1. Introduction
1.1 Project Objectives
As part of a process to develop a water allocation framework, Sinclair Knight Merz was engaged by the Ministry of Economic Development to research the national economic consequences of possible water allocation arrangements for the Waitaki River. As part of the research, quantitative modelling was to be developed that supported a National Cost Benefit analysis, with qualitative assessment of changes that could not be summarised in economic terms.
Economic appraisal of potential water allocations for the Waitaki River has been undertaken in the past. The most recent appraisal that considered catchment hydrology as well as economic evaluation was completed in 1986 as part of a review of the upper catchment (Gough et al., 1986). In addition to this, economic appraisals of several individual water take proposals has been undertaken by consent-holders requiring water from the Waitaki Valley, some of which are publicly available (e.g. Irricon & MWH, 2002).
The national cost benefit assessment forms only one part of the economic appraisal for the proposals concerned. It does not capture the economic implications at the regional and local levels, which also require consideration. While some information from this report may be relevant to a regional and local level type analysis, it should in no way be considered comprehensive from such a perspective.
The current analysis includes proposed water takes from both the main stem of the Waitaki River and tributaries across the catchment, recognising the large number of recent proposals for hydroelectric demands and irrigation development. In addition the analysis seeks to identify changes in social and environmental attributes of alternative management strategies.
The project data was gathered between November 2003 and January 2004. It should be noted that several social and environmental reports for specific proposals have become available since January 2003 that will supersede the information contained in this report (e.g. Draft Relocation Plan2 developed by Meridian Energy, 19/02/2004). It is also acknowledged that this new information may address uncertainties stated in this report, or change underlying assumptions for the economic modelling.
The specific terms of reference for this report are as follows:
- Identify the significant proposals to take water from the Waitaki catchment and potential combinations of proposals;
- Provide advice on the net benefits of water use at key points in the Waitaki catchment based on the significant proposals;
- For each scenario or critical point in the catchment, identify:
- the national costs and benefits of irrigation
- the national costs and benefits of energy (informed by the Concept Consulting report)
- the national costs and benefits of changed land use
- significant social and environmental impacts, whether these impacts are positive or negative and their likely magnitude. Comment on the implications of these impacts for the analysis and where they can be quantified, incorporate them into the cost benefit analysis.
- Consult with key stakeholder groups to test methodologies and assumptions used in the analysis.
This report contains the project team's findings in response to the terms of reference provided above, however the details behind many of the modelling assumptions are provided in the appendices. A "map" of the report structure is provided below:
- Section 1: Project Objectives and Characteristics of the Waitaki Catchment
- Section 2: Outlines the methodology of the National Cost Benefit Analysis and the limitations in estimating benefits and costs associated with proposals. A statement of the base case, and the options for consideration is also included within this section
- Section 3: Outlines the quantitative modelling structure and the key assumptions used for the irrigation and energy sectors
- Section 4: Summarises the impacts of each option considered
- Section 5: Summarises the conclusions from the analysis undertaken.
The appendices support many of the assumptions provided in the main report. A brief summary is provided below:
- Appendix A: Summary of the economic principles regarding water allocation
- Appendix B, Appendix C, Appendix D: Background information on the environmental, social and cultural impacts of various development scenarios
- Appendix E, Appendix F, Appendix G: Background economic information on the agricultural sector, energy sector and commercial manufacturing sector with a focus on the economic benefits and costs of additional water allocation, and the volumes of water required
- Appendix H: Calculation on the economy wide impacts of changes to changes in the agricultural sector and the energy sector
- Appendix I: Output from the quantitative economic modelling undertaken.
1.2 The Waitaki Catchment
The Waitaki River catchment comprises over 11,000 square kilometres extending from the Southern Alp headwaters to the South Island's East Coast north of Oamaru (see Figure 1). The Waitaki River is the fourth largest river in New Zealand with a mean historical flow at Waitaki Dam of 358m³/s recorded between 1927-2000 (Opus, 2003). The four major tributary basins of the Waitaki catchment are the Tekapo, Pukaki, Ohau and Ahuriri and the catchment includes the natural lakes of Tekapo, Pukaki and Ohau, and the major artificial lakes of Benmore, Aviemore and Waitaki.
There is a strong rainfall gradient over the 70 kilometres across the Mackenzie Basin in the Upper Waitaki, varying from 4,195mm at Mt. Cook Hermitage to 456mm at Grays Hill Station. Further down the catchment, annual rainfall in the Waitaki Valley is relatively low, varying from approximately 500 to 550mm. Northwesterly rainfall is the predominant source of water in the catchment. In addition to northwesterly rainfall, snow pack and glacier melts are significant sources of inflow to the dams during summer when the natural high flows in the catchment occur. Natural low flows occur when precipitation in the alpine areas is retained as snow and ice during winter (Opus, 2003).
An extensive system of dams, lakes, canals and hydroelectric power stations operate within the catchment, including eight power stations (Tekapo A and B, Ohau A, B and C, Benmore, Aviemore and Waitaki) that generate a combined total of 1,758MW. Lake Tekapo and Pukaki are the major water storage lakes with the other lakes and canal systems providing lesser storage. There are six dams and 59 km of canals diverting and channelling flow down the catchment. The system of dams and canals has greatly modified the hydrology within the natural river courses of the Upper Waitaki and has had a significant yet lesser effect on the hydrology of the Lower Waitaki.
Three headwater lakes (Tekapo, Pukaki, Ohau) completely dominate the flow of the Waitaki River, accounting for 82% of the mean flow at Waitaki Dam. The lakes exert a regulating and smoothing effect on Waitaki River flows, with their ability to absorb large flood inflows and sustain outflows during dry periods. This has effectively reduced the seasonality of flows downgradient of the dams.
Figure 1: Waitaki Catchment Locality Plan
→ Full size version of Figure 1 [1370KB JPEG file]
1.3 Acknowledgments
The project team would like to take the opportunity to thank those organisations and individuals for that has assisted the completion of the national cost benefit analysis:
- All individuals and companies that have given up time and resources to attend workshops, submit a great deal of relevant information to the project team, and answer questions on specific developments over the course of the study.
- The steering group including representatives from the Ministries of Economic Development, Environment, Treasury, Agriculture and Forestry for their direction and feedback during the study.
- Basil Sharp (The University of Auckland) for his comments and advice on earlier drafts
- Peter Clough and Vhari McWha (New Zealand Institute of Economic Research) for their comments and advice on earlier drafts.
- Concept Consulting for their assistance in understanding the energy sector implications under alternative scenarios.
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