Systems analysis of the Ballarat and connected regions

A first ever systems analysis of the Ballarat region provides a reality check on assumptions underpinning proposed water grids for the state of Victoria. Essentially, it is proposed that a water grid supplies the towns in the Ballarat region by transfer of water from dryer irrigation areas and the water stressed Murray Darling River Basin. Detailed systems analysis of hydrology, water resources, irrigation and urban behaviors across multiple linked water districts provides a wealth of cautionary information about the need for systems analysis to truly understand linked water systems.

Hydrology and Water Resources

The Ballarat region chosen for this investigation includes 144 State Suburbs, 7 local government areas and significant river basins managed by 5 Catchment Management Authorities. Central Highlands Water provides urban water supplies to 15 water districts and reticulated sewerage services to 10 districts within the region. The region is also dependent on groundwater resources and bulk water allocations from the Moorabool, Campaspe, Goulburn, Loddon and Yarrowee River catchments. These shared regional water resources are also subject to management by Southern Rural Water, Goulburn Murray Water, Coliban Water and the Murray Darling Basin Authority.

This report focuses on the base case behaviour of the Ballarat and Maryborough water districts from the context of the performance of the entire region and whole of water cycle behaviours. A Systems Framework of the Ballarat region was developed  to allow understanding of whole of water cycle challenges and opportunities across the region.

A base case Systems Framework for the Ballarat region included ongoing interactions with stakeholders via a Strategy Development Team (SDT). The Strategy Development Team was guided by the Office of Living Victoria’s Chief Scientist in the collation of information, data and insights underpinning the analysis presented in this report. This process also included liaison with a broader group of collaborators including local Catchment Management Authorities, Local Government, land developers and environmental groups via formal workshops and various discussions.

The Systems Framework includes high population growth and climate change scenarios. The Systems Framework was built up from local scale land uses from across the region and includes whole of water cycle processes at local, suburb, town and regional scales. This structure captures the spatial, temporal and behavioural variations of the water cycle across the region.

Figure 2: Spatial distribution of annual average rainfall across Victoria

 

The framework was developed to a state where it can be reliably and robustly applied to detailed and targeted ‘what if’ analyses, including assessments of future water security under a range of climatic and population growth scenarios, and future management options. The spatial and temporal detail within the Systems Framework allowed understanding, reproduction and testing of the complex interactions between waterways, reservoirs, operations, water demands and water restrictions.

Figure 3: The Ballarat region is connected to a dryer irrigation districts and the Murray Darling Basin

The Key Insights from this investigation are summarised as follows:

1. Key drivers for water cycle management in the Ballarat region include a variable climate, population growth, interactions with surrounding regions, health and viability of river basin, flooding, water security and climate change.

2. The Systems Framework for analysis of the base case water cycle management scenarios for the Ballarat region is complete. The Framework can be reliably utilised to test scenarios and options for water cycle futures, to optimise the performance of water operations and to investigate policies for water allocations (including stormwater) and protecting waterways

3. Water Cycle management in the Ballarat region involves strong interaction with surrounding regions including dependence on bulk water allocations and impacts on waterways. These surrounding regions often experience lower rainfall depths and frequencies than the immediate Ballarat region.

4. There is a high level of spatial and temporal variation across the region for most of the parameters impacting on water cycle management. Analysis using monthly or annual average assumptions would not reliably capture these important variations and hence would limit the associated understanding of challenges and opportunities.

5. The region is subject to cyclic patterns of wet and dry conditions which drive strong variations in spatial weather conditions. As a consequence, there are stark differences in the resilience of river basin and water catchments across the region.

6. The characteristics of water uses throughout the region have changed dramatically over the last decade. A majority of buildings and households have already incorporated measures which deliver increased water efficiency.

7. The Systems Framework has successfully reproduced the water cycle behaviours over the last decade including water demands and the performance of reservoirs.

8. The Ballarat West bore field, local water efficiency measures and water restrictions had a significant impact on the water security of Ballarat during the last decade. Introduction of the connection to the Campaspe and Goulburn River via the Goldfields pipe and flooding rains ended the critical water shortages for Ballarat that were associated with drought.

