Water Security and Regional Development in Australia

ARCRNSISS-ANZRSAI Conference Adelaide, 2nd December 2008

December 2008

Prof Mike Young, The Environment Institute The University of Adelaide

Drought & climate shifts

How did we get it wrong?

• Robust policies were not in place• Lacked

– Hydrological integrity– Economic integrity– Environmental integrity– Institutional integrity

• Our social and biophysical scientists failed to communicate messages adequately

Water withdrawals per capita

0

1000

2000

3000

4000

5000

6000

Au

stralia

Un

ited K

ing

do

m

New

Zealan

d

Iraq

(Australia = 135/161 countries)

“We have a water management problem not a water supply problem!” Business Council of Australia 2006

Australia = “The driest inhabited continent in the world.”

Urban Water

0

500

1000

1500

2000

19

11

19

14

19

17

19

20

19

23

19

26

19

29

19

32

19

35

19

38

19

41

19

44

19

47

19

50

19

53

19

56

19

59

19

62

19

65

19

68

19

71

19

74

19

77

19

80

19

83

19

86

19

89

19

92

19

95

19

98

20

01

20

04

Ra

infa

ll (

mm

)

14% less 20% less

Rainfall for Jarrahdale

0

100

200

300

400

500

600

700

800

900

1000

19

11

19

14

19

17

19

20

19

23

19

26

19

29

19

32

19

35

19

38

19

41

19

44

19

47

19

50

19

53

19

56

19

59

19

62

19

65

19

68

19

71

19

74

19

77

19

80

19

83

19

86

19

89

19

92

19

95

19

98

20

01

20

04

Str

ea

mfl

ow

(G

L)

N o te s : S tre a m flo w is fro m Ma y o f la b e lle d ye a r to th e fo l lo w in g Ap ri l

48% less

66% less

S tre a m in flo w fo r P e rth d a m s (P rio r to S tirlin g D a m )

PERTH

Hydrological integrity – changing dsns

- 1%

- 3%

Economic integrity

Lack competitive pressure– Full cost pricing

– for every drop– at every location

– Scarcity pricing

• Lack competitive pressure – Lack diversity– Recycling, stormwater, desalination,

technology

Direct Costs of Water Supply/Demand Options(Sydney, Adelaide, Perth, Newcastle)

$0.25

$1.30 $1.45 $1.50 $1.58

$2.61$3.00 $3.00

$4.00

$5.00

$5.60$6.00

$9.30

$1.68

$1.15 $1.30

$0.63

$0.22

$0.30$0.06

$3.00

$0.00 $0.10 $0.20 $0.15 $0.08$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

Catch

men

t thin

ning

Purch

ase

irriga

tion

water

Deman

d m

anag

emen

t

Storm

water

reus

e

Groun

dwat

er

Indir

ect p

otab

le re

use

Seawat

er d

esali

natio

n

Dams a

nd su

rface

wat

er

BASIX

Loss

redu

ction

Rainwat

er ta

nks

Nonpo

table

wat

er re

cycli

ng

Long

dist

ance

pipe

lines

$/k

L

Source: Marsden Jacob 2006

• The price of urban water supply and security is rising!• Who should bear the financial risk for increased

security in a world of climate shifts and change?• Security is expensive

Building and subdivision incentives

1. Developers required to source urban water entitlements prior to subdivision

– Potential sources• Irrigators• Urban storm water credits• Aquifer storage and recovery• House design

2. Urban infill and extensions under same regulatory disciplines as new homes

3. Mandatory disclosure of water efficiency at house sale

Developer & Builder ~ 80% Owners & Occupiers ~ 20%

Source: Marsden Jacob 2005 PMSEIC 2007

Social integrity

• Inclining block tariffs are inequitable• Especially when many fixed charges

in place– Target directly

• Offer rebates to the needy• Charge for volume used

Environmental integrity

NWI .. full cost recovery for water services to ensure business viability and avoid monopoly rents, including recovery of environmental externalities,– Use separate instruments and differentiate by

externality typ• Upstream• Local• Downstream

– Offset rewards– Stormwater credits– Sewage charges based on load and volume

Institutional integrity

• Pricing decisions involve politics!– Why?

• Appoint an independent price regulator– Move away from uniform pricing– Move toward cost-reflective pricing in a

world where third parties can compete

• Institutional unbundling

South East Qld’s unbundled admin.

structure

Bulk

Sup

ply

Trea

tmen

tD

istrib

utio

n Bu

lk

Tran

spor

tRe

tail Retailer

1

Water Grid Manager

Bulk Transport Entity

Single RegionalBulk Entity

Distribution Entity

Retailer 3

Retailer 5

End Users

Manufactured Water Entity

· PRW

· Desalination

Retailer 4

Retailer 2

Retailer 9

Retailer 8

Retailer 7

Retailer 6

Retailer 10

Operational 1 October 2008

[Councils submit preferred structures November 2007]

Operational 1 July 2010or earlier by agreement

By 1 July 2010

GR

ID M

AN

AG

ER

Rural Water - Murray Darling Basin

Long drys

DRY WET

Total River Murray System Inflows (including Darling River)

8 yrs 12 yrs 52 yrs

With half as much water

Users

Environment

River Flow

Environment

River Flow

Users

Hydrological Integrity

• Ground - surface water connectivity• Interception by

– Plantation forestry, small farm dams, overland flow capture, salinity interception

• Return flow erosion– Assign an entitlement to the environment– Require 100% offset of interception– Link ground & surface water entitlement

systems

Environmental integrity

• Dredges in mouth since Oct 2002• Over-allocated and over-entitled

– Secure entitlements for environment– New agreement once Act is passed– Transfer control of environmental

entitlements in regional trusts

Social integrity

• Restrictions on trade and adjustment have impeded rather than facilitated and expedited change

• Focused on infrastructure rather than changing entitlement regime– Speedier buyback– Exit payments for sale of entire

entitlement– No restrictions on trade out of district– Payment of termination fees

Economic Integrity

• Unrestricted water market• Faster settlement• Missing externality market

– Settlement within two days– Linked registers– Allocate salinity credits to individuals

Water needed to ensure conveyance

Entitlements Environment

Flood water

Shared WaterEntitlements

Vo

lum

e of w

ater availab

le

Environment with a

fully-specified share

Institutional integrity

All run by an independent Authority

The next MDB challenges1. Backing the Murray Darling Basin Authority– Murray Darling Basin Authority and a new Basin Plan

2. Developing a Basin Plan that has climate and accounting integrity

– A robust sharing regime

3. Securing an environmental share in a timely manner

– Combine infrastructure and acquisition money ($3.1b is not enough)

– Expedite expenditure

4. Reconfiguring the River, its lakes and wetlands• What do we give up? How clever can we be?

5. Removing all barriers to trade and rationalising infrastructure investment

“We don’t have all the answers – nobody does – but before we start laying bricks and mortar, we have got to get the foundations right, otherwise the cathedral will tumble with the smallest of tremors.”

Peter Cullen Wentworth Group of Concerned Scientists

Contact:

Prof Mike YoungWater Economics and ManagementEmail: Mike.Young@adelaide.edu.auPhone: +61-8-8303.5279Mobile: +61-408-488.538 www.myoung.net.au

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