Agriculture Reference
In-Depth Information
Table 2. Additional high flow events at Wagga Wagga
Minimum flow per day
25 GL
26 GL
27 GL
28 GL
29 GL
30 GL
7 days or more
10
13
13
11
7
-3
10 days or more
17
17
12
5
8
3
14 days or more
15
13
9
2
-1
0
Sensitivity analysis
While there are many parameters to consider in the design of an optimal release
strategy, the cost of failing to meet an environmental objective and the cost of the water
resources required to meet that objective are central to the problem. The model is
therefore solved under a set of alternative assumptions for both of these parameters.
The annual penalty for failure was reduced to $20 million and increased to
$60 million. The results for the volume of water on call, the reliability of the rule and the
cost of operation are shown in Table 3. The results are consistent with logical
expectations of a cost minimisation model. The relationship between penalty rates and
reliability is clearly illustrated. Relative changes in reliability are associated with a large
change in the volume of water on call and hence the costs of the optimal release strategy.
Moreover, the resource costs of adopting the release strategy decline sharply as the level
of reliability falls.
Table 3. The optimal release strategy under different penalty rates
Penalty/Value
$20 million
$30 million
$60 million
Volume on call (ML)
100 408
144 111
191 098
Likelihood of success (%)
93
97
100
Cost ($million NPV)
61
86
109
The cost of a high security entitlement is reduced to $1200 per megalitre and
increased to $1800 per megalitre. The salvage value is held constant so that the reduction
in entitlement cost reduces the capital and opportunity costs of environmental releases.
The results are shown in Table 4. Again the results are consistent with a cost
minimisation model. The volume of water on call falls with entitlement prices and there is
a consequent reduction in the reliability of the release strategy. Further, the percentage
change in entitlement costs is roughly equal to the percentage change in the costs of
adopting the strategy.
Table 4. The optimal release strategy under alternative entitlement costs
Entitlement cost
Value
$1200/ML
$1500/ML
$1800/ML
Volume on call (ML)
152 868
144 111
103 229
Likelihood of success (%)
97
97
94
Cost ($M NPV)
59
86
89
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