9. A majority of reservoirs and extractions for water supply to the region are situated in the headwaters of river systems that are subject to highly variable flows and their location and functionality has significant impacts on downstream catchments and waterways.

10. Inclusion of the Goldfields pipe and the Ballarat West bore field has changed the operating behaviour of the water supply system for Ballarat.

11. The water supply systems in the region are highly sensitive to a range of assumptions and display strong variations in responses to operating rules. This understanding has been unlocked by the detail in the Systems Framework. There is substantial opportunity to optimise water cycle systems using the Framework.

12. Regional storages that provide bulk allocations are subject to highly variable irrigation and evaporation demands that can impact on the availability of water allocations.

13. The predictions of future average water demands for Ballarat and Maryborough are consistent with the published Water Supply Demand Strategies. However, the detail in the Framework has produced an improved understanding of substantial variability in the magnitude of future demands and associated uncertainty.

14. The Ballarat district is not expected to experience unacceptable levels of water restrictions within the planning horizon to 2051. This trigger for augmentation of the water supply is later than previously reported. However, there is a probability of requirement for higher allocations from ground and surface water within the planning horizon.

15. The linked spatial and temporal detail that is incorporated in the time based analysis in the Systems Framework is substantially different to static methods of estimating “yields” from systems using average inputs at a coarser temporal scale. 
16. Figure 4: Verification of the Systems Framework to water levels in Lake Eppalock 

16. Waterways throughout the region are impacted by extractions for water supply, population growth, urban stormwater runoff, rainwater and stormwater harvesting, wastewater discharges and climate change. The future of regional waterways includes potential increased impacts on waterway health and higher flood risks. The Systems Framework can guide the development of necessary policies for management of waterways and aquifers from the perspective of the entire water cycle.

17. It is an important insight that the waterways throughout the region are subject to cumulative impacts including loads of contaminants, flood risks from high flows and diminishing fresh water flows. Whilst indicators for water quality (as indicated by concentrations of contaminants), peak flows (flooding) and average flows or flow regimes (waterway health) may be acceptable at a location in a catchment (especially in the headwaters), the resultant downstream cumulative impacts may not be acceptable.

18. There are a considerable number of properties that are subject to flood risks and there may be opportunities to manage water supply storages in the upper catchment to also mitigate some of the flood risks.

19. The West Moorabool River is currently highly stressed due to low flows and this situation is expected to worsen into the future. There is a need to decrease extractions for water supply from the river.

20. The Yarrowee River is likely to experience substantial increases in stream flows by 2051 that are generated by increased inflows of effluent from wastewater treatment and flows in river are expected to be dominated by effluent from the Ballarat South wastewater treatment plant. Substantial increases in nutrient loads are likely that may impact on the health of the waterway. These impacts can be mitigated by reducing extractions of fresh water from the Yarrowee catchment and reducing discharge of wastewater to the river.
21. Burrumbeet Creek may experience greater peak flows with associated increased flood risks. These flows are likely to be decreased by the climate change scenarios. The creek will be subject to moderate increases in nutrient loads because discharges of effluent from the Ballarat North wastewater treatment plant are diminished by reuse of treated wastewater.

22. Bet Bet Creek in the Maryborough district may be subject to increased peak flows and associated flood risks by 2051.

23. This investigation has revealed some interesting paradoxes including an understanding that replacement of agricultural land uses with urban development results in the decreased loads of nutrients in waterways. However this waterway health impact is countered by increased nutrient loads from wastewater discharges and increased frequent flows in waterways.

24. Urban areas in Ballarat and Maryborough generated greater stormwater runoff than water demands during the last decade. A combination of urban stormwater runoff and wastewater discharges to existing treatment plants generated water volumes that were at least twice the volume of water demands.

25. By 2051, the Ballarat district will be highly dependent on bulk water supplies from external sources whilst discharging volumes of urban stormwater runoff and wastewater that are three times the volume of water demands. There is an opportunity to utilise local water sources to minimise impacts on surrounding communities and ecosystems.

26. By 2051, water supply to Maryborough will be highly dependent on the surface water extracted from the headwaters of McCallum and Stoney Creeks with back up from bulk water allocations and ground water, whilst discharging volumes of urban stormwater runoff and wastewater that are six times the volumes of water demands. There an opportunity to utilise local water sources to minimise impacts on surrounding communities and ecosystems.

