The South Australian Government commissioned an independent consultancy to undertake a cost-benefit analysis of using water from the Adelaide Desalination Plant (ADP) to offset reductions in allocations to consumptive water entitlements during periods of low water availability in the River Murray.
The independent cost-benefit study, undertaken by Marsden Jacobs Associate, is now available online.
Media release 7 July 2016: Independent study to inform water allocations
Why was the Adelaide Desalination Plant built?
The Adelaide Desalination Plant (ADP) was constructed as an insurance policy for urban water supplies to ensure that sufficient water is available to meet Adelaide’s needs in extremely dry years.
The plant was built on the back of the Millennium Drought to provide a climate-independent source of water, in addition to the state’s reservoirs and the River Murray. The combination of these sources provides the necessary water security to underpin the state’s economic and population growth to 2050.
Is the Adelaide Desalination Plant currently being used?
The ADP is currently operating at minimum production, contributing on average 30 ML per day for nine months of the year, (producing approximately 8 GL per year).
The ADP has been supplying water since mid-October 2011, and has provided about 130 billion litres (130 GL) to metropolitan Adelaide customers so far.
For more information on how the Adelaide Desalination Plant works, visit SA Water.
What did the cost benefit study look at?
The independent cost benefit study examined the likely increased costs and benefits of using additional water from the desalination plant to determine whether using more desalinated water to boost irrigators’ allocations in dry periods would provide an overall economic benefit to the state.
The study is an outcome of consultation undertaken with the community on the revised River Murray Water Allocation Plan.
What were the findings of the study?
Marsden Jacobs found that River Murray allocation prices are not at a level that would make running the ADP a cost effective way of boosting allocations in 2016-17.
Such a policy change would be of net economic benefit only when River Murray water allocation prices are greater than the marginal cost of running the ADP.
Average River Murray allocation prices are unlikely to reach the minimum threshold level in 2016-17 required top run the ADP. Allocation prices are not expected to repeat the peaks ($560 per ML) of the Millennium drought.
The study’s findings have been informed by targeted consultation with irrigation stakeholders and water market participants, and represent best estimates for 2016–17. These findings are unlikely to materially change in the coming years, unless there is a major and unexpected change in the structure of the farm sector.
What are the next steps?
Although current information suggests it is not economic to run the ADP to boost allocations for irrigators this water year, the State Government is committed to explore other options for factoring the ADP into River Murray water allocations in 2016-17.
Further work will be undertaken to examine the best way to share water between River Murray users, given the water security provided by the ADP.
The work aims to ensure that there is a fair balancing of risks between River Murray users, acknowledging that, in a worst case scenario, there are alternative sources for Adelaide.
The work will be completed by September 2016, before the peak of the irrigation season.
In the meantime, if it becomes clear during the water year that SA Water does not require all of the water set aside for Metropolitan Adelaide, there is potential to make this water available for other users or to store for future years.