Water Demand Management in the City of the Future Cost Assessment of Demand Management Options

DM measures include those aimed at oIncreasing system efficiency at utility level, e.g.  Reduction in systems losses oIncreasing end-use efficiency, e.g.  Domestic water efficiency measures, Public education oPromoting locally & unused available resources, e.g.  Rainwater Harvesting, Greywater reuse oPromoting substitution of resource use, e.g.  Waterless toilets, Greywater reuse oUsing economic instruments to promote efficient use of water  Flexible water tariffs (adapted from White & Fane, 2001) Demand Management

Structural & behavioural opportunities for water conservation

Potential for potable water substitution – Use of the water quality cascade

Costs and Qualitative Assessment

Sustainability criteria: Qualitative assessment  Risk and feasibility consideration  Environmental impacts  Social issues and concerns

Financial and Economic Analysis of options  Cost per unit volume of water saved or supplied ($ / Ml) oAllows comparison of both demand management and supply options  What are the total resource costs borne by o the utility o the government oCustomers oSociety (externalities that can be quantified)  Use of various costing methods oAverage Incremental Cost per unit volume of water  What is the AIC cost of water under each option?

Page 9 Assessing Supply and Demand Options

Cost Assessment of Option 1 Capital and Operating Cost of Option ($ / year) Volume of Water Produced or Saved (m3/year) Year 1C (Y1), O (Y1) V (Y1) Year 2C (Y2), O (Y2) V (Y2) Year 3C (Y3), O (Y3) V (Y3) Year 25C (Y25), O (Y25) V (Y25) Total Page 10

Page 11 Estimating the Unit Cost of Water  For a particular option to supply or save water.  Life Cycle Analysis ostream of future costs, by year they are incurred - capital (C) and operational (O = management, operation and maintenance) C(Y1), O(Y1), O(Y2), O(Y3), O(Y4), O(Y5), O(Y6) etc ostream of future volumes of water supplied or saved each year V(Y1), V(Y2), V(Y3), V(Y4), V(Y5), V(Y6) etc

Page 12 AIC calculation of unit cost of water  Average Incremental Cost or levelised cost oComparable to marginal cost of water oNet Present Value approach  Streams of costs are discounted to present day  Streams of water supplied are discounted to present day oThen for a life cycle of 25 years

Page 13  More generally, and considering options that supply additional water or save water, taking account of capital (C) and operating (O) costs of the option and saved operating cost (OS) (Environment Agency, 2007)

Page 14 Economic Cost  Average Incremental Social Cost brings “externalities” into the calculation oSocial and environmental costs and benefits (E) (Environment Agency, 2007)