DUKE ENVIRONMENTAL ECONOMICS WORKING PAPER SERIESorganized by the

NICHOLAS INSTITUTE FOR ENVIRONMENTAL POLICY SOLUTIONS

Analyzing Economic Tradeoffs of Water Use in the Nam Ngum River Basin, Lao PDRRyan Bartlett*

Justin Baker†

Guillaume Lacombe‡

Somphasith Douangsavanh‡

Marc Jeuland§

Working Paper EE 12-10December 2012

* WWF-US† RTI International‡ International Water Management Institute§ Sanford School of Public Policy, Duke University

The Duke Environmental Economics Working Paper Series provides a forum for Duke faculty working in environmental and resource economics to disseminate their research.

These working papers have not undergone peer review at the time of posting.

NICHOLAS INSTITUTEFOR ENVIRONMENTAL POLICY SOLUTIONS

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AnalyzingEconomicTradeoffsofWaterUseintheNamNgumRiverBasin,LaoPDR

RyanBartlett1,JustinBaker2,GuillaumeLacombe3,SomphasithDouangsavanh3,Marc

Jeuland4

1:WWF‐US.WashingtonDC,USA.ryan.bartlett@wwfus.org2:RTIInternational.RTP,NorthCarolina,USA.justinbaker@rti.org3:InternationalWaterManagementInstitute.Vientiane,LaoPDR.g.lacombe@cgiar.org;s.douangsavanh@cgiar.org4:DukeUniversity,Durham,NC,USA.marc.jeuland@duke.edu

December2012

AbstractThispaperdevelopsahydro‐economicoptimizationmodelingframeworktoassesstheeconomicconsequencesandpotentialtrade‐offsofvariousinfrastructuredevelopmentandpolicypathwaysintheNamNgumBasin(LaoPDR).Weconsideredwhetherlargeshiftsinwaterresourcedemandsinarelativelywaterabundantbasincouldinducemeaningfuleconomictrade‐offsamongwateruses,includinghydropowergeneration,irrigationexpansion,floodcontrol,andtransboundarywatertransferobjectives.Weconstructedaseriesofsensitivityscenariosunderdry,average,andwethydrologicconditionswithvaryinglevelsdamdevelopment,irrigatedagriculturalexpansion,agriculturalreturns,floodcontrolstoragerestrictions,andwaterdiversionstoNortheastThailand.WealsoconsideredhowflowsintotheMekongwouldbeaffectedbythesecollectivedevelopments.Ingeneral,resultsindicatethattradeoffsbetweenhydropowerproduction,irrigation,andfloodcontrolaremodest.Hydropowerandagriculturalexpansionarefoundtobecomplimentaryunderhighlevelsofwateravailability,evenwiththemostambitiouslevelofirrigationexpansion.AllowingforfloodcontrolbymaintainingreducedstoragelevelsinthereservoirthatislargestandfurthestdownstreamontheNamNgum(NN1)hasaminimaleffectoneconomicoutputanddecreasestotalsystemhydropowerbylessthan1%.However,economicoutcomesarehighlydependentonwateravailabilityandeconomicreturnstoirrigatedagriculture.Systemhydropowerwasgreatlyreduced,andinter‐basintransferprojectsinducedlargeeconomiccostsunderdryconditions.Theseresultsonseasonalimpactsillustratetheimportanceofaccountingforclimatevariabilityandpotentialhydrologicchangeincost‐benefitanalysisofinfrastructureprojects,eveninwatershedsthatarerelativelywaterabundant.

Keywords:Optimization;waterresourcesmanagement,MekongRiver,LaoPDR,hydropower,irrigation

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1.Introduction

AsrapideconomicdevelopmentcontinuesinSouthEastAsiaandtheLowerMekongBasin,demandsforbothfoodandenergywillcontinuetorise(FAO2010;IEA2012).Withtheserisingdemandscomechallengesassociatedwithregionalmanagementofwaterresources,creatingincreasedcompetitionbetweendifferentusersandMekongRiverriparians,andputtingnewandgreaterpressureonsurroundingecosystems(Ringler2001;Friendetal.2009;Zivetal.2012).LaoPDR,oneoftheleastdevelopedeconomiesintheMekongregion,isalsooneofthemostactiveinpursuinghydropowerandagriculturaldevelopment(GrumbineandXu2011;Matthews2012).Withitsriverscontributing35%ofMekongflowsanditsstrategiclocationbetweentheboomingeconomiesofChina,Vietnam,andThailand,LaoPDRisuniquelysituatedtodeliverhydropowertobothdomesticandregionalmarkets,andhasambitionsofbecomingthe“batteryofSoutheastAsia”(Bardacke1998;MRC2005;ICEM2010).Thecountryhas10damsnowinoperation,eightunderconstruction,and82underlicenseorinplanningstagesnationwide,togetherrepresentingmorethan20,000MW(ICEM2010).1Yetthebasin‐wideimplicationsofsuchprojectsareamatterofsomecontroversy(Molleetal.2009;BangkokPost2011;Pearse‐Smith2012),andthedegreetowhichhydropower‐basedeconomicdevelopmentisconsistentwithothersocioeconomicandenvironmentalobjectivesinLaoPDR(e.g.irrigation,fisheries,floodcontrol)hasscarcelybeenexplored.

Infact,theLaogovernmentisalsokeentoutilizeitswaterresourcestopursueirrigationexpansion.MuchofthenewirrigatedareawouldbelocatedinorwouldusewaterfromtheNamNgumBasin(DWR2008).Covering7%ofthecountry’slandarea,theNamNgumBasinishometoroughly500,000people,representingapproximately9%ofLaoPDR’stotalpopulation(WREA2008).Itsflowscontribute4%ofmeanannualflowsandupto15%ofdryseasonflowsoftheMekongRiver(Lacombeetal.2012).ThevastmajorityofexistingfoodproductionandexpansionpotentialfromtheNamNgumoccursintheVientianePlain,whichishometooneofthenation’smostagriculturallyviablelandareas,withgreatpotentialforirrigationexpansion(WREA2008).Severalnewirrigationprojectsareinvariousstagesofplanningaspartofalargergovernmentstrategytoturnthebasinintoanationalandregionalproductionareaforriceandvegetables.Themostambitiousoftheseproposalswouldincreaseirrigatedareabymorethan100,000hectares(Geotech2012).TherehavealsobeenrecentdiscussionsofdivertingflowfromtheNamNgum(orMekong)Rivertowater‐scarceareasinnortheastThailandviaalargeinter‐basintransferjustupstreamofitsconfluencewiththeMekong.2

However,likemanyriversinLaoPDR,theNamNgumattractsthemosteconomicinterestforitshydropowerpotential.Thebasinalreadyincludesthreedamsbuiltprimarilyforhydropowerproduction.Twooftheseprojectswerecompletedinthelastthreeyears(representing255MWof

1LaoPDRfarexceedsanyoftheotherlowerMekongcountries,withVietnamsecondindevelopingitshydropowerpotential,withsevencurrentlyoperatingprojectsandfiveunderconstruction,butonlytwoinplanningstages.2Thisproposalisnotuncontroversial.However,duetotherelativewaterstressofthisregion,waterwealthintheNamNgum,andlong‐termeffortsoftheThaigovernmenttosignificantlyexpandriceproduction,itislikelytoresurfaceinfuturenegotiationsoverwatersharing.

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installedcapacity),anotherisunderconstruction(120MW),andsevenmore(373MW)areinvariousstagesofplanning(EPD2012;Lacombeetal.2012).ThesedevelopmentsareseenascriticallyimportantformeetingcurrentandfutureenergydemandintherapidlygrowingcitiesandtownsthroughoutthelowerMekonginThailandandVietnam,aswellasVientiane,thecapitalofLaoPDR.

Determiningtheviabilityofthedualstrategyofirrigationandhydropowerexpansionrequirescarefulanalysistounderstandwhetherenergygenerationobjectiveswouldbeconsistentwithdeliveryofwaterrequiredbyadditionalirrigationdevelopment.Asisthecasewithmuchofrecenthydropowerdevelopmentinthedevelopingworld,however,thedamprojectsintheNamNgumareplannedinpiecemealfashionandindependentlymanaged,withonlyminimalconsiderationoftheircumulativeandbasin‐wideeconomicandhydrologicalimpacts(Jeuland2010).Thelackofcoordinationisevidentinrecentcontroversiesandobservedflooddamagesfrompoorly‐managedwaterreleasesduringhighflowevents(Bachetal.2012).Thisisinpartduetoaninsufficientunderstandingoftheeconomicvalueofthecountry’svastwaterresources,withrevenuesfromelectricitygenerationatindividualdamssometimesovershadowingpotentialtrade‐offswithotherimportanteconomicsectorslikeagriculture,aquaculture,orwiththenonmarketvaluegeneratedbysubsistencefisheriesorotherhydrologicalservices(GrumbineandXu2011).

ThispaperdevelopsanoptimizationmodelingframeworkforassessingtheeconomicconsequencesassociatedwithvariousinfrastructuredevelopmentpathsintheNamNgumBasin.Themodelisthenparameterizedwiththelatesthydrological,wateruse,andtechnicalandeconomicproject‐specificdata.Ourgoalisnottoconductacomprehensiveeconomicanalysisofdifferentpackagesofpotentialinfrastructures,butrathertounderstandwhetherdifferentenergygeneration,irrigation,andfloodcontrolobjectivescanbeachievedacrossalternativewateravailabilityscenarios,focusingspecificallyonpotentialeconomictradeoffsamongthem.Todoso,weuseahydro‐economicmodelthatoptimizestheeconomicbenefitsfrombasin‐widepowerproductionandagriculturalproduction,subjecttoconstraintssuchasfloodcontrolandenvironmentalflowrequirements.Themodelallowsustomeasurethecost,intermsoflostpowergeneration,thatmightemergefromconstraintsdevelopedtoprotectassetsandecosystemslocateddownstreamfromhydropowerdams.Wemodeldry,normal,andwetyearsasselectedfromthewiderangeofvariabilityinhistoricalflows,sincethisvariabilityappearstoincludetherangeofprojectionsofaverageclimatechangeforthisregion(Lacombeetal.2012).Importantly,themodelassumesthatoperationofcontrolinfrastructuresinthebasinwouldbecoordinatedacrossdamsandovertime,andthusrepresentsanupperboundontheeconomicproductionthatwouldbepossible.TheNamNgumbeingsuchanimportanttributarytotheMekong,wealsoconsiderhowflowsintothelargerriverwouldbeaffectedbythesecollectivedevelopments.Wealsostudythedegreetowhichdownstreamflowrequirementsorlarge‐scaledemandsforwatertransfertoNortheastThailandwouldreducetheeconomicbenefitsgeneratedintheNamNgumBasin.Thoughsuchwatertransfersarenotcurrentlyunderseriousconsideration,theyhavebeeninthepast,andcouldre‐emergeinthefuture.Thus,weplaceourresultsforthisbasininthewidercontextofMekongBasindevelopment(Ringler2001;Laurietal.2012),withouthoweverattemptingtoevaluatetheeconomicsofchangesintheMekonghydrograph.

