basin) has taken a pro-farmer orientation leaving the environment to become the residual claimant. Around 1990, the attention was focused on minimisingoveruse that led to on-farm productivity losses and developing a market for water to help define opportunity costs of water in irrigation. More recently, the scope has been extended to include explicit allocations for the environment. However, the failure to agree on policies for recovering water for the environment in the implementation of the Basin Plan has extended avenues for rent seeking and cost shifting, thereby raising the total costs of reform. A focus on water use per se, rather than system productivity, and sidelining of market-based approaches in preference for government investment in water recovery and water use efficiency has complicated risk assignment amongst different users. Recurring droughts and resultant scarcity of water has made negotiations further complicated and controversial, broadening the gulf between environmentalists seeking public good outcomes and irrigators seeking private profit.Despite these, the MDB system as a whole, including dryland and irrigated farming, environmental uses and other industries, has adjusted to chanding conditions, drawing on new knowledge and technology and emerging market opportunities. Irrigators have shown an ability to diversify into new commodities with better prospects for managing risks. However, declining farm numbers, a changing demography and accelerating climate change point to general failure risks if the reform process were to halt and governments disregarded the gains through a rebalancing of consumption possibilities from the full complement of Basin’s resources — not just irrigation. This paper, examines the sources of social costs in water resource allocation, including pros and cons of water trading with respect to agricultural production and externalities. The aim is to canvass possible reform alternatives which might help governments to become a catalyst in fostering collaboration for efficient adaptation.

Emerging water and carbon market opportunities for environmental water and climate regulation ecosystem service provision

Markets are increasingly part of government, non-government, and private business provision of public environmental interests. Key examples include carbon credit markets and environmental water markets. Market demand for carbon credits from sequestration are expected to expand in size and geographic scope as a result of climate action obligations and increased carbon credit tradability provisions in the Paris Agreement on climate change. Market based reallocations of water are also increasingly common. The increased use of markets for multiple and related environmental good provision will inevitably introduce synergies and risks in joint ecosystem service provision. This study assesses water and carbon ecosystem service supply potential for a joint carbon and water market participation strategy using a case study of the lower Murrumbidgee, in the Murray-Darling Basin. The methodology is a dynamic hydro-economic simulation of river flows, floodplain inundation, forest carbon dynamics, carbon credit value, and water opportunity cost. The study results indicate possible synergies in joint provision of carbon sequestration and environmental flow benefits through a carbon-water trading strategy. This involves funds for environmental water purchases generated through sale of carbon credits from improved floodplain conditions. Results identify limited trading opportunities at the current carbon price (AU$13/tCO2), resulting in an economically viable re-allocation of 2.31 GL/year (0.1% of water currently diverted for irrigation) to the environment with frequent years of zero re-allocation. At prices above AU$20/tCO2, there may be additional trading opportunities and as much as 5% of current irrigation diversion was predicted to be reallocated at AU$100/tCO2. While the results are particular to the case study, the conclusions discussing policy design challenges related to realizing effective environmental improvements in interacting carbon and water markets are relevant to many water catchments globally.

Smallholder farmers’ willingness to pay for irrigation water: Insights from Eritrea

The role of irrigation water pricing as a signal for scarcity and opportunity cost of water, and financing tool for irrigation developments has been strongly upheld. While the ability and willingness to pay (WTP) of smallholder farmers for irrigation water could profoundly determine sustainability of irrigation projects, little empirical evidence exists about the consequences of irrigation water pricing based on direct survey of smallholder farmers’ WTP particularly from drier regions of the globe such as the Sahel. Here, we economically evaluate the consequences of irrigation water pricing through a direct survey of farmers’ WTP and the factors that affect farmers’ WTP for irrigation supply improvements. We collected unique data through a double-bound dichotomous-choice contingent valuation survey of smallholder irrigation farmers in Eritrea. Eritrea has set pricing guidelines designed to reflect irrigation water as an economic good, while the entire country is being swallowed by the ever-expanding Sahara desert as well as being home to globally the poorest smallholder farmers. Bivariate probit and logistic regression models were employed for data analysis and revealed: (1) some 54% of the farmers perceived water as an economic good; (2) about 76% of the farmers were willing to pay the initial offered bid for irrigation water; and (3) the average WTP of farmers was about 5% of average farm income. Our results further indicated that initial bid, land tenure security, age of a farmer, households’ income from irrigation farming and source of water being used are all significant determinants of farmers’ WTP for irrigation water supply improvement. Overall, our findings provide evidence that smallholder farmers are willing to pay for increased volumes of water for irrigation purposes and suggest that public-private partnerships for the storage and delivery of water for irrigation could be economically feasible, even in poor countries such as Eritrea.

