The Benefits of Rain in Canberra

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Factoid for you. A rain event, even of 10mm, across the Snowy Mountains produces a runoff of between 20 and 50 Giga litres of water, depending on how dry the ground is, sunshine/evaporation and recent rains etc. The value of that to the Australian economy may surprise you…

Canberra Rain benefits the nation -Who would have thought

The ACT and Canberra are right on the edge of the Snowy Mountains and sandwiched between the Great Dividing Range to the East and the Brindabella Mountains to the West. This means that rain falling in this area goes directly to the Murrumbidge. The Snowy Mountains drain via the Murray, Snowy, Murrumbidgee, Tumut and to a lesser extent the Bombala and other small coastal rivers. So let’s look at the impact of rainfall events.

Snowy River from Mount Kosciuszko

The Snowy Mountains catchment area is about 100 by 100 km square or 10,000,000,000 m2. 10mm of rain over that area results in 100 Gl of water falling from the sky. Lets say that half of that goes to the sea via the Snowy or coastal rivers or is absorbed by plants and evaporates – assuming the ground is not bone dry. That leaves 50 Gl to flow into dams and streams that water the Murray River and Snowy catchments. While taking into account the Snowy, I will just talk about the Murray when doing the analysis.

If we get 50 Gl from an event it generates in the region of 250 MW hours of electricity just by running through the turbines in the Snowy Hydro electrical system. A Gl weighs 1 x 109 Kg and it falls around 200 m through the Snow Hydro System. Gravity is 9.8. The Potential Energy of that water (E(p)=mgh)  That is 2 x 1012 Joules. That is 544 MWh (divide by 3,600,000,000). There will be inefficiencies in generation so lets say it is about 250 MWh. Lets now take the value of that electricity as $110 a MWh (11c a kWh at roughly a wholesale price).

The same 50Gl of water provides an economic value between $1340 per Gl (purchase price by Murrumbidgee Irrigation) through to $1million as paid by Adelaide domestic water consumers. We have to assume (like an economist) that the price paid reflects the economic value of the resource.

From each Gl of water somewhere between $300,000 and $1,300,000 of economic gain is generated through irrigation (pasture through to fruit and vegetables). Industrially, the value is usually between $1,000,000 and $2,500,000 in Canberra, Adelaide or Wagga Wagga. I have distributed the usage of the water and allowed for losses due to evaporation and soakage before it gets to the point of irrigation. The split might not be exact but it is close. Domestic cost/value for water is around $1,500,000 per Gl which is about a dollar for a full bath – mostly to cover the cost of treatment and distribution. We complain about the high price of water as a commodity for washing and gardens. Yet we pay more than a dollar for a one litre bottle of water in the shops because we value it as a basic need.

Picture showing economic returns from various types of water usage. Courtesy CSIRO Land  and Water (originally) and The Australian
Picture showing economic returns from various types of water usage. Courtesy CSIRO Land and Water
UseAllocationValue
Flood Irrigation
25%$3.75 million
Drip Irrigation5%$3.25 million
Industry
7%$8.75 million
Domestic3%$2.25 million
Losses60%$0
Total 100%$18 million

Along the way the water contributes some 2% (proportion of total environmental flow) to the tourism value in the Murray Valley of more than $180m. Effectively, without this rainfall the tourism does not happen. We are talking water sports and sightseeing/camping and fishing for the most part.

What do we do with the water?

Most water goes to flood irrigation which is the lowest economic value. A tiny proportion goes to the most valuable uses.

I offer a conservative estimate of the value to the Australian economy of a widespread downpour of 10 mm in the Canberra region as:

ResourceValue
25 MW of electricity$27.5 million
Tourism$3.6 million
Water usage$18 million
sustaining Basin CommunitiesNot calculated
Total $49.1 million

Interestingly the value of the water for irrigation is to the right of the decimal point despite my calculations assuming 70% of the (non-evaporated) water going to irrigation. Water for domestic and industrial consumption is a far more profitable prospect for water. Of course I have not fully accounted for evaporation  (up to 90% by the time it reaches Adelaide) and quite a few other factors but then I have ignored other economic value as well. For example, just by supporting communities who live in the Murray River valley, you generate economic activity. Without water they would not be there. Without the jobs from other economic activity they would not be there either so the analysis becomes a bit more complex than a simple blog post.
So, why are we so keen on preserving water for irrigation when at least 30% and up to 80% can just evaporate before being used for growing anything?

And Basin Communities?

I have not included analysis of the value to Basin communities, however it is clear to me that there is a higher value than is normally attributed to sustainment of communities. That may be a task for another rainy day

And the point is? … it is amazing how productive you can be just reading on a rainy Winter’s day.

Actually, the point that should be made is that the disparity in the value of water means that a rational economist should declare that the best economic value is to let significant amounts of water run to Adelaide rather than use it for low value irrigation. Even assuming 90% evaporation and absorption to groundwater, there is a 1,000 fold lift in value of the water to Adelaide. This means a nett economic value of 100 times that of flood irrigation. Then again, evaporation and “loss” to groundwater is not a real loss because it does return at least 30% to the basin water cycle.

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