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Theremainderofthepaperisorganizedasfollows.Inthenextsection,weprovideadditionalbackgroundontheNamNgumBasinandthevariousdevelopmentproposalsadvancedforincreasedutilizationofitswaterresources.WethendevelopthemodelanddiscussdatasourcesandparameterizationinSections3and4.Section5presentsresults,andadiscussionfollowsinSection6.

2.Background

2.1.ExistingLiterature

Alargenumberofhydro‐economicoptimizationmodelingstudieshavebeendevelopedandappliedtoriverbasinsaroundtheworld(RogersandFiering1986;Harouetal.2009;Jeuland2010),butonlytwohavefocusedontheMekongoritssub‐basins.Inabasin‐wideanalysis,RinglerandCai(2006)appliedanoptimizationmodeltoanalyzetrade‐offsbetweendamdevelopmentonthemainstemoftheMekongandthevalueofdownstreamfisheriesandwetlandslocatedaroundtheTonleSapLakeinCambodia.Theanalysisrevealedcleartradeoffsbetweenconsumptiveandin‐streamuses,withthelargestoccurringbetweenfisheriesandagriculture,andwetlandsandmunicipalandindustrialuses.Ultimately,duetothegeographicscopeofthestudy,theMekongBasinmodelisfairlycoarseinresolution,requiresnumerousassumptionsduetosignificantdatagaps,andislimitedtoconsideringdevelopmentprojectsontheMekongmainstream.Nonetheless,thestudyisusefulfordescribingtheeconomicsofcompetingsectorsofproductionfromwaterresourcesinthebasin:hydropower,agriculture,andecosystemservicessuchasfisheries.

Similarlytoours,thesecondanalysiswasconductedforanimportantsub‐basinofthelowerMekong.Ringleretal.(2006)useaneconomicoptimizationmodelfortheDongNaicatchment,asub‐basinlocateddownstreamintheVietnameseMekongDelta,toassesstheimpactsofchangesinwatermanagementpoliciesinthebasin,includingimprovementsinirrigationefficiency,changesincroppingpatternsorreservoiroperations,andtheestablishmentofwaterrightstradingmechanisms.Contextually,theDongNaiisaverydifferentbasinthantheNamNgum,however.Inparticular,theDongNaiisalreadyhighlydevelopedanddenselypopulated,andcompetitionamongwaterusersinirrigation,domesticwaterconsumption,andhydropowergenerationisalreadyacute.Theauthorsdonotthereforeincludenewinfrastructureprojectsintheanalysis.TheNamNgum,incontrast,wasuntilrecentlyfairlyundeveloped,withtheexceptionoftheNamNgum1damandtherelativelylimitedirrigationlocatedintheVientianePlain;itthereforeprovidesanopportunitytoconsidersomewhatdifferentquestionsrelatedtotheeconomicsofnewinfrastructureprojects.

ThoughtherehavebeenfewstudiesoftheeconomicsofdifferentinfrastructuredevelopmentstrategiesintheMekongBasin,studiesofthedriversofhydrologicalandotherchangesaffectingtheriverabound(Laurietal.2012;Räsänenetal.2012).Thesestudiespointtoimportantdevelopmentsinhydropowerandirrigation(Kingetal.2007;Keskinenetal.2012),climatechange(Vastilaetal.2010;Kingstonetal.2011;Laurietal.2012),andlandcoverchange,waterdiversion,andurbanization(KummuandSarkkula2008).Thiscollectiveworkpointstotheimportanteffects

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thatwouldresultfromalterationsofthenaturalfloodpulseoftheriver,whichwouldsignificantlyperturbseveralofitskeyecologicalfunctions(KummuandSarkkula2008;Zivetal.2012).

ModelingeffortsspecifictotheNamNgum,thoughmuchmorelimited,havealsobeencarriedout,withaparticularfocusontheeffectsofnewinfrastructureproposals.Broadlyspeaking,thesestudiesfallintotwobasiccategories:studiesthatdescribeorestimatethesocialandenvironmentalimpactsofspecificprojects,especiallynewdamproposals(ADB1996;ADB2007;VattenfallPowerConsultantAB2008);andmorecomprehensiveresearchthatanalyzesdevelopmentscenariostobetterunderstandthebasin’swaterbalanceandfuturewateravailability(SCI2004;WREA2008;AgenceFrancaisedeDeveloppementandAsianDevelopmentBank2009;WREAetal.2009;Lacombeetal.2012).Themostcomprehensiveofthesestudies,Lacombeetal.(2012),findsthathydropowerprojectsenablethefullsuiteofirrigationexpansionplansintheVientianePlain,whilepreservingrequiredecologicalflowsandincreasingdryseasoncontributionsfromtheNamNgumtotheMekong.Theanalysisshowsthatsuchexpansionwouldnotbefeasiblewithoutdamstorage;however,itisalsoworthnotingthathydropowerprojectsreducethefloodpeakintheriverbyroughly20%inanaverageyear.

Ingeneral,theNamNgumBasinstudiesdonotconsidertheeffectsthatnewwatercontrolinfrastructureswouldcollectivelyhaveonecosystems,fisheries,anddownstreamflooding.Inaddition,todate,therehasbeennocomprehensiveeconomicassessmenttounderstandthenatureofsynergiesortradeoffsbetweendevelopmentoptions,andtounderstandthecumulativeimpactsonthebasinfromtheiroptimaleconomicmanagement.

2.2.TheNamNgumBasin

TheNamNgumRiverextendsfromitsuppermostregionsabovethePlainofJarsintheXiengkhouangplateausouthintotheexpansiveNamNgum1reservoirandtheVientianePlain,anddowntoitsconfluencewiththeMekongneartheLaocapitalofVientiane(Figure1).Withtheexceptionsofthesetwolargeplainsthebasinismostlyhillyandmountainous,withelevationsrangingfrom2820metersabovesealevelatthePhouBiapeak(thehighestmountaininLaoPDR),tothelowestlowpointof155mattheconfluencewiththeMekong.ThebasinisthefourthlargestinLaoandcoversanareaof16,700km2(or7%ofthetotalareaofthecountry).Itcomprises18developmentdistrictsspreadacrossfiveprovincesinLao,andrepresents2%ofthetotalareaoftheMekongbasin(andprovides4%ofitsmeanannualflow).Theclimateofthebasinistropical,withtwodistinctseasonspoweredbytheEastAsianandIndianmonsoons.ThewetseasonbeginsinJuneandendsinOctoberandthedryseasonspansfromNovembertotheendofMay.Meanannualrainfallacrossthebasinrangesfrom1,500to3,000mm,withanaverageof2,000mmperyear(WREA2008).

Thehydrologyofthedownstreamportionsofthebasinisheavilyinfluencedbytheregulationprovidedbythe155megawattNamNgum1(NN1)damanditsenormous370km2reservoirjustupstreamoftheVientianePlain.PriortoconstructionofNN1,averageflowsinthemainstemoftheNamNgumRiverthroughtheVientianePlainrangedfromapproximately150m3/sinthedryseasonto3,000inthewet.Today,though,flowsrangefromroughly300m3/sto1,500m3/s;the

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hydrographhasthussignificantlychanged,whichtheoreticallyallowsforgreaterwateruseduringthedryseason(Lacombeetal.2012).DuewestoftheNN1catchment,thelargetributarysystemoftheNamSongandNamLikriversflowsaroundthedam,itsconfluencewiththeNamNgumRiverlyingjustdownstreamofNN1’soutflowstotheVientianePlain.Adiversioncompletedin1996transfersaportionofflows(thecapacityofthistransferisabout400m3/s)fromtheNamSongRiverdirectlyintotheNN1reservoir,forthepurposeofincreasinghydropowergeneration.TherearealsotwomajorinterbasindiversionsintotheNamNgumBasinfromneighboringcatchmentsoutsidethebasin:theNamLeuk,eastofNN1andcompletedin2000,divertsflowsintotheNN1reservoirviatheNamSanRiver(roughly100m3/scapacity)andtheNamMang3dam,completedin2005,whichdivertsflowsintotheNamKhanRiverintheVientianePlain(Figure1).

Figure1.TheNamNgumBasin,includingcurrentandplannedhydropowerdams

TheNamNgumbasinislargelyrural:smallvillagesandpopulationcentersarefoundalongmainroadsandintheXiengkhouangPlateauandVientianePlain,withsomeperi‐urbanareasandthemajorityofthepopulation(300,000;aboutthreefifths)foundatthesouthernendofthebasininthecityofVientiane.Forestcoversroughly50%ofthebasin,withshrubland,bamboo,andre‐growingforestcoveringroughlyonethird,andcroppedareasabout10%(WREA2008).Subsistence‐basedagricultureisthemainformoflivelihoodgeneration,and75%ofthepopulationinbasinprovincesreportagricultureastheirprimaryformofemploymentinthe2005nationalcensus.Thefifthprovince,whichcomprisesVientianeMunicipality,ismostlyurban;twothirdsof

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peopletherereportednon‐farmincomeastheirmainactivityin2005.Industrialactivityinthebasinisverylimited(WREA2008).

ThewetseasonirrigationpresentthroughoutmuchoftheLowerMekongregionalsooccursintheNamNgumBasin(MekongRiverCommission2010),withlowlandanduplandricebeingthemostcultivatedcrops,followedbymaizeandamixofvegetables.Dryseasonirrigationiscurrentlymuchmorelimitedduetoanumberoffactors,includinginsufficientreturnsoninvestment,limitedinfrastructure,highoperationandmaintenancecosts,insufficientcapitalinvestmenttoexpandirrigationnetworks,andprobablyalsoresistancetoadoptionofnewmodernfarmingpractices(UNEPandAIT2001;Setboonsarngetal.2008).ThemaindryseasonirrigationareasareontheXiengkhouangPlateauandintheVientianePlain,withtheplainaccountingforroughly75%ofthebasin’sdryseasonirrigationandthemajorityofitslarge‐scaleirrigationinfrastructure.Forty‐twopumpingstationsandanumberofconcrete,brick,anddirtcanalswerebuiltintheVientianePlainalongthemainstemoftheNamNgumRiverduringthe1990s(Lacombeetal.2012).CurrentgovernmentplansobtainedfromtheDepartmentofIrrigationcallforanincreaseofroughly5,000hectaresatthreeofthesepumpingstationsduringthenextfiveyears,withfeasibilitystudiesbeingcarriedoutformuchgreaterexpansioninthecomingdecades,including120,000haofnewgravity‐fedirrigationinthePlain(Geotech2012).ThislargedevelopmentplanwouldutilizedivertedflowsfromtheNamLikRiverandtheNamNgumreservoir.ThegovernmentalsohopestoexpandproductionintheXiengkhouangPlateau,onamorelimitedscale(WREA2008).