Analysis of the competitiveness of wheat and orange in Tunisia under water shortage scenarios

Increasing water shortage results in higher food prices which may affect the competitiveness of small irrigated farming systems. The purpose of this paper is to evaluate the effects of water shortage on the competitiveness of orange and wheat commodities in Tunisia. Stochastic production functions were used to estimate changes in the opportunity cost of water which will be utilized in the calculation of domestic resource cost (DRC). Primary data used for the empirical analysis were collected from 170 wheat and 51 orange farms located in the major irrigated areas of the country. Empirical results indicate that, in the current baseline situation, Tunisia has a comparative advantage in the production of orange but not for wheat production. Results of sensitivity analysis show that the competitiveness in wheat and orange production has been deteriorated due to a decrease in water availability at the farm level. DRC ratio increases from 0.91 to 1.13 for orange, and from 1.24 to 8.27 for wheat with 50% decreases in water availability. However, improving irrigation water use efficiency led to a significant decrease in DRC for both commodities. This finding urges decision-makers to put more efforts to optimize irrigation management at field and farm levels through dissemination of better irrigation scheduling techniques and implementing deficit irrigation strategies especially that the country is under a critical water shortage.

Co-Optimization of Energy and Ancillary Services for Hydrothermal Operation Planning Under a General Security Criterion

One of the most used methods for long-term hydrothermal operation planning is the stochastic dual dynamic programming (SDDP). Using this method, the immediate and future water opportunity cost can be balanced and an economic-dispatch policy can be defined for multiple reservoirs under inflow uncertainty. In this framework, equipment outages and reserve deliverability are generally disregarded, despite their strong impact on the operative plan. However, recent advances in robust optimization have shown how to endogenously account for security criteria in scheduling models with reduced computational burden. Within this framework, reserve deliverability is ensured across the network via the co-optimization of energy and reserves (ancillary services). In this paper, we propose a new multistage model for planning hydrothermal coordination that co-optimizes the nominal energy dispatch and individual up and down reserve allocations. The main goal of this paper is to address a general $n-K$ security criterion, such that, for each inflow scenario, the system is capable of withstanding the loss of up to $K$ components, i.e., generation or transmission assets. The proposed methodology uses the column-and-constraint generation algorithm to efficiently incorporate a compound umbrella set of contingencies in the SDDP algorithm. Results for the Brazilian power system data corroborate the effectiveness of the proposed model.

Finding water scarcity amid abundance using human–natural system models

Water scarcity afflicts societies worldwide. Anticipating water shortages is vital because of water's indispensable role in social-ecological systems. But the challenge is daunting due to heterogeneity, feedbacks, and water's spatial-temporal sequencing throughout such systems. Regional system models with sufficient detail can help address this challenge. In our study, a detailed coupled human-natural system model of one such region identifies how climate change and socioeconomic growth will alter the availability and use of water in coming decades. Results demonstrate how water scarcity varies greatly across small distances and brief time periods, even in basins where water may be relatively abundant overall. Some of these results were unexpected and may appear counterintuitive to some observers. Key determinants of water scarcity are found to be the cost of transporting and storing water, society's institutions that circumscribe human choices, and the opportunity cost of water when alternative uses compete.

Water Resource Pricing Study Based on Water Quality Fuzzy Evaluation: A Case Study of Hefei City

Price plays an important role in water resources management. The price of water resources can also be considered as a “water resource tax” which reflects the value and opportunity cost of water, and people will pay for the right to use water. Currently, the water resource fees’ effect of regulating resource differential revenues is not manifest and it’s not enough to reflect the principle of paid use of resources as well as regulating resources differential revenues. Due to the ambiguity and complexity of water resources price, this paper uses methods relating to fuzzy mathematics for modeling and processing. The study had a comprehensive consideration of five factors including water quality, water resources per capita, household consumption level, per capita GNP, population or population density to evaluate the water resource price.

