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River Murray Water Supply Where is your future headed?. Prof. Mike Young Research Chair, Water Economics and Management The University of Adelaide “Water, wine and horticulture: A Scholefield Robinson Horticultural Services Seminar” Chifley Hotel, 18 th September 2007. - PowerPoint PPT Presentation
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Prof. Mike YoungResearch Chair, Water Economics and ManagementThe University of Adelaide“Water, wine and horticulture: A Scholefield Robinson Horticultural Services Seminar”Chifley Hotel, 18th September 2007
River Murray Water SupplyWhere is your future headed?
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0
500
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Rai
nfal
l (m
m)
14% less 20% less
Rainfall for Jarrahdale
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900
1000
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Str
eam
flo
w (
GL
)
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 ril
48% less66% 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
Changes in rain and water supply
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Warragamba + 3 Nepean Dams (Inflows & annual rainfall)
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Year
Inflo
w G
L
0
500
1000
1500
2000
2500
3000
3500
4000
4500
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Rainf
all (m
m)
892 GL pa
2,027 GL pa
572 GL pa
780 mm pa 907 mm pa 681 mm pa
Sydney
- 25%
- 75%
4
If it gets drier
Less rain means much less water
5
Melbourne
6
0
10,000
20,000
30,000
40,000
50,000
60,000
1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Year (financial year ending)
Inflo
w to
Lal
Lal
Res
ervo
ir (M
L)Lal Lal, Victoria in-flow Levels
Average post 1997 11,600 ML
Average pre 1997 27,400 ML
7
Total Murray-Darling Basin inflows Annual flows (year ending June) showing forecast for 2006/07
Source: Craik, MDBC
21 years
8
9
900 GL for use
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Salinity at Morgan
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Salinity Lake Alexandrina
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Lake Alexandrina Level
-0.5 m
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Problems
1. Over-allocation When too much is allocated to users and not enough to the
environment and for system maintenance & operation2. Over-entitlement When more is allocated than exists
3. Interception Activities that by reducing river flow debase reliability
4. Inefficient storage management When too much or too little is left in storage and in the system
itself5. Administrative inefficiency When transactions take too long to complete When there is un-necessary duplication When there are barriers to adjustment
14
Over-allocation and over-entitlement
A dredge was put in the Murray Mouth in October 2002 – before the drought!
Nature’s solution to this problem is to debase the reliability of your entitlement.
Governments can purchase entitlements and either • Cancel them when over-entitlement is the
problem • Re-assign them to the environment when over-
allocation is the problem• Can change fixed volume entitlements into
shares
15
Flow interception
Flow reducing activities
1. Increased forestry2. More farm dams3. More groundwater development4. Increased irrigation efficiency5. More lined channels and more piped water6. More salinity interception
Two Risks1. Climate change2. Bushfires
16
Language
SA is unbundling its holding and taking licence systemEntitlements A share of the amount allocated for use in any year
Allocations The amount that is allocated for use or for trade
17
Risk management reforms1. Guaranteed allocations
• Once made, they can not be reduced without compensation
2. Access to the system’s dams Carry forward with adjustment for evaporation
3. A tradeable share of the cap as a maximum delivery entitlement
18
Entitlement reliability reform
1. Transfer SA entitlements to a common register with NSW and Vic
No state differences between SA, Vic or NSW entitlements A formal allocation for River maintenance and operation
2. A guaranteed flow to the sea and no guaranteed flow over the SA boarder
3. Entitlements defined as shares of the available water in two reliability pools in each part of the system
High security adjusted for long run trend General security varies with seasons
19
Trading reforms
1. Internet-based access to your water account2. Guaranteed register integrity3. Instantaneous trading of allocations4. Announcement timing synchronised across the
Basin5. Low-cost and speedy entitlement trading
• Two days maximum time• Less than $60 per trade• Electronic mortgage clearance and settlement
6. Unbundled entitlements, allocations and use approvals
20
Adjusting to a new regime
1. The system has been seriously over-allocated for some time
2. Adjustment styles Impede Facilitate Expedite
3. Avoid any program that impedes structural adjustment
4. With much less water there must be less irrigation and fewer environmental assets
Sacrifice on both sides will be necessary
21
Environmental water reform
1. Hold entitlements in a trust at arms length from any decision making about seasonal allocations and trading rules
2. Support counter-cyclic trading3. Source water using off-market
mechanisms
22
Options 1. Continue to debase your entitlement2. Bring all flow reducing activities into the allocation regime3. Voluntary acquisition4. A market-assisted step change
Paid 2 years in advance for a percentage reduction in your entitlement Paid above market value => Just terms
Waive all water trading charges for two years Pay all exit fees For income tax purposes defined as compulsory
acquisition
Ending Over-allocation & Over-entitlement
23
What you can do
Manage your own risk1. Determine the breakeven price at which it pays to sell
rather than use water• Review your assets carefully
2. Expect minimal allocations for the next few years3. Invest in water entitlements in NSW and Victoria4. Carry forward water if you can5. Invest in river water entitlements that are outside
irrigation districts and, hence, exempt from exit fees• Trade allocations in but think twice before trading
entitlements into a district
Contact:
Prof Mike YoungWater Economics and ManagementEmail: [email protected]: +61-8-8303.5279Mobile: +61-408-488.538 www.myoung.net.au
Subscribe to our Droplets at www.myoung.net.au