Assessment of the Ultimate Potential and Future Marginal Cost of Water Resources in South Africa
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ASSESSMENT OF THE ULTIMATE POTENTIAL AND FUTURE MARGINAL COST OF WATER RESOURCES IN SOUTH AFRICA EXECUTIVE SUMMARY South Africa is rapidly approaching the full utilisation of its fresh water resources and most of the remaining potential has already been committed to be developed. With the continued population and economic growth as well as industrialisation in South Africa, the requirements for water also keep on increasing, in many cases to well beyond the potential of the fresh water resources that could serve specific geographic areas. In particular, large quantities of water will in future be required for urban/industrial growth, power generation and mining developments, and mostly in locations distant from the large remaining fresh water resources. This report assesses the remaining potential for water resource development in South Africa as well as means to extend the utility of the resources, all with associated costs and estimated energy requirements. Scenarios are developed on how the future requirements for water and the potential ability of water resources could be reconciled. It is foreseen that the report should serve as background to spatial and sectoral development planning on a national scale to, amongst others, determine the most appropriate parameters and locations for large future developments. It should also serve as background towards achieving the most beneficial allocation and sectoral use of water. The report is focussed on the key growth areas in the country, which comprise the main urban and metropolitan areas as well as areas of high potential for exploitation of mineral resources. It is concluded that sufficient water can be made available to meet the future needs in all the major urban and industrial centres in South Africa, although at steeply increasing costs in most cases. The full utilisation of fresh water will also not be reached at a common date throughout the country, but at different dates over an extended period of time, depending on the situation pertaining to the respective areas. Water resources across the country will become even more inter-connected and inter-dependent in future. Sufficient water can be made available to the Vaal River system supply area (Gauteng) at reasonable cost until about 2050, also to the KwaZulu-Natal coastal metropolitan areas to beyond 2050. Similar perspectives apply to the Amatole, Outeniqua and Mhlatuze areas. Most of the projected potential water requirements for the mining, energy and petrochemical developments in the Lephalale area can be supplied from the Crocodile West and Vaal river systems at reasonable cost. The greater Cape Town area, however, is likely to become totally dependent on the desalination of seawater and the re-use of water for any growth in water requirements from about 2030. The most critical situation is with respect to the Olifants River system where a deficit already exists. This will be dramatically exacerbated with the implementation of releases for the Reserve, thus requiring the large scale augmentation of resources from the Vaal River System at substantial cost. Comparisons of the indicative future costs of water to the economic value of water indicate that the unit cost of water from some new developments will substantially exceed the economic value of some existing water uses. Although the URVs and economic values are based on different financial and economic approaches and are not intended to be directly comparable, they at least provide a broad indication of the relative costs and economic values/benefits. The re-allocation of water could therefore offer a feasible alternative to some new resource developments and augmentation schemes. It is also evident from the report that large financial investments will be required to secure the future water resource situation in South Africa. Key recommendations that flow from the findings of the report are: • Long term financial planning should be conducted to provide for the large capital investments in water resource developments together with the relevant operating and maintenance costs that will be needed during the coming decades. • The implementation of projects needs to be expedited and decision-making streamlined to prevent further backlogs from developing. • The practical aspects relating to the implementation of the Reserve should be further investigated and clear guidelines – also on the application of Compulsory Licensing – should be developed as a priority. • Continued monitoring and assessment of developments and of water requirements (as is being done). • Specific attention needs to be given to remain abreast with technological developments and trends on climate change. • Further studies need to be conducted into the value of water in different sectors and uses, to inform the possible re-allocation of resources. Social, political and strategic aspects should be considered together with the economic value of water, to ensure that all are properly accounted for. • Following on the latter point above, a national strategy should be developed on the preferential utilisation of the country’s water resources. This should also include guidelines on what products should preferably be produced/grown in South Africa, and what products could or should rather be imported and thereby saving large quantities of precious water in South Africa, without imposing any unwarranted risks. i ASSESSMENT OF THE ULTIMATE POTENTIAL AND FUTURE MARGINAL COST OF WATER RESOURCES IN SOUTH AFRICA TABLE OF CONTENTS Page 1 INTRODUCTION ................................................................................................... 1 1.1 Background ................................................................................................................... 1 1.2 Purpose of the report ..................................................................................................... 1 1.3 Study area ..................................................................................................................... 1 1.4 Sources of information ................................................................................................... 3 2 APPROACH .......................................................................................................... 4 2.1 General ......................................................................................................................... 4 2.2 Future requirements for water ....................................................................................... 4 2.3 Water resources and options for augmentation .............................................................. 4 2.4 Basis for comparison ...................................................................................................... 5 2.4.1 Unit cost of water .................................................................................................................... 5 2.4.2 Unit energy requirements ........................................................................................................ 6 2.4.3 Other considerations ............................................................................................................... 6 2.4.4 Acid mine drainage .................................................................................................................. 6 2.5 Standardisation ............................................................................................................. 7 2.5.1 Assumptions ............................................................................................................................ 7 2.5.2 Price adjustments .................................................................................................................... 8 2.5.3 Typical development cycle ....................................................................................................... 9 2.6 Ultimate utilisation of water resources ......................................................................... 10 3 DEVELOPMENT OPTIONS ................................................................................... 11 3.1 Vaal River System ........................................................................................................ 11 3.2 Orange River System .................................................................................................... 12 3.3 Lephalale area ............................................................................................................. 13 3.4 Olifants River System ................................................................................................... 15 N:\J01330 - MOCWS\11 BKS Add Hoc\Marginal Cost Of Water\Assessment Of Future Marginal Cost Of Water In SA - FINAL.Docx ii 3.5 Mhlatuze System ......................................................................................................... 16 3.6 KwaZulu-Natal Coastal Metropolitan Areas .................................................................. 17 3.7 Amatole System ........................................................................................................... 18 3.8 Algoa Area ................................................................................................................... 19 3.9 Outeniqua Coastal Area ............................................................................................... 20 3.10 Western Cape System .................................................................................................. 21 3.11 Remainder of South Africa