Opportunity cost of water allocation to afforestation rather than conservation of natural vegetation in China

Estimation of ecosystem service values is a hot area of research in ecological conservation and economics. However, the costs of these outputs are largely unknown. In this paper, we estimated the opportunity cost of water allocated to afforestation projects through mathematical modeling based on statistical data for all of China to provide support for restoration planning based on a fuller consideration of the true costs. To guide future ecological conservation and environmental policy development, we illustrate a neglected concept (ecosystem service costs) and use this concept to compare the ecological services provided by ecological restoration based on afforestation with those of restoration based on the conservation of natural vegetation using data obtained since 1949 in China. The results showed that afforestation and natural vegetation create annual costs related to use of the available water resources equal to 4800 and 3700 RMBha−1, respectively, representing a water opportunity cost of 1100 RMBha−1 for afforestation. This illustrates the rule that “there is no free lunch” for any service, including ecosystem services. Therefore, to support the development of more effective and sustainable environmental restoration policy, it will be necessary to evaluate the associated opportunity costs.

Definition of efficient scarcity-based water pricing policies through stochastic programming

Abstract. Finding ways to improve the efficiency in water usage is one of the most important challenges in integrated water resources management. One of the most promising solutions is the use of scarcity-based pricing policies. This contribution presents a procedure to design efficient pricing policies based on the opportunity cost of water at the basin scale. Time series of the marginal value of water are obtained using a stochastic hydro-economic model. Those series are then post-processed to define step pricing policies, which depend on the state of the system at each time step. The case study of the Mijares River basin system (Spain) is used to illustrate the method. The results show that the application of scarcity-based pricing policies increases the economic efficiency of water use in the basin, allocating water to the highest-value uses and generating an incentive for water conservation during the scarcity periods. The resulting benefits are close to those obtained with the economically optimal decisions.

WATER PRODUCTION FUNCTION AND MATHEMATICAL OPTIMIZATION OF REGULATED DEFICIT DRIP IRRIGATED PEACH

Egypt is one of the countries facing great challenges due to its limited water resources associated with expanding population. Therefore, new approaches for irrigation management are required to reduce water consumption and improve water use efficiency. Regulated deficit irrigation (RDI) is the strategy of reducing irrigation rates during a specific period of growth and development, with the objective of conserving water and managing plant growth while maintaining or improving yield and fruit quality. A two years old Peach trees in sandy soil under drip irrigation system were subjected to a range of irrigation deficits from pit hardening to harvest during the 2011 and 2012 seasons to evaluate the effects of deficit irrigation on peach yield. Four irrigation treatments were evaluated according to irrigation water requirements: 120% of full irrigation (I120), 100% full irrigation (I100), 80% full irrigation (I80), 60% full irrigation (I60).A cost-benefit analysis was performed for two and three years old peach plantation [prunuspersica]to determine profitability under regulated deficit irrigation (RDI). The opportunity cost of water is higher than the delivery cost of water. One major point of this analysis is the dramatic differences between the delivery cost of water and its opportunity cost which is almost 10 times more than the delivery cost. It is clear that such a cost ought to be considered as the value of water. Regression equations were developed to predict crop yield resulting from water deficit. The study recommended the model to predict crop yield and water saving. As long as the main goal is to maximize the profit as well as saving water, it could be said that the optimal profitable yield is not necessarily the maximum one, but could be less. Deficit irrigation technique is recommended in arid regions such as Egypt where water resources are limited.

Pricing Energy and Ancillary Services in a Day-Ahead Market for a Price-Taker Hydro Generating Company Using a Risk-Constrained Approach

This paper analyzes a price-taker hydro generating company which participates simultaneously in day-ahead energy and ancillary services markets. An approach for deriving marginal cost curves for energy and ancillary services is proposed, taking into consideration price uncertainty and opportunity cost of water, which can later be used to determine hourly bid curves. The proposed approach combines an hourly conditional value-at-risk, probability of occurrence of automatic generation control states and an opportunity cost of water to determine energy and ancillary services marginal cost curves. The proposed approach is in a linear constraint form and is easy to implement in optimization problems. A stochastic model of the hydro-economic river basin is presented, based on the actual Vinodol hydropower system in Croatia, with a complex three-dimensional relationship between the power produced, the discharged water, and the head of associated reservoir.