Table1.CurrentandFutureDamsintheNamNgumBasin

  Status  Type Year Operational 

Capacity (MW) 

Intended Market

Nam Lik 1‐2  Operational  Reservoir  2010  100  Lao PDR 

Nam Ngum 1  Operational  Reservoir  1971  155  Lao PDR/Thailand Nam Ngum 2  Operational  Reservoir 2011 615 Lao PDR            

Nam Ngum 5 Under 

construction Reservoir  2012  120  Lao PDR/Vietnam 

           

Nam Bak 1  Proposed  Reservoir  Unknown  88  Thailand 

Nam Bak 2  Proposed  Reservoir  Unknown  60  Lao PDR/Thailand 

Nam Ngum 3  Proposed  Reservoir  2014  440  Thailand 

Nam Ngum 4A  Proposed  Run‐of‐river  Unknown  45  Lao PDR/Vietnam 

Nam Ngum 4B  Proposed  Run‐of‐river  Unknown 45  Lao PDR/Vietnam Nam Ngum Downstream  

Proposed  Run‐of‐river  Unknown 70  Lao PDR 

Nam Ngum Downstream 2 

Proposed  Run‐of‐river  Unknown 5  Unknown

Nam Lik 1  Proposed  Reservoir  Unknown 60  Unknown

Notes:Operationalyearsandintendedmarketsarecurrentlyunknownforsomeproposedprojects,astheyarestillinfeasibilityassessmentstages.Source:CompiledfromADB,1996;InternationalRivers,2009;EPD,2012.

Theothermajorcomponentofcurrentbasindevelopmentplansistheconstructionofnewhydropowerfacilities.Thereareatotalof13damsinvariousstagesofoperation(3dams;870MW),construction(1dam;120MW)andplanning(9dams;813MW)inthebasin(Table1).Fourof

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theseplannedprojectsarerun‐of‐the‐riverdamsthatwouldnotstorewater.Thereisverylittleirrigatedareaaroundtheplanneddamprojects;thustheareaoflostfarmlandduetoconstructionofsuchinfrastructureswouldlikelybeminimal.

3.ModelingFramework

Inthissection,wedescribethemathematicalstructureofthemodelusedtoassesspotentialeconomicandhydrologictrade‐offsofvariousdevelopmentpathwaysintheNamNgumBasin.Thiseconomicoptimizationmodelisanonlinearmathematicalprogrammingmodelthatmaximizesnetreturnstoregionaleconomicactivitiesthatrelyonwaterasaprimaryfactorofproduction(principally,irrigatedagricultureandhydropowergeneration).

3.1.ModelSchematic

WecharacterizetheNamNgumsystemasaseriesoflinks(riverreachescorrespondingtoparticularsub‐catchments)connectingnodesthatrepresentkeywaterinfrastructuresorriverconfluencelocations(Figure2).Nodeswereclassifiedintofourcategories:riverconfluences;hydropowerprojects(reservoirswithhydroelectricturbines);surfacediversionpoints;andirrigationpumpingstationslocatedalongtheriversystem.Nodetypeswerefurtherseparatedintocategoriesof“existing”and“proposed,”dependingontheircurrentstatus,asdeterminedfrombasinplanningdocumentsfromtheDepartmentofIrrigation(DOI),theMinistryofEnergyandMines(MEM),andNGOsworkingintheLaohydropowersector.Proposedprojectnodeswerethenassignedtodifferentdevelopmentscenariosbasedonthesecategoricalclassifications(seeSection4.5).Theschematiconlyincludesthemostimportantsurfacediversionsinthebasin,anddoesnotincludeconnectionstogroundwatersystems.

3.2ModelObjective

Aswithmanyotherpreviouseconomicmodelsappliedtoriverbasinmanagement,waterisallocatedoverspaceandtimetooptimizeneteconomicreturnstothecombinedagricultureandenergysystem.Thetime‐stepforthemodelismonthly.Theobjectivefunctionofthemodelmaximizesthenetreturnstohydropower(HydroBenefitsi)andagriculturalprofits(AgBenefitsi)acrossallmonths(t)andmodeledriver“nodes”(i)withinthesystem(expressedbyEquation1),overthecourseofamodeledyear.Nodesrefertoanymodeledpointorareaalongthewatershedandcanincludeconfluencepointsbetweentributaries,orlocationswherewaterisregulated,consumed,stored,ordiverted.

∑ (1)

Themodelconstraintsaredescribedbelow.

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Figure2.TheNamNgumRiverbasinnode‐linkhydrologicalschematic

3.3.Flowcontinuityconstraints

→ , → , 1 ∀ , (2)

→ , , → , , (3)

Thecontinuityconstraintsensureproperaccountingofthewaterquantitiesflowingthroughthesystem,fromupstreamreachestowardsthedownstream.Equation2depictsthecontinuityflowconditionsforintermediatenodeswithoutstorage,whereasequation3dictatesthecontinuityofflowsathydropowerdams.Theoptimizationprocedureusesinflowdatatoinitiatetheflowofwaterwithinthesystem;node‐specificvirgininflows(Inflowit)werethuscalculatedforeachnode.Thefirstconstraintthenrequiresthatthesumofnaturalinflows(Inflowit)andreleasesfromupstreamnodes(Wi‐1i,t)equatetoallreleases(Wi→i+1,t

)andirrigationwithdrawals(WitAg),forintermediatenodes.Thetermδinequation2accountsforthefractionofflowthatreturnstotheriversystemfromirrigatedareas(a30%returnflowrateisassumedforthisanalysis,asinother

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similaranalyseswhereirrigationcanalsareunlined–seeforexampleWuetal.(2012)).Forhydropowerdams,theflowcontinuityconstraintsalsoaccountfornetrainfall(precipitationlessevapotranspiration)overthestoragereservoir(NetRainit);andtheabilitytostorewaterflowsovertime(asrepresentedbytimevariationinthestockvariableWSit).Thus,fordamsinthesystem,thesumofallinflowsintandstorageint‐1mustequatetototalstorageandreleasesinthecurrenttimestep.

3.4.Hydropowerproductionandturbineoutflows

Netoutflowfromhydropowerdamscomesfromtwosourcesthataredeterminedendogenouslybythemodel:turbineoutflow(whichdictatesenergyoutput),andspillwayoutflow(forperiodsofwaterabundance,i.e.whendamstorageexceedsthespillwaylevel).LetDbethesetofallnodesthatareactivehydropowernodesinthesystem,equation4illustratesthenetoutflowrelationshipforhydropowerfacilities:

→ , → , → , ∀ ∈ (4)

Equations5and6governhydropowerproductionbymonth,whichisafunctionofturbineoutflow,plantefficiency(ϕit),gravity,andnethead—thedifferencebetweenthestorageheightvariableandtheturbineintakeheight(whichisafixedparameterspecifictoeachdam):

→ , ∙ ∙ ∅ ∙ 9.81 (5)

(6)

Linearfunctionswithslopecoefficientsβiandintercepttermswereusedtoapproximatetherelationshipbetweenstorageheightandvolumeforeachreservoir.ThisrelationshipissummarizedinEquation7:

∙ (7)

Additionally,weimposeminimumandmaximumboundsonstoragevolume,storageheight,nethead,turbineoutflow,andspillwayoutflow.Thelowerandupperboundscorrespondtothecharacteristicsofspecificdams(suchasstoragecapacity,maximumheight,andturbineintakelevels).DamspecificparametervaluesareshowinTableA1intheAppendix.Inaddition,minimumandmaximumboundsareimposedontheproportionofhydropowerproduced,bydam,inanygivenmonth:

∙ ∑ ∙ (8)

Equation8isabehavioralconstraintonoperationsthatensuresthatanarbitrarilylarge(orsmall)amountofenergyisnotproducedbyspecificdamsduringparticularmonths.TheseparameterswereformedusingobservedenergyoutputdataattheNN1damfrom1999‐2010.Foreachmonth,wecalculatedtheaverageandmaximumproportionofmonthlyenergyoutputtototalenergyproducedduringthecalendaryear.Theaverageproportionparameterizesthelowerbound(Өmin)

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ontheleft‐handsideoftheequation,whilemaximummonthlyproportions(Өmin)areusedfortheupperboundconstraint.Theminimumandmaximumvaluesvarybymonth,andserveaslowerandupperbounds,respectively,ontheproportionofenergyeachdamcanproduceinagivenmonth.Forsimplicity(andduetoalackofobserveddataforadditionaldams),weassumethesamerelativemonthlyproportionsholdforeachdam.

Revenuegeneratedateachdamistheproductofhydropowergeneration(inmegawatthours)andtheelectricityprice($permegawatt‐hour).Eqation9showsthenetbenefitstohydropower,whicharecalculatedasthesumofrevenueoverallmonthslessannualizedcapitalcostsofdamconstructionandmaintenance(assumingadiscountrateequalto5%andalifespanof50years).

∑ ∙ (9)

WherePeistheunitpriceofenergyandCapCostsHydroiaretheannualizedcapitalcostscalculatedforeachdam.

3.5.Floodcontrolconstraints

ToallowforfloodcontrolupstreamoftheVientianeplain,welimittotalstorageinNN1tobelessthansomethresholdbelowfullcapacity.Thepurposeofthisconstraintistoallowforexcessstoragecapacityatthelargestdaminthesystemincaseofafloodevent,whichwouldprovideprotectiondownstreamfarmersandinhabitantsfromextremeflows.Equation10depictsthefloodcontrolconstraintforthissystem:

NN1, ∗ (10)

Whereγisauser‐definedproportionsetto1whenfloodcontrolconstraintsarenotactive.Forthisstudy,wetseasonmonthsincludeMaythroughOctober.

3.6.Agriculturalproduction

Inoptimizingoverallnetreturnsfromwateruse,themodelallocateswaterforirrigation(WitAg),andsolvesforthecorrespondingtotalproductiveareaforcropj(Lij)associatedwitheachwithdrawalnodeinthesystem.Totalirrigatedareaforallcropscannotexceedtheinitiallandendowment(Limax)plustheexpansionpotentialatnodei(LExpimax):

∑ (11)

WemodelcropproductioninareasirrigatedwithNamNgumwaterusingthreecompositecropgroups:rice,cereals(includingmaize),andfruits/vegetables.Areaweightedpricesandyields(exogenousmodelparameterswhichwerespecifiedatthedistrictlevel)foreachcompositecroptypewereformedbydividingcommodity‐specificyieldsandpricesbythetotalareaforthecropgroup,asshowninequations11and12.Forexample,ifkrepresentsthesetofcropswithincompositecropgroupj,thenthefollowingequationswereappliedtogenerateatimeseriesofyield(Yij)andpricePijAg.

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Thesecalculationswereperformedforallyearsinthetimeseriesforwhichwehaveprovincial‐levelstatistics.Wetookthemeanandmaximumvaluesforyieldsandpricesoverthetimeseriestoproducehighandlowprofitconditions.The“highreturns”caseisbasedondatafromtheyear2009,while“lowreturns”parameterswereformedusingaverageyieldandpriceestimatesoverthefulltimeseries.Highagriculturalreturnsdenotethebaselineyieldandpriceassumptions,whichisjustifiedgiventhetrendsinhighglobalcommoditypricesthathavebeenobservedinrecentyears.Furthermore,useofhighyieldandpriceparametersencouragesirrigationexpansion,allowingonetoevaluatepotentialtrade‐offsbetweenuses,oreffectsofirrigationexpansiononwatershedhydrology.

