Hydrologic-economic appraisal of life-cycle costs of inter-basin water transfer projects

This article describes research that compares actual water transfers of an inter-basin transfer (IBT) scheme with its original, appraisal stage, prediction. Transfers are shown to be significantly less and also more variable than predicted. Further research reveals that the state of the receiving system has a large bearing on year-to-year decisions regarding water transfers. Past appraisals, following what is called the Incremental Approach, do not adequately consider the stochastic nature of the likely future inter-basin transfer operating regime. Examination of six case studies, four South African, one Chinese and one Australian, shows that the Incremental Approach is still in general use - despite tools available for an improved approach. A new approach, called the Comprehensive Approach, is proposed to upgrade estimations of variable costs associated with water transfers - often substantial life-cycle cost components of IBTs. A demonstration of the Comprehensive Approach, by means of an example of an IBT with significant pumping costs associated with water transfers, is provided. Uncertainty regarding future water transfers and associated variable costs are provided for by stochastic simulation modelling. The Incremental Approach is shown to be severely biased with respect to variable costs and it is shown that this bias leads to significantly different estimations of likely life-cycle project costs. Such differences conceivably lead to suboptimal decision-making.