Review and synthesis of the effects of climate change on amphibians

Considerable progress has been made in understanding the responses of amphibians to climate change, with successful research carried out on climate change-associated shifts in amphibian phenology, elevational distributions and amphibian-parasite interactions. We review and synthesize the literature on this topic, emphasizing acutely lethal, sublethal, indirect and positive effects of climate change on amphibians, and major research gaps. For instance, evidence is lacking on poleward shifts in amphibian distributions and on changes in body sizes and morphologies of amphibians in response to climate change. We have limited information on amphibian thermal tolerances, thermal preferences, dehydration breaths, opportunity costs of water conserving behaviors and actual temperature and moisture ranges amphibians experience. Even when much of this information is available, there remains little evidence that climate change is acutely lethal to amphibians. This suggests that if climate change is contributing to declines, it might be through effects that are not acutely lethal, indirect, or both, but evidence in support of this suggestion is necessary. In fact, evidence that climate change is directly contributing to amphibian declines is weak, partly because researchers have not often ruled out alternative hypotheses, such as chytrid fungus or climate-fungus interactions. Consequently, we recommend that amphibian-climate research shift from primarily inductive, correlational approach as to studies that evaluate alternative hypotheses for declines. This additional rigor will require interdisciplinary collaborations, estimates of costs and benefits of climate change to amphibian fitness and populations, and the integration of correlative field studies, experiments on 'model' amphibian species, and mathematical and functional, physiological models.

Estimating the opportunity cost of water for the Kusile and Medupi coal-fired electricity power plants in South Africa

In South Africa, water is considered a limited source, not only because of the country’s arid nature, but also because of the relatively skew distribution of the resource and the fact that 98% of the resource is already allocated. Eskom, the South African electricity supplier, commenced with the construction of two new coal-fired power stations namely Kusile and Medupi. The question is: what is the opportunity cost of investing in these power stations from a water perspective? We do not argue here against the need for power plants and additional electricity generation capacity per se, but consider the opportunity cost of using this specific technology. We estimate the shadow price of water for different power generation technologies as an indicator of the opportunity cost of water. We apply a production function approach for a baseline case (coal-fired power generation using the Medupi and Kusile parameters), and four alternative technologies. The only alternative that performs worse than the baseline case is the traditional wet-cooling coal-fired power process. The baseline case, however, does show a high opportunity cost when compared to renewable alternatives (solar, wind and biomass) ranging from R0.66/kWh (biomass) to R0.83/kWh (solar) to R1.31/kWh (wind).

The external costs of coal mining: the case of collieries supplying Kusile power station

The aim of this paper was to quantify the external costs of mining and transporting coal to the Kusile coal-fired power station in eMalahleni. Monetary values were estimated for a number of impacts including its contribution to climate change, human health effects of classic air pollutants, mortality and morbidity, impacts of water pollution and water consumption. The results of the study disclosed that coal mining and transportation will inflict costs to both the environment and humans of between R6 538 million and R12 690 million per annum, or between 20.24 c/kWh and 39.3 c/kWh sent out. The external effect of water consumption (opportunity costs of water) constitutes over 90% of the total cost, followed by global warming damage costs and ecosystem services lost due to coal mining. The estimated externality cost is approximately between 50% and 100% of the current average electricity price.

Role of Virtual Water in Optimizing Water Resources Management in Jordan

Role of virtual water (VW) in optimizing water resources management in Jordan, a far water-short country, was explored by calculating VW content of imported commodities and their costs. Feasibility of farming and water required to produce all crops growing in Jordan were evaluated using net return per unit volume of water and VW embedded in unit mass of production. The results of these analyses showed that there were regional differences in crop profitability and thus net return from unit volume of irrigation water. This was attributed to variations in agro-climatic zones punctuated by production and irrigation technologies and access to water resources. In this regard, opportunity cost of water should be considered when allocating water to different consumption sectors. Agricultural systems generating net profits less than an arbitrary limit of $1.0 m−3 of irrigation water and producing yield at water use efficiency of 50–60 m3 ton−1 or more were viewed not feasible. The key challenge facing decision makers would be to ensure that the opportunity cost of water was incorporated into the analysis process when determining future cropping pattern. Such a cost of water should be combined with crop-embedded VW analysis and expected net return from unit volume of irrigation water. Therefore, water allocation mechanism (e.g. water market) need to be developed for more efficient water use than the commonly practiced farm quota. Optimization of the usage of the limited water resources can be envisaged by continuous imports of VW, especially that embedded in cereal, oil, meat, live animals and sugar. Appropriate amendment of water legislations and concerned institutions are encouraged to provide better guidelines to policy makers, water managers, extension and advisory services, water use associations and farmers. Optimization of water resources management could be based on contract farming to ensure that water allocation and cropping pattern respond to water scarcity. Furthermore, Jordan should concentrate on production and export of crops having low VW contents and high return per m3.

