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Orange River Integrated Water Resources Management Plan: Summary of Water Requirements from the Orange River

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Orange River Integrated Water Resources Management Plan: Summary of Water Requirements from the Orange River Economic Study of Assurance of Supply Requirements for Water Resource Management with Reference to Irrigation Agriculture Volume 1 Final Report S Barnard1 and R Cloete2 Report to the Water Research Commission by 1 WRP Consulting Engineers (Pty) Ltd 2 Conningarth Economists WRC Report No. TT 775/1/18 January 2019 Obtainable from Water Research Commission Private Bag X03 Gezina, 0031 [email protected] or download from www.wrc.org.za DISCLAIMER This report has been reviewed by the Water Research Commission (WRC) and approved for publication. Approval does not signify that the contents necessarily reflect the views and policies of the WRC, nor does mention of trade names or commercial products constitute endorsement or recommendation for use. ISBN 978-0-6392-0066-8 Printed in the Republic of South Africa © WATER RESEARCH COMMISSION ii EXECUTIVE SUMMARY All natural water resources, including dams, form part of hydrological systems. Every system has a certain water yield during a specified time period. This yield is influenced by stochastic processes such as rainfall, evaporation, seepage, infiltration, vegetation, droughts, floods and demands from the various water-use sectors. The water demands within a hydrological system are dynamic and are based on population growth and economic development. The purpose of water resource planning is to determine the sustainability of the available water supply with current and growing demands imposed on the system. The system yield can be determined by performing a yield analysis, which is initially based on historical sequences, and thereafter on stochastic sequences. The historical firm yield (HFY) is determined from historical observed flow sequences in the system and the system’s ability to constantly supply the required demand at the current development level without failing. Since historical records are seldom repeated, it is important to predict what the sequences are likely to be in future; therefore, stochastic sequences are generated. The variability of system yield behaviour can be evaluated by observing the performance of a water supply system using many long- and short-term sequences with defined operating rules. The water supply system’s yield reliability cannot be assessed accurately without generating simulated sequences based on historically observed sequences. Computer-based models are used for these analyses. Water is a limited natural resource. The natural distribution and variability of water are not sufficient to meet the needs of all users at all times. This emphasises the need for water allocation as a means of facilitating sharing between different regions and competing users. Consideration should be given to prioritising water consumers according to the economic value of the products produced with the available water within the system. The difficult task of the water resource manager is to prevent a total system failure by deciding whom to curtail and by how much. Such a decision can be supported by determining the economic benefit of the products produced for the specific region of supply or catchment. For the past 25 years, analysis for drought management has been carried out with various models, and a distinction was made between different priorities and associated risk levels in terms of water supply to users in drought conditions. This research focuses on applying quantitative economic analysis to improve on the status quo in terms of risk-based water-restriction analysis. The driver behind stochastic risk and water-restriction analysis is the priority classification of the different water-use sectors. The definition of the priority classification or criteria for risk of curtailments has largely been based on expert opinion and qualitative economic criteria. The aim of this study is to develop a methodology for deriving an effective priority classification, in terms of the economy, for drought management and scheduling of augmentation requirements. The study approach entails analysing the effect on macroeconomic indicators – such as gross domestic product (GDP), employment creation and low household income – by allocating different levels of assurance of water supply to the various water user sectors within selected economic regions. These sectors include irrigation agriculture, urban, mining and industrial users. The methodology identified to realise the study approach involves creating a link between the existing water resource planning model (WRPM) and the water impact model (WIM) such that the economically best user priority classification can be derived. The models are linked by means of post-processing using Excel™ Visual Basic. Such an integration could serve as platform that offers decision-making support in terms of assurance of supply requirements based on a quantitative (scientifically grounded) method as opposed to the current qualitative assessment. The water resource yield model (WRYM) is used to determine the HFY, and the short- and long-term capacity of a specific resource. The WRPM uses both stochastic sequences and short-term yield iii capacity to predict probable future yield. The probability of a system failure within a certain time period can therefore be calculated. The risk of failure or its inverse – the assurance of supply – is determined, which enables proactive interventions during times of drought. Assurance of supply forms the basis of sustainable water resource management. The WIM was developed to determine the impact of reduced water supply on the crop yield of irrigation crops, and subsequently the economic indicators of the region. The crop data, namely, water volumes, hectares and specific crop production budget are the main drivers of the WIM whereby the macro- economic indicators are estimated. Economic multipliers as derived from the social accounting matrix (SAM) model and the Leontief inverse applied are used in the WIM to calculate direct and indirect impacts. The focus of the study is therefore on the irrigation agriculture sector; however, any amendments to the assurance of supply to one user sector affect the assurance of supply to another. Crop detail and varying assurance of supply levels are incorporated in the WRPM to determine the available supply for a given scenario. For the irrigation agriculture sector, the economic impact on crop yields as a result of non-supply at different crop growth stages is envisaged. Water supply assurance affects the WIM and its resulting indicators by crop yield variation. The variation leads to a new macroeconomic impact for the region supplied by the water resource. Based on the outcome and interpretation of the analyses, criteria can be developed to allocate assurance of supply, which serve as guidelines for water resource managers for a more informed decision-making process to allocate water equitably. The ability of a system to supply water at various reliability indices is derived from the short-term yield characteristic curve of the system. With the aid of probabilistic techniques, different possible drought scenarios can be simulated. Up to a 1000 sequences are simulated in the WRPM for a single year, which results in a 1000 different probabilities to reduce water supply. The WIM makes provision to automate the process of incorporating the results from the WRYM/WRPM instead of inputting manually. The WIM then produces an annual time series of economic indicators (GDP, employment and household income). The output of the 1000 simulated sequences are presented graphically as probability distribution plots (box plots) for inspection and comparison among the scenarios analysed. The main objective is to find the present value at various discount rates for each economic indicator within an economic region, which is influenced by a change in water supply. Based on the interpretation of the present values, a decision can be made in terms of the risk criteria to be configured in the WRPM for the specific economic region. By comparing the results from the developed scenarios, additional scenario options could be derived for further analyses. This derivation is aimed at making provision for extreme water resource system yields, resulting from the specific decision of the user priority or risk of curtailment criteria. Sensitivity analyses will ultimately consist of an iterative process between extremes of which the most favourable results can be determined by reviewing the present value for different economic indicators for the selected economic regions. The results as per present value for each economic indicator are presented as box-and-whisker plot. The proposed methodology is illustrated in the figure that follows. iv v The steps from A to H (see previous figure) are summarised as follows: • The user priority and risk criteria (A) are the main variables as input to the WRPM for the scenario analyses to be undertaken. The user priority and risk criteria do not apply to the WRYM. The system yield and the demand imposed on the system indicate if there are any deficits, which is referred to as a proportion of non-supply. • A risk analysis is undertaken with the WRPM (B). The output file represents simulated curtailment levels for the water supply system (C). • These curtailment levels are factors converted to a proportion of the original full water supply and imported to the WIM (D). • The impact of a reduction in water supply on the economic indicators is determined with the WIM for each of the simulated levels of curtailment. A disbenefit function can be derived for the relationship
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