Figure 5: Validation of the Systems Framework to water levels in the Warranga Irrigation Basin near Golburn River Weir

Figure 6: Water demands and resources within the Ballarat Water District

Systems analysis report for the Ballarat region: Systems Analysis

Economic Analysis of Option for the Region

This report has focused on the economic behaviour of the Ballarat water district in the context of the performance of the entire region for Business as Usual (BAU), for Scenarios that may challenge the future performance of the System (such as Climate Change and High population Growth) and Options for future management (including building, precinct and regional scale strategies). A Systems Framework of the Ballarat region was developed as part of the Living Ballarat Project to assist in understanding the whole of water cycle challenges and opportunities across the region.

This investigation does not seek to define the best or preferred strategy for the Ballarat region. The purpose of this report is to provide insights into the behaviour of the water cycle system throughout the Ballarat region and the likely economic response of the regional system to different Scenarios and Options.

The Dynamic Economic Framework utilised in this analysis is a linked component of the Systems Framework that combines all available costs for the whole water cycle across the region to produce a range of economic futures. The economic analysis of the entire system (Systems Economics) utilised in this investigation is based on cash flows of costs throughout the water cycle system.

Whilst the Economic Framework allows rapid assessment of almost all inputs, this report has presented the results for the inputs provided in Section 2 using a real discount rate of 5%. The results presented in this report should be considered in conjunction with the previous reports, namely “Systems analysis of water cycle systems – analysis of base case scenarios for the Ballarat region” and “Summary of the performance of options and key insights”.

The framework has been developed to a state where it can be reliably and robustly applied to detailed and targeted ‘what if’ analyses, including assessments of future water security and economics under a range of climatic and population growth scenarios, and future alternative strategies. The spatial and temporal detail within the Systems Framework allowed understanding, reproduction and testing of the complex interactions between waterways, reservoirs, operations, water demands, water restrictions and financial impacts.

Figure 7: Validation of the Systems Framework to total operating costs for the Ballarat Water District 2002 – 2012

This report includes hind casting of the economic analysis across the historical period from 2002 to 2012 that includes known financial information about the costs of the water and wastewater systems in the region. This process was used to verify and calibrate the inputs to and processes within the economic framework. In general, the hind casting process was able to verify the efficacy of the systems economics as highlighted by Figure 2. This version of the report also includes a sensitivity analysis that responds to workshops held by the Victorian government and tests the most significant drivers of economic behaviour revealed by this investigation. Finally, this report is accompanied by supporting web-enabled software that allows the reader to further investigate the investment processes for water cycle management in the Ballarat region.

Figure 8: Verification of total costs predicted by the Systems Framework  2002 – 2012

Key Insights from this investigation are:

1. The whole of System finances and economics of the Living Ballarat region are highly sensitive to variation in physical and financial parameters throughout the scales (temporal and spatial) within and external to the regional. Only a small proportion of regional costs are fixed or invariant from a systems economic perspective. This insight is consistent with classic economic knowledge that all costs are variable in the long run.

2. The systems analysis has produced a richness of results and information that are available for additional analysis. Only a fraction of the information and results are presented in this report.

3. The analysis using the economic framework has utilised real data from Central Highlands Water, City of Ballarat and a wide range of published reports by the National Water Commission, The Essential Services Commission and others.

4. Analysis of the entire water cycle, including linked or dependent regional systems, counting all costs and use of a planning horizon that is consistent with the behaviour of infrastructure reveals the highly sensitive and variable nature of the System’s economics.

5. There is substantial value within the Ballarat Options that indicate that the project can provide outstanding value to the State of Victoria. The most significant future economic costs are to society for declining waterway values and flooding, and the water authority for water supply and wastewater management.

6. The Ballarat water district is challenged by a range of potential Scenarios. Changes to operating rules, reliance on regional bulk water sources, increases in regional irrigation demands, climate change and high population growth has substantial economic impacts on the Ballarat water district.