Review of whole-farm economic modelling for irrigation farming

The main objective of this paper is to review the progress that has been made in South Africa with respect to whole-farm economic modelling over the past 2 decades. Farming systems are complex and careful consideration to the stochastic dynamic nature of irrigation farming processes and their linkages with the larger water system is necessary when conducting whole-farm modelling. Both simulation and optimisation approaches to whole-farm modelling have been developed. Simulation is able to realistically model key performance indicators for decision-making while taking cognisance of the stochastic dynamic nature of irrigation agriculture. Normally only a few predefined scenarios are considered and these do not include decisions regarding allocation of water between competing farm uses of water. Optimisation models take the opportunity cost of water into account while optimising water use between multiple crops. Simplifications of the soil-cropwater subsystem are necessary to optimise agricultural water use between activities which are differentiated by crop, irrigation technology and soil at whole-farm level. Appropriate use of crop simulation models to provide input for mathematical programming models holds promise but needs to be weighed against the extra time needed to validate models and generate the required information. Research is necessary to determine the value of considering water as a stock resource compared to a situation where water use is optimised without considering water as a stock resource. Optimisation results indicated that it is profitable to irrigate larger areas with water saved from deficit irrigation and increasing irrigation efficiency. Relatively little research was done to demonstrate the externalities caused by irrigation farming under the current water policy. Future research should focus on developing integrated hydro-economic modelling frameworks that will incorporate irrigation externalities. Modelling decision-making by means of a single-attribute utility function is unsatisfactory and more research is necessary to improve understanding of the decision-making process to enhance whole-farm modelling frameworks that will assist farmers in making tactical decisions.

Urban water restrictions: Attitudes and avoidance

In most urban cities across Australia, water restrictions remain the dominant policy mechanism to restrict urban water consumption. The extensive adoption of water restrictions as a means to limit demand, over several years, means that Australian urban water prices have consistently not reflected the opportunity cost of water. Given the generally strong political support for water restrictions and the likelihood that they will persist for some time, there is value in understanding households' attitudes in this context. More specifically, identifying the welfare gains associated with avoiding urban water restrictions entirely would be a nontrivial contribution to our knowledge and offer insights into the benefits of alternative policy responses. This paper describes the results from a contingent valuation study that investigates consumers' willingness to pay to avoid urban water restrictions. Importantly, the research also investigates the influence of cognitive and exogenous dimensions on the utility gain associated with avoiding water restrictions. The results provide insights into the impact of the current policy mechanism on economic welfare.

Using Instream Water Temperature Forecasts for Fisheries Management: An Application in the Pacific Northwest1

Huang, Biao, Christian Langpap, and Richard M. Adams, 2011. Using Instream Water Temperature Forecasts for Fisheries Management: An Application in the Pacific Northwest. Journal of the American Water Resources Association (JAWRA) 47(4):861-876. DOI: 10.1111/j.1752-1688.2011.00562.x Abstract: Water temperature is an important factor affecting aquatic life within the stream environment. Cold water species, such as salmonids, are particularly susceptible to elevated water temperatures. This paper examines the potential usefulness of short-term (7 to 10 days) water temperature forecasts for salmonid management. Forecasts may be valuable if they allow the water resource manager to make better water allocation decisions. This study considers two applications: water releases from Lewiston Dam for management of adult Chinook salmon (Oncorhynchus tshawytscha) in the Klamath River and leasing water from agriculture for management of steelhead trout (Oncorhynchus mykiss) in the John Day River. We incorporate biophysical models and water temperature distribution data into a Bayesian framework to simulate changes in fish populations and the corresponding opportunity cost of water under different levels of temperature forecast reliability. Simulation results indicate that use of the forecasts results in increased fish production and that marginal costs decline as forecast reliability increases, suggesting that provision and use of such stream temperature forecasts would have potential value to society.

THE VALUE OF IN‐STREAM WATER TEMPERATURE FORECASTS FOR FISHERIES MANAGEMENT

Water temperature is an important factor affecting aquatic life within the stream environment. Cold water species, such as salmonids, are particularly susceptible to elevated water temperatures. This paper examines the economic value of short‐term water temperature forecasts for salmonid management. Forecasts may have economic value if they allow the water resource manager to make better water allocation decisions. This study considers two applications: water releases for management of Chinook salmon in the Klamath River and leasing water from agriculture for management of steelhead trout in the John Day River. We incorporate biophysical models and water temperature distribution data into a Bayesian framework to simulate changes in fish populations and the corresponding benefit from recreational fishing and opportunity cost of water under different temperature forecast accuracies. Simulation results indicate that use of the forecasts results in increased fish production and that marginal costs decline and net benefits increase as forecast accuracy increases, suggesting that provision and use of such stream temperature forecasts would have value to society.(JELQ22, Q25, Q28, Q50)