∑ ∀ ∈ (12)

∑ ∀ ∈ (13)

Similartotheyieldandpriceparameters,anarea‐weightedprocedurewasusedtogeneratecropwaterrequirementsforeachcompositecroptype.Equation14thenequatesmonthlyirrigationwithdrawalstothesecropwaterrequirements,whereϕijtrepresentsthetheoreticalcropwaterrequirementforcropgroupjandμistheirrigationcanalefficiency(assumedtobe50%atallnodes):

∑ ∅ ∙ (14)

Equation15thendenotestotalprofits(oreconomicbenefit)generatedfromirrigatedproductionateachnode:

∑∙ ∙

∙ (15)

Inthisequation,Cijrepresentscultivationcost,andtheparametersκandηrepresentper‐hectarecapitalcostsforlandconversionandirrigationcanalexpansion,respectively(annualizedat5%discountrates,andassumingalifespanof25years).

Cropareaallocationateachnodeisrestrictedtoavoidcornersolutions(i.e.unrealisticconversionofallirrigablelandtoaparticulartypeofcrop)andtoreflectappropriateareatotalsthatareconsistentwithobservedcropmixes.FollowingMAF(2010)andconversationswithMAFofficials,weassumethat80%ofallnewirrigatedareaisdedicatedtoriceproduction,while20%isallocatedtograinproduction.Whilethisdoesnotallowforflexibilityincropmixdecisionsfornewirrigatedarea,itisconsistentwithexpecteddevelopmentplansinthebasin.Here,wecalculatedtheminimumandmaximumratioofobservedareabyproxycroptototalobservedirrigatedareafortheyearsofavailabledata(seenextsection).Theratioofprojectedarea(bycrop)tototalcroplanduseateachnodewasthenconstrainedtoliebetweentheseminimumandmaximumareaproportions:

13

∑

(16)

3.7.Instreamflowprotectionandterminalconstraints

Finally,weimposethreeadditionalmanagementconstraintsonriverflowsand/ordamoperations.First,aninstreamflowconstraintisimplementedtopreserveminimumlevelsofunregulatedoutflowsfromthebasin.ThisconstraintensuresthattheminimumamountofflowflowingintotheMekongisatleastequaltothehistoricallowflowintheriver.ConsistentwithLacombeetal.,2012,thisoutflowconstraintissetto94m3/sec.,orapproximately247millionm3permonth:

→Mekong, ∀ (17)

Second,wespecifyatargetwithdrawalfortheproposedwatertransfertoNortheastThailand.Todoso,weaddanintermediatenodetotheschematicjustupstreamoftheMekongconfluence.Watertransfersatthispointarerequiredonamonthlybasis.ThisessentiallyreducesnetflowstotheMekongRiverbyaconstantamountonam3/sec.basis.Thisprocessaugmentsequation17,forminganewminimumoutflowconstraintgivenwhentheThaitransferisactive,asshownbyequation18.

→Mekong, ∀ (18)

Finally,werestrictfinalreservoirstorageconditionstoprotectagainstthemodelsystematicallydepletingstorageinthelatermonthsoftheoptimizationperiodinanefforttomaximizehydropowerand/orotherwateruse.Thisconstraintrequiresthatfinalstorageateachreservoirmustfallwithin+/‐5%oftheinitialstoragecondition.InitialstorageisdefinedastheDecemberstorageconditionobtainedusingsimulatedflowdatafortheyearprecedingtherainfallscenarioyear(Lacombeetal.2012):

0.95 ∙ 1.05 ∙ (19)

4.Dataandanalyticalapproach

ThissectionpresentstheNamNgummodelschematicanddescribesthedatausedtoparameterizethemodel(AdditionaldetailsareprovidedintheAppendix).

4.2.Flowdata

FlowdatawereobtainedfromtheLaoDirectionofMeteorologyandHydrology(DMH)fortwostations:BanNaluangonthemainstreamoftheNamNgumRiversouthoftheNamNgum2dam(1985‐2004);andBanHinheupontheNamLikRiverbetweentheNamLik1‐2andNamLik1dams(1967‐1984).InflowswerethenassignedtospecificnodesinthemodelbyapportioninghistoricalflowsrecordedatthemainhydrologicalgaugingstationsintheNamNgumBasinusingthecatchmentmethod,similarlytotheprocessdescribedinLacombeetal.(2012).Wealsousedata

14

fromLacombeetal.todefineinitialreservoirstorageconditions.Foradditionaldetailsonthespatialdelineationprocedureusedtocalculateinflowsatmodelednodeswithinthesecatchments,refertothetechnicalAppendix.

4.3.Hydropowerdamcharacteristicsandenergyproduction

Modelparametersforcurrentandproposeddamswereobtainedfrombasindevelopmentreports,projectprofiles,damdevelopers,theelectricityauthorityofLaoPDR,ElectricitéduLaos(EDL),andtheDepartmentofEnergyPromotionandDevelopment(EPD)oftheMinistryofEnergyandMines(MEM).ActualelectricitygenerationdatafromNN1for2009and2010,thoughnotstrictlynecessaryforthemodel,provideausefulcomparisonwithouroptimizedproductionestimatesforthatdam(ElectriciteduLaos(EDL)2010).Thesedam‐specificparametersaresummarizedinTableA1oftheAppendixandareconsistentwiththoseusedinLacombeetal.(2012).Pricedata($0.07/KW‐hr)andelectricitygenerationcapacitiesforexistinginfrastructuresareconsistentwiththefigurespresentedinannualreportspublishedbyEDL(2010).

Capitalcostsforthedamsincludedinthelong‐termscenariowereobtainedfromEPD,damfeasibilityandimpactassessmentreports,andNGOswithdirectknowledgeoftheLaohydropowersector(ADB1996;InternationalRivers2009;SD&XPConsultantsGroupandNipponKoei2009).Thesecostswerenormalizedtobeinconstantyearterms(2010).

4.4.Cropproductiondata

ThemainirrigatedcropgrowninLaoPDRisrice(crop1).Wegroupedothercerealcrops(group2)andhighvaluefruitsandvegetables(group3)whicharealsowidelycultivatedintheNamNgumBasin.Ourdataforthecropparameters(yields,pricesandareas)comefromatimeseriesof(2000‐2009)ofdistrict‐andprovincial‐levelagriculturalstatistics.Theseparametersareformedatthedistrictorprovinciallevelusingtheobservedagriculturalstatistics,whicharethenmappeddirectlytothenodelevel.

Cropwaterrequirements(perunitarea)wereestimatedforindividualcropsusingCROPWAT8.0(UNFAO2009).CROPWATcalculatesirrigationrequirementsbasedonclimate,soils,andotherenvironmentalparametersforeachcrop,aswellasauser‐specifiedcroppingcalendar.CroppingcalendarsforLaowereobtainedfromtheMinistryofAgricultureandForestry(MAF)(MAF2010;MAF2010).Duetodatalimitations,theCROPWATdefaultparametervaluesfordevelopmentalstagetime,cropcoefficientsandsoilsweremaintained(MAF2009;MAF2010;MAF2010).

Cultivationcostswerederivedfromasurveyofroughly500farmersinVientianeProvinceandtheVientianePlain(Setboonsarngetal.2008).Duetodatalimitationsinthesurveydata,cultivationcostsdonotvarybycrop.Fornewirrigatedareas,estimatesofcapitalcostsassociatedwithbuildingnewirrigationcanalswereobtainedfromDOI.Theseestimates(inUS$/hA)includecostsassociatedwithbuildingnewreservoirs,weirs,electricwaterpumps,andliningdirtcanalswithbrickorconcrete,butdonotincludeothercostsassociatedwithdevelopingnewagriculturallands,

15

suchasclearingandleveling,whicharelikelytovaryconsiderablydependingonthenatureofthelandsthatwouldbeconvertedtoirrigation.

AdditionaldetailsonagriculturalstatisticsandparameterdevelopmentcanbefoundintheAppendix.

4.5.Scenarioanalysis

Ourbaseanalysisconsistsof39differentscenarios:threedifferentclimaticconditionsrepresenting“wet,”“dry,”and“average”hydrologyinthebasinforfiveagricultureandhydropowerexpansionscenarios,includingcurrentconditionsandmaximumexpansion,andtwodifferentlevelsofagriculturalreturns(Table2).These“wet,”“dry,”and“average”years(2002,1998,and1996)weredeterminedbythemax,min,andmedianoftotalannualflowsfortheentirebasin,asindicatedbytheflowsmeasuredupstreamoftheconfluencewiththeMekongRiver(atThaNgon),followingdatafromLacombeetal.(2012).Agricultureandhydropowerscenariosarereasonablebestguessesoflikelydevelopmenttrajectoriesinthebasin.Withregardstohydropower,ourmodelincludesthreeactivedamsforthecurrentscenario(NN1,NN2,andNL12),and8activedamsforalllong‐termscenarios(addingNN3,NN4,NN5,NB1,NB2).Thus,onlyfiveofthenineplanneddamsforthebasinarerepresented;theremaining4projectshavenotbeenwellstudiedatthistimeandcriticaldesignparametersneededforinclusioninthemodelarethereforeunavailable.

Potentialnewirrigatedareasforagriculturaldevelopmentweredividedintothreemainexpansionscenarios:ID1,ID2,andID3(Table2).TheID1scenarioroughlycorrespondstoroughlyadoublingofthedetailedexpansionplansdescribedbytheMAFinits5yearinvestmentplan(2011‐2015),whichidentifiedthreespecificpumpingstationstobeexpandedbyatotalofroughly5,000hectaresintheVientianePlain(MAF2010).Thisscenarioexpandsonthe5yearexpansionplanbyaddingallcurrentlydrypaddyfieldswithin2kilometersofawatersourceandwhoseelevationislowerthanthatofexistingcanals.TheID2scenariofurtherincludesnonagriculturalbushareas,grasslands,andpondsthatarebelowtheelevationofexistingcanalsandwithin2kilometersofexistingirrigatedareas.Lastly,theID3scenarioincludesadoublingoftheirrigatedareaunderproductionintheID3scenario,whichapproximateslong‐termplanstoexpandirrigationintheVientianeplainby100,000hectares(Geotech2012).Thescenariosrepresentincreasesinirrigatedareaofapproximately12,000,50,000,and100,000hectare,respectively,andweremodeledusingthesamespatialdelineationprocedureasthatusedbyLacombeetal.(2012).

Wealsotestedthesensitivityofresultstoalternativeassumptionsofagriculturalreturns.Specifically,weexaminedcaseswith“low”returns(meanpriceandyieldfrom2000‐2009)and“high”returns(maxpriceandyieldfrom2000‐2009,whichtypicallycorrespondsto2009values).Ourbaseassumptionis“high”agriculturalreturns,whichisjustifiedgivenrecenttrendsinagriculturalcommoditymarkets(OECD/FAO2012).

Totestadditionaltrade‐offsbetweenhydropowerandagriculturalproduction,wealsomodelthediversiontoThailandandfloodcontrolsonNN1damintheID2andID3expansionscenarios.WerunseparateanalysesthatincludetwolevelsofdiversiontoThailand:150m3/s,whichSCI(2004)determinedcouldbetransferredtoThailandwhilestillmeetingirrigationrequirementsinLaoin

16

anaveragehydrologicalyear;and300m3/s,whichrepresentstheproposeddesigndischargecapacityofthediversiontunneltonortheastThailandSCIoutlinesinitsfeasibilitystudyofthetransfer.Wealsostudythetradeoffbetweeneconomicbenefitsandfloodcontrol.TodosowelimittotalstorageatNamNgum1duringnormalandwetyearsto90%and95%ofthemaximumstoragecapacity,insteadof100%usedforthedefaultscenarios.Notethatwedonotevaluatefloodcontrolunderdryhydrologicconditions,asfloodcontrolmeasuresarenotnecessaryunderdryyearconditionswhenreservoirsarelikelyalreadymaintainedatlowlevels.Additionally,the300m3/sec.transfertoThailandisinfeasibleunderthedriesthydrologicconditionsaccordingtomodelresults,sowefocusontheimplicationsofthisdiversionunderaverageandwetconditions.