7. The Systems Economics Frameworks utilised in this investigation are based on input output economics (cash flows), whole of system costs and whole of water cycle costs. The analysis is not based on revaluations of deteriorating infrastructure. This analysis is different to the assumptions in economic or financial analysis used to satisfy various regulatory assessments.

8. A fully dynamic economic model is now available for Ballarat that can allow gaming of Options or Scenarios in seconds. This capability should allow unprecedented value for testing assumptions and a wide range of perceptions in a workshop forum.

9. Importantly, a Systems Economics framework has been created for Ballarat that allows testing of the majority of “contentious inputs” from the most objective perspective possible (does not reply on assumptions or professional opinion) – this is a first for the water industry and it is recommended that the Victorian government utilise this powerful capability to understand the potential of the region.

10. Local or building scale strategies improve the overall viability of the water cycle in the region by reductions in water demands, wastewater discharges, stormwater runoff, pollutant loads to waterways and reliance on bulk water source resulting in diminished impacts on waterways. This creates reduced costs for water supply, wastewater and stormwater management with increased costs to citizens for building scale solutions.

11. Precinct scale strategies such as wastewater reuse and stormwater harvesting improve the overall viability of the water cycle in the region. The wastewater reuse strategy produces moderate benefits that are derived from reduced water demands and wastewater discharges with associated diminished impacts on waterways.

12. However, the most significant benefits are derived from the stormwater harvesting for potable use (perhaps via managed aquifer storage processes) and for the multiple scale integrated water cycle management (IWCM) strategy.

13. This analysis has incorporated all available financial data and economic information in a whole of systems economic framework. Certainty about the analysis can be further improved by inclusion of additional information and knowledge about inputs and processes. For example, the valuation of nitrogen sourced from Melbourne Water dominates the costs of pollution.

14. A significant proportion of the economic benefits revealed from this investigation are derived by smoothing the investment cycle for regional infrastructure by use of local and precinct strategies that impact as smaller increments of costs.

15. Some of the economic benefits derived from the systems analysis are dependent on understanding and acceptance of the improved and synergistic performance created by various local and precinct scale strategies.

The Scenarios used to test the performance of the Ballarat water district are summarised in Table E1 and an overview of the performance of Scenarios is provided in Table E2.

Table E1: Overview of Scenarios

Scenario	Description
Base Case (BAU)	The Base Case is defined as continuing with current water cycle management processes and behaviours that are subject to the trajectory of current climate processes
BAU NoGW	Ground water resources are only used during droughts
Bulk	Water supply is not sourced from the Moorabool and Yarrowee Catchments
Bulk 2Irr	Water supply is not sourced from the Moorabool and Yarrowee Catchment with a 100% increase in regional irrigation demands
Climate Change (CC)	High emissions climate change as defined by the fifth report by the IPCC as a rate of increase in average temperature of 0.05°C/annum
High Growth (HG)	High population growth as defined by the Victoria in Future 2012 (VIF 2012) forecast population for 2051 achieved at 2041.
High Growth with Climate Change (HGCC)	High population growth as defined by forecast population for 2051 achieved at 2041 with high emissions climate change as defined by a rate of increase in average temperature of 0.05°C/annum.

Table E2: Impact of Scenarios on performance of the water cycle in the Ballarat Water District

Scenario	Net Present Cost ($m) versus reduction in costs (%)
	Water	Wastewater	Stormwater	Waterways	Alternative measures
BAU	734 (0)	707 (0)	315 (0)	7497 (0)	89 (0)
NOGW	877 (+19.5)	707 (0)	315 (0)	7497 (0)	92 (0)
Bulk	893 (+21.7)	707 (0)	315 (0)	7497 (0)	92 (0)
Bulk_2Irr	886 (+20.8)	707 (0)	315 (0)	7497 (0)	92 (0)
CC	776 (+5.8)	744 (+5.2)	305 (-3)	7412 (-1.1)	92 (0)
HG	820 (+11.8)	811 (+14.6)	357 (+13.2)	8085 (+7.8)	98 (+10.1)
HGCC	845 (+15.3)	814 (+15.6)	354 (+ 12.4)	8,136 (+8.5)	96 (+9.6)

16. The majority of future costs of water cycle management accrue to the Water Authority and to Society as defined by impacts on waterways and flood risks. The costs of providing reticulated water and sewerage services, flood risks and impacts on waterways are the dominant economics costs for the Ballarat Water District. The total net present costs of water cycle management to 2051 for the BAU option is $4,108 m. Jurisdictional NPCs for all scenarios are presented in Table E3.

