Will we all be Rooned without a Desal Plant? Hanrahan's Lament and the Problem of Urban Water Planning under Climate Change

Donna Brennan[1]

Table of Contents

Predicting the climate
The effect of climate uncertainty on the urban water balance in Western Australia
System reliability and the effect of climate-change assumptions
Implications for long-run marginal cost
Impact on the risk of a sprinkler ban of aligning prices with climate expectations


Given the uncertainty of climate forecasts there is a danger of overly pessimistic forecasts justifying overly large and early investment in desalination plants. If the recent weather patterns turn out to be just a drought, water utilities will find themselves with redundant desalination plants or, worse still, a commitment to pay high costs to desalinate water when dams are regularly spilling. A case study of Western Australia argues that the construction of the touted second desalination plant will mean dams will spill significantly one year in two if the climate follows the average patter of the years 1975–2006. Further, the climate assumptions that are used to justify the plant imply a long-run cost potentially high enough to eliminate the demand for the water supplied by the plant.

[1] Centre for Agricultural Policy, Institute for Policy and Strategy for Agriculture and, Vietnam, donnabrennan@iinet.net.au