Table 2. Summary of model scenarios 

     

Current 

Conditions 

HP 

Expansion 

Only 

HP + ID1 

Expansion 

HP + ID2 

Expansion2 

HP + ID3 

Expansion2 

  

Potential Irrigated 

Land Area (ha)1 20,759  20,759  32,064  70,172  119,147 

   Total dams  3  8  8  8  8 

       Capacity (MWh)  870  1228  1228  1228  1228 

     

Scenario 

Specifics  Climate Scenario    

Agricultural 

Returns – High 

& Low3,4 

Dry   X  X  X  X  X 

Average  X  X  X  X  X 

Wet  X  X  X  X  X 

Notes:  1 Irrigated potential is not fully developed if net returns do not justify capital expansion. 2 Diversion to Thailand and flood control at NN1 are also considered in separate sensitivity analyses in the ID2 and 

ID3 expansion scenarios.   

3 High agricultural returns are based on 2009 prices and yields and are therefore used for the sensitivity analyses 

on flood control and the Thailand water diversion.  

4 Low agricultural returns are also considered in separate sensitivity analyses in the ID2 and ID3 expansion 

scenarios.   

5.Results

OurresultsprovideinsightsintothepotentialeconomicandhydrologicimpactsofalternativedevelopmentpathwaysintheNamNgumBasinacrossthedifferenthydrologicalconditionsdescribedabove.Thefollowingsectionsprovidethekeyresultsforhydropowerproduction,agricultureandirrigationexpansion,neteconomicbenefits,andtotalbasinoutflows;additionaltabularsummariescanbefoundintheAppendix.

17

5.1.HydropowerProduction

Figure3displaysthepotentialincreaseinsystemhydropowerasthebasinmovesfromacurrent(threedam)scenario,toafuturewitheightdams(underaverageannualflowconditions).Theadditionofthefivedamsleadstoasubstantialincreaseinhydropowerproductionandnetrevenue.Averagemonthlyenergyproductionexpandsfromapproximately570MWhtoslightlymorethan820MWh,representinga44%increasepermonthonaverage.Whiletheadditionofnewdamstothesystemincreasestotalenergyoutput,hydropoweratexistingdamsdoesnotincrease.Infact,averagemonthlyhydropoweroutputatNN1andNN2decreasesfromthecurrentscenarioby15and11.6MWh,respectively,implyinggreatersystemflexibilityandreducedrelianceonindividualdamsforhydropower.

Figure3.Hydropowerexpansionfromcurrentbaselineto8damfuturescenario

Whilehydropowerpotentialisdramaticallyimprovedwiththeadditionofnewdams,totaloutputishighlydependentonclimateconditions.Figure4displaysthevariationinoptimalhydropoweroutputacrossthethreeclimatescenarios(assumingnoagriculturalexpansion).Inwetyears,monthlyhydropoweroutputisapproximately9%higherthanintheaverageyear(rangingfrom600‐1150MWoverthecourseoftheyear),reflectingadditionalwateravailabilityinthesystem.Underdryconditionsthesystemismuchmoreconstrainedbywateravailability,andhydropowerdecreasesby61%whenall8damsareincluded(to400‐600MWduringtheyear).Thisissimilartothe59%decreaseobtainedwiththe3existingdams.Theimplicationofthisresultisthataddingadditionaldamsincreasestotalhydropowerproductionbutthatlong‐termreductionsinflowcouldstillreducehydropowerproductiontolevelsbelowhistoricalgeneration.

0

200

400

600

800

1000

1200

jan feb mar apr may jun jul aug sep oct nov dec

Energy Generation (MWh)

Curent Conditions HP Expansion Only

18

Whilehydropoweroutputvariesgreatlywithwateravailability,irrigationexpansionandotherdevelopmentscenariosdonotsubstantiallyaffectenergyoutput,implyinglittletonotrade‐offbetweenirrigatedagricultureandhydropower.Figure5showsthepercentchangeintotalannualhydropoweroutput,byclimatecondition,acrossirrigationexpansionscenarios.Evenunderdryconditions,increasedirrigationwithdrawalsdonotaltertotalenergyoutputsignificantly(lessthan1%,evenwiththegreatestareaexpansionscenario).Fortheaverageandwetscenarios,thepercentchangeintotalhydropowerislessthan1%acrossallirrigationexpansioncases.

Figure4.Hydropowergenerationvariationbyhydrologicalcondition

Figure5.Theeffectofagriculturalexpansiononhydropowergeneration

0

200

400

600

800

1000

1200

jan feb mar apr may jun jul aug sep oct nov dec

Energy generation (MWh)

Dry Year

Average Year

Wet Year

‐0.60%

‐0.50%

‐0.40%

‐0.30%

‐0.20%

‐0.10%

0.00%

Dry Year Average Year Wet Year

% Difference from HP Expan

sion Only 

Scenario HP + ID1

Expansion

HP + ID2Expansion

19

ThewatertransferstoThailandandfloodcontrolscenarioshaveagreaterimpactonnethydropowerthanirrigationexpansion,asshownbyFigure6.Atransferof300m3/sinducesa3.5%and1%decreaseintotalhydropowerunderaverageandwetconditions,respectively,relativetothe30‐yearagriculturalexpansionscenariowithnotransfer.Thisreductioninoutputoccursbecausetemporalflowsmustbeaugmentedtosupplymonthlydiversionrequirements(hence,greateroutflowsinthedryseasonwhichreducestotalstorage,storageheight,andnetelectricitygenerationoverthecourseoftheyear).Floodcontrolalsoreducestotalhydropower,thoughthiseffectisverysmall(lessthan1%).FloodcontrolatNN1changesreservoirmanagementpatterns,andinhibitsthesystem’sabilitytomaximizestorageheightatNN1forgreaterhydropoweroutput.Thiseffectincreaseswiththeleveloffloodcontrolrequired.Additionally,floodcontrolinducesalargerhydropowertrade‐offasirrigationwithdrawalsincrease;aswaterdemandsincreaseinthesystem,theopportunitycostsoffloodcontrolconstraintsincreasesandthereservoirwaterstoragesystematicallydecreases.ToassessthevalueoffloodcontrolatNN1,onewouldhavetocomparethereducedhydropowergenerationwiththebenefitsfromenhancedfloodcontrol.

5.2.AgriculturalExpansionandIrrigationWaterUse

Toanalyzetheeffectsofirrigationexpansion,weallowthetotallandareaavailableforirrigationtoexpandincrementallyintheVientianePlainandtheXiengkhouangPlateau,from20,000hectaresundercurrentconditionstoabout120,000hectaresintheID3scenario.Asdetailedinsection3,ourmethodologydoesnotrequirethatallirrigatedareapotentialbeusedinallscenarios,butratherallowsthemodeltoincreaseordecreasetotalirrigatedareaendogenouslydependingonwateravailability,waterdemands,netreturnsfromirrigation,andotherconstraintsonwaterusethatarespecifictoascenario.Thecrop‐mixinirrigatedareasisalsoconstrained,toavoidunrealisticcrop‐productionsolutions(suchasconversionofalllandtovegetablefarming).

‐4.00%

‐3.50%

‐3.00%

‐2.50%

‐2.00%

‐1.50%

‐1.00%

‐0.50%

0.00%

Average Wet

Percent Chan

ge from HP Expan

sion Only 

Scenario

HP + ID2 Expansion + 150m3/s Transfer

HP + ID3 Expansion + 150m3/s Transfer

HP + ID2 Expansion + 300m3/s Transfer

HP + ID3 Expansion + 300m3/s Transfer

20

Figure6:Hydropowerproductionlosseswithinter‐basintransfertoThailandandfloodcontrolscenarios

Inmostcases,irrigatedpotentialisfullyrealized.Figure7showstotalirrigatedarea,bycrop,underaverageclimateconditions.Ineachcase,irrigatedareaismaximized,risingfromapproximately20,000hainthebaselineto119,000undertheID3expansionscenario.Thesameresultisfoundforwetyearconditions.However,underdryyearconditionswhenirrigationsuppliesareconstrained,areaexpansiondecreasesbelowthemaximumbound.FortheID2andID3expansionscenarios,totalirrigatedareaunderdryyearconditionsfalls0.6%and7.6%,respectively,relativetotheaverageyeartotals.

‐4.00%

‐3.50%

‐3.00%

‐2.50%

‐2.00%

‐1.50%

‐1.00%

‐0.50%

0.00%

Average Wet

Percent Chan

ge from HP Expan

sion Only 

Scenario

HP + ID2 Expansion + 150m3/s Transfer

HP + ID3 Expansion + 150m3/s Transfer

HP + ID2 Expansion + 300m3/s Transfer

HP + ID3 Expansion + 300m3/s Transfer

 ‐

 10,000

 20,000

 30,000

 40,000

 50,000

 60,000

 70,000

 80,000

 90,000

 100,000

HP Expansion Only HP + ID1Expansion

HP + ID2Expansion

HP + ID3Expansion

Hectare

Rice Cereals Fruits and Vegetables

21

Figure7.Totalirrigatedareabyirrigationexpansionscenario(top)andalternativescenario(bottom)

Furthermore,astheright‐handsideofFigure7indicates,totalirrigatedareaisnotfullyrealizedunderallscenarios.IntheID2expansionscenario,totalirrigatedareadeclineswhenlargewatertransfersarerequired,orwhenexpectedagriculturalreturnsarelow.RelativetotheID2casewithoutthetransfer,totalirrigatedareaswiththe300m3/stransferdeclinesbyapproximately25%.The150m3/stransferscenariodoesnotimpactirrigatedareaunderaverageclimateconditions,but(ifprioritized)decreasesagriculturalexpansionbyapproximately60%underdryconditionsrelativetotheID2expansionwithnotransfer.Supplyingincreasedirrigationdemandsandwatertransferrequirementsunderdryconditionswouldthusbedifficult.Asthetransferquantityismandated,thisinducesacleartrade‐offwithlostagriculturalproductionintheNamNgum.Underwetconditions,transferrequirementsdonotaffectagriculturalexpansion.

Loweragriculturalreturnshavethelargesteffectonirrigatedarea,astotalproductiondeclinestolevelsconsistentwiththebaselinecondition.Theselowerreturnsdeliverinsufficienteconomicbenefitstojustifytheadditionalper‐hectarecostsforlandconversionandirrigationcanalexpansion.Iftheseadditionalcostswerecoveredfromexternalpublicorprivatesources,thenadditionalirrigatedareacouldstillprovidepositiveneteconomicbenefitstofarmers,evenwithreducedagriculturalrevenues,thoughtheeconomiccaseforsuchfinancingwouldlikelybeweak.Finally,thefloodcontrolmeasureshavenoimpactonirrigatedareaexpansion.

