The Costs of Drought in Urban Water Supply Planning

Abstract

Droughts can have significant and varied impacts in urban areas. Such impacts range from the direct costs of water interruptions on businesses, the intangible costs of water restrictions on households, to the environmental costs of increased water abstraction. It is therefore challenging to assess the full range of costs of a drought. This research presents a practical framework to assist urban water suppliers with this challenge. The framework supports suppliers to identify relevant drought impacts, apply suitable methods to quantify the costs of these impacts, and then integrate such costs into their long-term water supply planning. A supplier can use these results not only to inform the optimal level of service for its supply network but also to inform decision-making during a drought. This study addresses some gaps in current research by focussing on drought costs in urban areas rather than agricultural areas, considering methods for estimating drought costs from both economics literature and water industry studies, and by providing practical guidance on how resulting drought costs can be integrated within water supply planning. This paper applies the framework to Wellington Water, a New Zealand water supplier. Under the framework, Wellington Water’s current 2%/1 in 50-year annual shortfall probability level of service sits within the range of optimal level of service results, albeit with some limitations and assumptions that need refining. This initial outcome was surprising in light of recent studies into the cost of drought in the United Kingdom that have recommended significant improvement in levels of service. The case study illustrates the difficult choice a supplier may face during a severe drought between cutting off water to some customers or taking water beyond environmental limits, with potentially high environmental costs. The results indicate that, in this case, taking water beyond environmental limits likely has lower economic costs than cutting off water. However, the research identifies several challenges and uncertainties in linking river abstraction with environmental costs. This paper identifies areas of further research to improve understanding of the drought impacts and community preferences to aid suppliers to make more well-informed decisions in this complex but increasingly important area of network planning.