Figure8displaystotalwaterwithdrawalsforirrigation(inmillioncubicmeters,ormcm)useacrossagriculturalexpansionscenariosforaverageyearconditions.Irrigationwithdrawalsincreaseproportionallywiththeamountofareaexpansion,risingfromapproximately262mcmwithnoareaexpansiontoalmost1,400mcmundertheID3expansioncase.Resultsshowminor

0

10000

20000

30000

40000

50000

60000

HP + ID2Expansion

HP + ID2Expansion + 150m3/s Transfer

HP + ID2Expansion + 300m3/s Transfer

HP + ID2Expansion withLow Returns

Hectare

Rice Cereals Fruits and Vegetables

22

changestototalwithdrawalsbetweenthedry,average,andwetyearscenariosundertheID2andID3scenarios.ThesedifferencesarecausedbyslightlyreducedirrigationwithdrawalsintheXiengkhouangPlateau,whereflowsareverylowunderdryconditions.

Figure8.AgriculturalWaterUseacrossAgriculturalExpansionScenarios

Figure9displaystheproportionofirrigationwithdrawalstototalbasinoutflowsonanannualbasis.ThisfigureillustrateshowirrigationexpansioncouldpotentiallyreducetotaloutflowstotheMekongannually,andhowthisvarieswithwateravailability(withthelargestproportionsfoundfordryyears).Underfuturebaselineconditionswithnoagriculturalexpansion,thisproportionislessthan2%forallclimatescenarios.Thisrangeexpandsto3%‐6%fortheID2expansion,and5%‐10%fortheID3case.

Figure9.Theproportionofirrigationwithdrawalstototalbasinoutflows(annual)

0

200

400

600

800

1000

1200

1400

1600

HP ExpansionOnly

HP + ID1Expansion

HP + ID2Expansion

HP + ID3Expansion

MM3

0%

2%

4%

6%

8%

10%

12%

HP ExpansionOnly

HP + ID1Expansion

HP + ID2Expansion

HP + ID3Expansion

Dry

Average

Wet

23

5.3.EconomicBenefits

Adetailedsummaryoftotaleconomicbenefitsforthemodeleddevelopmentscenariosisprovidedintables3‐5,whichrepresentdry,average,andwethydrologicyears.Theseresultsrevealseveralkeyfindings.First,thereisasubstantialdifferencebetweentheneteconomicbenefitsderivedunderdry,average,andwetconditions,suggestingthatbothhydropowerandagriculturalprofitsarehighlysensitivetochangesinwatershedhydrology(thoughthesesensitivitiesmaybeoverstatedsinceeconomicreturnshavebeenassumedtobethesameacrossscenarios,whichignoresthepotentialforpriceadjustmentstomitigatethesevariations).Totaleconomicbenefitsare30%‐38%lowerunderdryconditionsthanunderaverageconditions,withthemajorityofthisdifferenceattributabletoreductionsinhydropoweroutput.Thedifferenceineconomicbenefitsbetweenaverageandwetconditionsissmaller,butnotinconsequential,rangingfrom3.5%to7.5%.

Theneteconomicbenefitofhydropowerdevelopmentinthebasinisfoundtobeapproximately$28million,$98million,and$112million,respectively,underdry,average,andwetconditions.Theseprojectswouldthereforeprovideasignificantboostineconomicactivityfromenergygenerationandconsumption.UsingacurrentGDPmeasureofapproximately$8.3billionperyearinLaoPDR,themacroeconomicbenefitofdamdevelopmentunderaverageconditionswouldequatetoa1.2%increaseinannualeconomicoutputifallbenefitsaccruedinLao,thoughitislikelythatsomeexportpowerwouldbeexported(WorldBank,2012).Ofcourse,theseestimatesdonotincludetheeconomiccostsassociatedwithresettlementorreducedlivelihoodsforactivitiesdisplacedbythereservoirconstruction,forwhichdatacurrentlyarenotavailable.

Agriculturalexpansionwouldalsodelivernetbenefitsintheregion.Incontrasttohydropower,irrigationbenefitsonlyincreasemodestlywithwateravailability,sincethereisrelativelylimitedirrigationpotentialintheNamNgum,anditcanbedevelopedevenunderdryconditions.Thedifferenceinnetbenefitsofirrigationexpansionunderdifferentwateravailabilityscenariosisdrivenbysubtlechangesintheoptimalcropmixandwaterreleaseschedulefromhydropowerdams.ThenetbenefitstoID1expansionrange$5.3‐5.6millionrelativetoanoexpansioncase.Thisrangeexpandsto$15‐16millionunderID2expansion,and$30‐32millionunderID3.Thedivergenceinadditionaleconomicbenefitstoirrigationexpansionbetweendryandaverage/wetconditionsexpandswiththelevelofirrigatedareapotential.Thisimpliesthatwithincreasedeconomicopportunitiesforwaterconsumptionandlowerwateravailability,thereisaslightlyincreasedtrade‐offbetweenhydropowerandagriculturalexpansionastemporalflowsareadjustedandupstreamflowsaredivertedforirrigation.

However,netbenefitsfromagriculturalexpansionaredramaticallyreducedunderthe“lowreturns”scenario.Inthiscase,thecapitalcostsoflandconversionandirrigationcanalexpansionwouldleadtonegativeprofitsforproductionactivitiesonnewland,sotheexpansion,assumedtohaveaconstantcostperunitarea,doesnotoccur.Inaddition,profitsonexistinglandsarereducedinthiscasevialoweryieldsaswellasreducedpricesTotaleconomiclossesundera“lowreturns”scenario(measuredrelativeto“highreturns”)thusrange$91‐$92millionperyear.Thisresultholdsacrossallhydrologicscenarioswithlowreturns,thoughtheoptimalcropmixshiftsslightlyin

24

responsetowateravailability.Note,however,thatoncelandconversionandcanalexpansioncostsarecovered(thatis,settingthesecostparameterstozerointhemodel),landexpansionpotentialisonceagainmaximized,andneteconomicbenefitstoexpansionaremuchclosertothe“highreturns”case.Ifgovernmentsupportwereprovidedforlandandcanaldevelopment,agriculturalexpansionwouldinallcasesdeliverneteconomicbenefitstofarmersacrossarangeofagriculturalmarketconditions(thoughnetsocialbenefitswouldprobablyremainnegative).

WatertransferstoThailandandimplementationoffloodcontrolmeasurescanalsoinduceeconomictrade‐offs.Thecostsofimplementing95%floodcontrolareapproximately$640,000and$780,000peryearunderwetandaverageconditions,respectively.Thisisamodestcostcomparedtototaleconomicbenefitsfromthesystem(1%‐2%peryear),andrepresentstheopportunitycostofforgoneeconomicactivity(mostlyduetoreducedhydropowerproduction)oncefloodcontrolmeasuresareimplemented.Floodcontrolcostsincreasewithlowerwateravailability.The90%floodcontrolcaseleadstolosteconomicbenefitsranging$2‐$2.3millionperyearfortheaverageandwetscenarios,respectively.HighwatertransferratestoThailandalsoimposecostsonthesystem.Whilethe150m3/sinducesnocostsfortheaverageandwethydrologicscenarios,a300m3/stransferleadstosignificanteconomiclosses(approximately$2.3and$22millionforthewetandaveragecases,respectively,withID2expansion).Thisequatestoanaverageopportunitycostoftransferringwaterofapproximately$0.2and$2.4/1,000m3(beforeaccountingforthecapitalcostsofdevelopingthetransferinfrastructure).Inaddition,the300m3/scasewasfoundtobeinfeasibleunderdryconditions,sowedonotincludethatscenariointhisanalysis.

Table3.DevelopmentScenariosandNetEconomicBenefits(DryYear)

 Outcome Current 

Conditions 

HP Expansion 

Only 

HP + ID1 

Expansion 

HP + ID2 

Expansion 

HP + ID3 

Expansion 

Hydropower (GW‐hr/yr)  2.5  6.1  6.1  6.1  6.1 

Irrigated area (‘000 ha)  20.8  20.8  31.6  69.7  110.4 

Irrigation water used (mcm)  262  262  431  823  1,375 

Incremental hydropower net benefits (millions of $) 

n.a.  $35.1  $35.1  $35.1  $35.1 

Incremental agricultural net benefits (millions of $) 

n.a.  n.a.  $5.3  $15.4  $30.1 

Total Benefits; ‘high’ ag. Returns (millions of $)  

$297  $332  $337  $347  $362 

Total Benefits; ‘low’ ag. Returns (millions of $)       

$256  $256 

5.4.TotalBasinOutflows

Lacombeetal.(2012)provideacomprehensiveassessmentofthehydrologicimpactsofdamdevelopmentintheNamNgumBasin.Here,wefocusonthecombinedeffectsofadditionaldamsandthealternativeirrigationdevelopmentscenariosontotalbasinoutflowstotheMekonginordertocharacterizethepotentialhydrologicimpactsofthesedevelopments.Asdiscussed,thereisa

25

substantialdifferenceintemporalandspatialwateravailabilityacrosshydrologicalscenarios.Figure10illustrateshowthesedifferencestranslateintobasinoutflowsoverthecourseofayear.

Table4.DevelopmentScenariosandNetEconomicBenefits(AverageYear)

 Outcome Current 

Conditions 

HP Expansion 

Only 

HP + ID1 

Expansion 

HP + ID2 

Expansion 

HP + ID3 

Expansion 

Hydropower (GW‐hr/yr)  6.9  9.9  9.9  9.9  9.8 

Irrigated area (‘000 ha)  20.8  20.8  32.1  70.1  119 

Irrigation water used (mcm)  262  262  431  830  1,390 

Incremental hydropower net benefits (millions of $) 

n.a.  $97.6  $97.6  $97.6  $97.6 

Incremental agricultural net benefits (millions of $) 

n.a.  n.a.  $5.6  $16.1  $32.0 

Total Benefits; ‘high’ ag. Returns (millions of $)  

$427  $525  $530  $541  $557 

$449Total Benefits; ‘low’ ag. Returns (millions of $)       

$449  

Costs (millions of $) of…   150 m3/s Thai diversion   300 m3/s Thai diversion 

n.a. n.a. n.a. 

$0.35 $22.3 

$0 $36.2 

Costs (thousands of $) of…   95% Flood control   90% Flood control 

n.a. n.a. n.a. 

$777 $2,260 

$777 $2,260 

Table5.DevelopmentScenariosandNetEconomicBenefits(WetYear)

 Outcome Current 

Conditions 

HP Expansion 

Only 

HP + ID1 

Expansion 

HP + ID2 

Expansion 

HP + ID3 

Expansion 

Hydropower (GW‐hr/yr)  7.45  10.63  10.63  10.62  10.61 

Irrigated area (‘000 ha)  20.8  20.8  32.1  70.1  119 

Irrigation water used (mcm)  262  262  431  830  1,398 

Incremental hydropower net benefits (millions of $) 

n.a. $121  $121  $121  $121 

Incremental agricultural net benefits (millions of $) 

n.a. n.a.  $5.6  $16.1  $32.2 

Total Benefits; ‘high’ ag. Returns (millions of $)  

$442  $564  $570  $580  $596 

Total Benefits; ‘low’ ag. Returns (millions of $)       

$488  $488 

Costs (millions of $) of…   150 m3/s Thai diversion   300 m3/s Thai diversion 

n.a. n.a. n.a. 

$0 $2.0 

$0 $3.1 

Costs (thousands of $) of…   95% Flood control   90% Flood control 

n.a. n.a. n.a. 

$643 $2,061 

$643 $2,061 

26

Akeyresultfromthemodelisthatagriculturalexpansionhasaminimalimpactonmonthlyoutflows,evenwhilechangesinwateravailabilityleadtohighvarianceintotalbasinoutflows.ThegreatestdifferencebetweentheirrigationdevelopmentscenariosandthestatusquoconditionoccursinFebruary‐April(atthepeakofthedryseasonwhenirrigationdemandsaregreatestincomparisontoriverflows).Table6displaysthepercentchangeinannualbasinoutflows,relativetothenoirrigationdevelopmentcase.ForIP1thisreductionislessthan1%acrossallwateravailabilitycases.ForIP2,thisreductioninoutflowsrangesfrom1.3%‐2.7%(fromwettodry—thechangeintotaloutflowsisgreatestwhenflowsarereduced).Finally,forIP3,thereductionintotalbasinoutflowsranges2.7%‐5.3%.Thereisthusasmall,butpotentiallymeaningfulhydrologicaltrade‐offbetweenflowsintotheMekongandexpansionofirrigationintheNamNgumbasin,andthistradeoffisgreatestatthepeakofthedryseasonwater.

Figure10.Comparisonofhydrographsacrosshydrologicconditions

TransferstoThailandhaveamoresubstantialimpactonannualoutflowstotheMekong.Forthe150m3/scase,reductionsinannualbasinoutflowrange17%‐32%(rangingfromwettodry),andtheseincreaseto33%‐39.3%underaverageandwetconditions,respectively.AstheNamNgumsupplies4%ofthetotalannualMekonginflowsand15%ofdryseasonflows,thistransferwouldreducetotalflowtotheMekongRiver,andcouldaffecteconomicactivitiesandecologicalprocessesdownstreaminthatsystem.Floodcontroldoesnothaveasignificantimpactonannualoutflows,thoughwefindsubtlechangesinmonthlyoutflows.

6.Discussion

Thispaperdevelopedandappliedahydro‐economicoptimizationmodelforassessingtheeconomicconsequencesassociatedwithvariousinfrastructuredevelopmentandwatermanagementstrategiesintheNamNgumBasin.Avoluminousliteraturehasappliedsimilarhydro‐economicoptimizationmodelstoaddressanarrayofpolicyandenvironmentalissuesinvariouswatershedsworld‐wide.Thesemodelingtechniquesaremostoftenusedinregionssufferingfrom

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

jan feb mar apr may jun jul aug sep oct nov dec

Total basin outflow(m

cm)

Dry Year

Average Year

Wet Year

27

waterscarcityand/orover‐allocationofexistingwaterresources,wheremarginalchangesinwateravailabilityordemandinduceimportanteconomictrade‐offs.Thecontributionofthisstudyistoassesstheimplicationsofvariouslevelsofdevelopmentthatwouldincreasewaterresourcedemandsinarelativelywaterabundantwatershedbyalargeamount(e.g,uptoasix‐foldincreaseinirrigatedarea,orlargeinter‐basintransfers).Weconsiderwhethersuchincreasescouldinducemeaningfuleconomictrade‐offsamongwaterusers.

Table6.Percentagechangeinannualbasinoutflowsrelativetofuture8damscenario

   Dry  Average  Wet 

HP + ID1 Expansion  ‐0.76% ‐0.48%  ‐0.39%

HP + ID2 Expansion  ‐2.66% ‐1.62%  ‐1.33%

HP + ID3 Expansion  ‐5.28% ‐3.22%  ‐2.65%

HP + ID2 Expansion + 150 m3/s Transfer  ‐32.32% ‐20.89%  ‐17.11%

HP + ID3 Expansion + 150 m3/s Transfer  ‐32.34% ‐22.49%  ‐18.44%

HP + ID2 Expansion + 300 m3/s Transfer  n.a. ‐39.37%  ‐32.91%

HP + ID3 Expansion + 300 m3/s Transfer  n.a. ‐39.40%  ‐34.23%

HP + ID2 Expansion + 95% Flood Control   n.a. ‐1.62%  ‐1.33%

HP + ID3 Expansion + 95% Flood Control   n.a. ‐3.22%  ‐2.65%

HP + ID2 Expansion + 90% Flood Control   n.a. ‐1.62%  ‐1.33%

HP + ID3 Expansion + 90% Flood Control   n.a. ‐3.22%  3.54%

HP + ID2 Expansion with Low Returns   ‐0.10% ‐0.06%  ‐0.05%

HP + ID3 Expansion with Low Returns   0.00% 0.00%  0.00%

Specifically,theprimaryobjectiveoftheanalysiswastoquantifythepotentialeconomictradeoffsamongenergygeneration,irrigation,floodcontrol,andtransboundarywatertransferobjectives.Weconstructedaseriesofsensitivityscenariosunderdry,average,andwethydrologicconditions,withvaryinglevelsdamdevelopment,irrigatedagriculturalexpansion,agriculturalreturns,floodcontrolstoragerestrictions,andwaterdiversionstoThailand.

Ingeneral,resultsindicatethattradeoffsbetweenhydropowerproduction,irrigation,andfloodcontrolaremodest.Hydropowerandagriculturalexpansionarefoundtobecomplimentaryunderhighlevelsofwateravailability,aseventhemostambitiouslevelofirrigationexpansion(ID3)wouldreducetotalhydropowerproductionbyonlyamodestamount(lessthan2%annuallyforallhydrologicconditions).ThissuggeststhatenergyexpansionandexpandedfoodproductioncouldgohandinhandintheNamNgumBasin.ThetradeoffsbetweenhydropowerandfloodcontrolalsoappeartoberelativelysmallintheNamNgumBasin.AllowingforfloodcontrolbymaintainingreducedstoragelevelsinthereservoirthatislargestandfurthestdownstreamontheNamNgum(NN1)decreaseshydropowerbylessthan1%.Similarly,additionofthewatertransfertoNortheastThailanddoesnotgreatlyaffecthydropowergeneration.Alloftheseresultsgenerallyfollowfromthefactthatthedamswouldoptimallybeoperatedtomaximizestorageduringthefloodseasonandtoslowlyreleasewaterduringthedryseason,whichisalsobeneficialintermsofirrigationrequirements,ecologicallowflows,anddownstreamfloodcontrol.Wenote,however,thatcritical

28

informationontheimpactthatdamdevelopmentwouldhaveonfreshwaterbiodiversityandfishpopulationsinthebasinislacking,soassessingtheeffectsofhydrologicalchangesonecosystemsrequiresadditionalresearch.WedidalsofindthattheamountofwaterflowingoutoftheNamNgumandintotheMekongcoulddecreasebyupto5%withfulldevelopmentofirrigation.

Resultsalsosuggestthateconomicoutcomesarehighlydependentonwateravailability.Systemproduction(ofhydropower)wasgreatlyreducedunderdryhydrologicconditions,andirrigationconsumedrelativelymorebasinwater.Forexample,hydropowerdecreasedby60%fromtheaverage,andirrigationrequirementsreached5%oftotalbasinflowunderthemostambitiousexpansionscenarios.Ifflowsweretodecreasetosuchlevelsonalong‐termbasis,theeconomicproductivityofthebasincouldthusbeseverelyhampered.Ontheotherhand,‘wet’conditionsonlyleadtomodestimprovementsinenergygeneration,sincedamandturbinecapacitiesarequicklyreached,andirrigatedlandpotentialinthebasinisfairlylimited.Theseresultsillustratetheimportanceofaccountingforclimatevariabilityandpotentialchangeincost‐benefitanalysisofinfrastructureprojects,eveninwatershedsthatarerelativelywaterabundant.

Furthermore,indryyears,watertransfersoutoftheNamNgumtoNortheastThailandwouldcreatetradeoffsbetweenwaterallocatedtodryseasonirrigationandthatremainingforecosystems.Indeed,largetransferswerefoundtobeinfeasibleinsomemonths.Largewatertransfers(300m3/s)wouldalsoleadtoreducedeconomicbenefitsandbasinoutflowsunderaverageandwetconditions,particularlywhencoupledwithirrigationexpansion.Overall,a150m3/swatertransfertoThailandcouldreducebasinoutflowsby32%indryconditions,andalarger300m3/stransferwoulddecreasetheseoutflowsby40%underaverageconditions.

Overall,ourresultshavetwoimportantpolicyimplicationsforthehydropowerandagriculturesectorsinLaoPDR.WiththerecentcontroversyresultingfrompoorlymanagedwaterreleasesatNN1duringthetyphoonof2011thatresultedinsignificantcropdamagesintheVientianePlain,theminimaltrade‐offbetweenhydropowergenerationandfloodstoragesuggeststhattheLaogovernmentcouldchangeoperatingrulesforNN1toensureadequatestoragecapacityduringtherainyseasontobuffersuchevents.Fordomesticagriculturalpolicy,ourresultsindicatethateffortsbytheLaogovernmenttoturntheVientianePlainintoasignificantlyexpandedriceproductionareaareeconomicallyfeasible,ifhighagriculturalreturns–intermsofyieldsandprices–remainpossible.Ifreturnsdecrease,however,thebenefitsofsuchanexpansionpolicywouldneedtobeconsideredcarefully,sincethecapitalcostsofcanalexpansionandlandclearingmightoutweighthebenefitsobtained.

TheimplicationsofdevelopmentintheNamNgumonthewiderMekongarealsoimportanttoconsider.Ontheonehand,fullhydropowerdevelopmentandirrigationexpansionwouldonlyreduceflowsintotheMekongbyroughly10%onanannualbasisunder‘dry’conditions,andwouldbemuchlower(4‐6%)underwetandnormalconditions.CoupledwithlargewatertransferstoNortheastThailand,however,theseeffectscouldbecomemoresignificant.Inaddition,thetimingofflowsintotheMekongwouldchangemarkedlyduetotheeffectsofstorage,withlowerpulsesduringthewetseason,andhigherdryseasonflows(Lacombeetal,2012)potentiallynegativelyimpactingflood‐pulsedependentecosystemsdownstream.CarefulanalysisisneededtobetterunderstandtheimplicationsofsuchchangesforthewiderMekongregion.

29

Thereareanumberofimportantlimitationstoouranalysis.First,acriticalassumptionoftheoptimizationmodelusedhereisthatoperationofcontrolinfrastructuresinthebasincouldbecoordinatedacrossdamsandovertime.TherealityofmanagementofdamsintheNamNgumisthattheyarelesscoordinated,however,asindividualdamsappeartobemostlyoperatedbyindependentcompanies.However,ElectricitéduLaos(EDL)isamonopolisticbuyerofhydroelectricenergy,andimprovingsystemoperationwouldlikelybeinitsbestinterest.Evenso,energyproductionisclearlynotthesoleobjectiveinthebasin,sothebenefitssimulatedhereprobablyrepresentanupperboundontheeconomicproductionthatwouldbepossiblegiventhemodeledsuiteofinfrastructures.Second,modeloutcomesarehighlydependentoneconomicandhydrologicalparameters.Asshown,thenaturalvariabilityinthesystemhasadramaticeffectonpowerproductionpotential.Similarly,factorssuchasagriculturalreturnsinfluencetheextentofefficientirrigationexpansion.Third,theassumptionofprofitmaximizingbehaviormaynotreflectlandmanagementdecisionsinaregionwithahighlevelofsubsistencefarming.Wehopetoaddressthislimitationinfutureworkbyincorporatingrecentlyassembledinformationonlandownerpreferencestomoreadequatelyaddressthepotentialimpactsofagriculturaldevelopmentonlivelihoodofsubsistencefarmers.Fourth,themodeldoesnotvaluechangesinflowthataffectareasoutsidetheNamNgum(i.e.downstreamintheMekong),nordoesitexplicitlyvaluethechangeinecologicalservicesthatwouldresultfromchangingthenaturalhydrologyoftheNamNgum.Withregardstoclarificationofthesepoints,additionalresearchisneeded.

Acknowledgements

TheauthorswouldliketothankPeterMcCornickforhissupportintheinitialstagesoftheresearchandMartaDarbyforherexcellentworkinsupportingthedatadevelopmentprocess.WealsowouldliketothankDr.JohnWardandCSIROforsupportingthelargerMekongFuturesprojectthatmadeourresearchpossible.Lastly,wewouldespeciallyliketothanktheNicholasInstituteforEnvironmentalPolicySolutions;itsdirectfinancialsupportmadetheprojectpossible.

30

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Appendix:AdditionalModelingDetails

LocalInflows

Thesub‐catchmentscorrespondingtomodelnodeswereobtainedusingspatialflowmodelingandadrainagemapdevelopedinArcGIS10.Beginningatthenodefurthestupstreaminthecatchment—representingthesurfacediversionfortheXiangkhoangPlateau—nodesub‐catchmentareasweredeterminedusinga50meterresolutionDigitialElevationModel(DEM),aGISpolylinefileofthemainstreamsinthebasin,andtheArcHydropackageofspatialhydrologytoolsinArcGIS10.Creatingthedrainagemaprequiredafourstepprocess:1)“burning”ofthestreamfileintotheDEMthroughsimplesubtractiontoensureaccuraterepresentationofrealstreamconditionsinthebasin;2)filling“sinks”intheDEMtoaccountforsmallnon‐drainingirregularitiesintherelativelylowresolutionelevationmapdata;3)usingthe“FlowDirection”tooltomathematicallydeterminehowcellsdraindownstream;and4)usingtheFlowAccumulationtooltodeterminethedrainageareaateachpointontheriver,basedonthedirectionoftheflowdeterminedinthepreviousstep.Themapcreatedthroughthisprocesscontainsdataonthenumberof50mby50mcellsthatdrainintoanypointalongthetributariesandmainstemoftheNamNgumriversystem.

Movingfromupstreamtodownstream,themappedsub‐catchmentareaofeachnodewasthenconvertedintohectares,withdownstreamareasdeterminedviasubtractionofupstreamareasfromtotalcatchmentarea.Forexample,whilethedrainageareaforNamNgum4wassimplyitsupstreamcatchmentarea,thenextdownstreamnode,theconfluenceoftheNamTingandNamNgumrivers,wasdeterminedbysubtractingtheNamNgum4catchmentareafromthetotaldrainageareaattheconfluencepoint(measuredontheNamNgum)togettheuniquecatchmentsub‐catchmentareaforthisspecificnode.Allsubsequentdownstreamnodesub‐catchmentsweredeterminedsimilarly.

Onceallsub‐catchmentareashadbeensodetermined,thelocalinflowsforeachnodesub‐catchmentwerecalculatedbymultiplyingthetotalflowsattheclosestdownstreamgaugebytheratioofthatsub‐catchment’sareatothatoftheentirecatchmentdrainingintothepointcoincidingwiththatgaugingstation.Forexample,localinflowsfortheNamNgum2damwerecalculatedasfollows:

NN2inflows=BanNaluanginflows*(HaNN2subcatch/HaBanNaluangsubcatch) (A1)

Forintermediatepointsbetweengaugingstations,theincrementalchangeinflowsbetweenstationswassimilarlyascribedtothesub‐catchmentslyingbetweenthosestations.Thiswasthenreplicatedforeachnodeforeachofthethreeclimatescenarios:wet,dry,andaverage,resultinginthreeseparateyearsofinflowsforeachnode.

TherewerealsotwoimportantexceptionsinthederivationofflowsrelatedtodiversionsinandoutoftheNamNgumBasin,specificallythediversionsintotheNamNgum1damreservoirfromtheNamSongRiverinthebasin,andfromtheNamLeukDamoutsidethebasin.Inmodelingthesediversions,actualhistoricalflowsobtainedfromtheGovernmentofLaoweredirectlyincludedas

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flowsintoandoutofthecorrespondingnodes,sincewedonotknowthepreciseoperatingrulesgoverningtheamountsofthesediversions.

Thismethodologyalsohassomekeylimitations.BecauseeachcellintheDEMcontains2,500m2

surfacearea,itmissesmuchofthefinerresolutionsurfacegeology,resultinginsmallerstreamsandriversdrainingincorrectly,confluencepointsmappingtoincorrectlocations,aswellasotherproblemsrelatedtospatialscale.Theflowaccumulationmodel,andthusthesub‐catchmentareasthatarecalculated,arenotexactrepresentationsoftheriversystem.Ideally,LIDAR,orotherfinerresolutionimaging(unobtainableforthisstudy)couldbeusedtodeterminetheexactflowpathsandaccumulationsforthesmallerstreams,resultinginamoreaccuratehydrologicalmodelforthebasin.Thelower‐scaleresolutionspatialmodelingwasdeemedsufficientforthepurposesofbasin‐scaleoptimization.

CurrentandPotentialIrrigatedArea

Threedatasourceswereusedtodeterminecurrentandfutureirrigatedareas:1)satelliteimageryfromthedryseason;2)pumpingstationcapacityandirrigatedareaperpumpingstation(datafromtheMAF);and3)localsurveysofactualandplannedirrigatedareasbydistrict,weightedaccordingtotheirportioninthebasin(DepartmentofIrrigation(DOI)andJapanInternationalCooperationAgency(JICA)2009).Theimagesusedwerefreely‐available,highresolution(0.46to0.60m)satelliteimagestakenduringthedryseasonmonthsofMarch2002,April2003,December2007,January2008,andDecember2010,anddisplayedinGoogleEarth.ThehighresolutionandcontrastbetweendryandcultivatedlandintheimagesallowedforrelativelystraightforwarddelineationofcurrentlydevelopedirrigationareaslocatednearexistingcanalsandpumpingstationsintheVientianePlainusingArcGISsoftware.Unfortunately,similarimagesdepictingdryseasonproductionarenotavailablefortheupstreamareasofthebasinwhereadditionalirrigatedproductionoccurs,sogroundlevelDOI/JICAdatabydistrictandgovernmentdatafromplanningdocumentswereusedforestimatingproductionareasintheXiengkhouangPlateau.FutureexpansionpotentialwasthenestimatedasdescribedinSection4.4above.

Hydropowerdata

TheparametersforhydropowerdamsarepresentedinTableA1.Theseparameterswereobtainedfromvarioussources:basindevelopmentreports,projectprofiles,damdevelopers,theelectricityauthorityofLaoPDR,ElectricitéduLaos(EDL),andtheDepartmentofEnergyPromotionandDevelopment(EPD)oftheMinistryofEnergyandMines(MEM).

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TableA1.Modelinputsforhydropowerdams

Name  Dead Storage (Mm3) 

Total Storage (Mm3) 

Turbine Height (M) 

Minimum Operating Height (M) 

Maximum Operating Height (M) 

Spillway Capacity (Mm3) 

NN1  2330  7030 75 196 212.3  70.3

NN2  2269  4886 181 345 378.75  48.86

NN3  337  1316 220 660 720  13.2

NN4A  111  443  65 1025 1045  4788

NN5  65.2  314  99 1060 1100  31.4

Nam Lik 1‐2  270  1095 103 270 305  11.13

Nam Bak 2B  65  238  85 1010 1050  1.86

Nam Bak 1  147  473  83 600 640  4.73

Notes:CompiledfromEPD,2012;Lacombeetal.,2012;ADB,1996;VattenfallPowerConsultantsAB,2008;andSD & XP Consultants Group and Nippon Koei, 2009.

Additionalresults

AdditionalresultsforhydropowerandagriculturalwaterusebyscenarioandhydrologicalconditionsaresummarizedinTablesA2andA3below.

TableA2.Annualhydropowerproductionbyscenario

   Dry Year   Average Year   Wet Year  

Current (3 dam) Scenario                          2,547                           6,891                           7,454 

HP Expansion Only                           6,104                           9,857                        10,632 

HP + ID1 Expansion                          6,103                           9,856                        10,631 

HP + ID2 Expansion                          6,087                           9,849                        10,623 

HP + ID3 Expansion                          6,074                           9,840                        10,614 

HP + ID2 Expansion + 150 m3/s Transfer                          5,975                           9,848                        10,623 

HP + ID3 Expansion + 150 m3/s Transfer                          5,973                           9,839                        10,614 

HP + ID2 Expansion + 300 m3/s Transfer   NA                           9,510                        10,580 

HP + ID3 Expansion + 300 m3/s Transfer   NA                           9,500                        10,558 

HP + ID2 Expansion + 95% Flood Control    NA                           9,834                        10,611 

HP + ID3 Expansion + 95% Flood Control    NA                           9,825                        10,603 

HP + ID2 Expansion + 90% Flood Control    NA                           9,805                        10,584 

HP + ID3 Expansion + 90% Flood Control    NA                           9,796                        10,575 

HP + ID2 Expansion with Low Returns                           6,104                           9,861                        10,632 

HP + ID3 Expansion with Low Returns                           6,104                           9,857                        10,632 

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TableA3Totalagriculturalwaterusebyscenario

   Dry Year   Average Year   Wet Year  

Current (3 dam) Scenario                             262                              262                              262 

HP Expansion Only                              262                              262                              262 

HP + ID1 Expansion                             431                              431                              431 

HP + ID2 Expansion                             823                              830                              830 

HP + ID3 Expansion                          1,375                           1,390                           1,398 

HP + ID2 Expansion + 150 m3/s Transfer                             308                              824                              824 

HP + ID3 Expansion + 150 m3/s Transfer                             548                           1,384                           1,392 

HP + ID2 Expansion + 300 m3/s Transfer   n.a.                              538                              824 

HP + ID3 Expansion + 300 m3/s Transfer   n.a.                              548                           1,392 

HP + ID2 Expansion + 95% Flood Control    n.a.                              830                              830 

HP + ID3 Expansion + 95% Flood Control    n.a.                           1,390                           1,398 

HP + ID2 Expansion + 90% Flood Control    n.a.                              830                              830 

HP + ID3 Expansion + 90% Flood Control    n.a.                           1,390                           1,398 

HP + ID2 Expansion with Low Returns                              284                              284                              284 

HP + ID3 Expansion with Low Returns                              284                              284                              284