Table E3: Jurisdictional NPCs for all scenarios

Jurisdiction	Net Present Cost ($m)
	BAU	NoGW	Bulk	Bulk2Irr	CC	HG	HGCC
Water authority	1,374	1,519	1,527	1,527	1,450	1,541	1,567
Local Government	80	80	80	80	68	90	79
Developers	181	181	181	181	180	227	220
Citizens	51	51	51	51	53	58	115
Society	2,423	2,423	2,423	2,423	2,708	2,983	2,987
Total	4,108	4,254	4,261	4,261	4,459	4,898	4,968

17. Only using groundwater resources for drought relief results in a requirement to augment water security infrastructure and an overall 3.6% ($146 m) increase in costs that accrue to the water authority.

18. A greater reliance on external water supplies from the Goulburn, Campaspe and Loddon catchments by not extracting water supply to meet urban water demands from the Moorabool and Yarrowee Catchments generates an overall 3.7% ($153 m) increase in costs that accrue to the water authority.

19. A greater reliance on external water supplies from the Goulburn, Campaspe and Loddon catchments by not extracting water supply to meet urban water demands from the Moorabool and Yarrowee Catchments with 100% increases in regional irrigation demands generates a 3.7% ($148 m) increase in costs that accrue to the water authority.

20. The impact of high emissions climate change generates an overall 8.6% ($351 m) increase in costs that accrue to the water authority, developers and society. Reductions in costs to local government are generated by reduced costs for managing stormwater quality and the diminished costs to Society are created by reduced pollutant loads.

21. Accelerated population growth with 2051 population achieved in 2041 creates an overall 19.2% ($790 m) increase in costs that accrue to all jurisdictions with a higher proportion of costs impacting on local government, developers and society. These increases in costs are driven by a requirement for additional resources and infrastructure to service a higher population, and greater impacts on waterways created by additional urban growth.

22. A combination of accelerated population growth and high emissions climate change generates a 19.5% ($803 m) increase in costs that accrue to all jurisdictions with a higher proportion of costs impacting on local government, the water authority and society. These increases in costs are driven by a requirement for additional resources and infrastructure to service a higher population, greater impacts on waterways created by additional urban growth and reduced availability of water resources.

23. A sensitivity analysis revealed that changes in costs of rainwater harvesting and water efficient appliances displayed a similar impact on all of the Scenarios. Increases in costs to operate water and wastewater services generated greater impacts on the Scenarios with greater dependence on bulk water sources with limited local use of groundwater resources. Reductions in the costs of pollutants discharging to waterways provided that greatest reductions in costs for the high growth Scenarios.

The details of the alternative Options are summarised in Table E4 and an overview of the performance of the Options are provided in Table E5.  The jurisdictional distribution of NPCs for each Option is presented in Table E6.

Table E4: Summary of the Alternative Options

Option	Description
BC1	Rainwater harvesting and highest level of water efficiency adopted in all new and substantially renovated buildings
BC2	Rainwater harvesting and highest level of water efficiency adopted in all new and substantially renovated buildings. Include 5 m3 of vegetated stormwater management for each new and substantially renovated building (this could be street trees, bio-retention, landscaping of similar)
IWCM	Rainwater harvesting for non-drinking indoor uses and highest level of water efficiency adopted in all new buildings. Wastewater reuse via a third pipe network for toilet, outdoor and open space uses.
SWH	Stormwater harvesting from all impervious surfaces, stored and treated to supplement water supply for all new buildings. The highest available level of water efficient appliances and water efficient gardens.
WWR	Wastewater reuse via a third pipe network for toilet, outdoor and open space uses at all new buildings. The highest available level of water efficient appliances and water efficient gardens.

Table E5: Impact of Options on performance of the water cycle in the Ballarat Water District

Scenario	Net Present Cost ($m) versus reduction in costs (%)
	Water	Wastewater	Stormwater	Waterways	Alternative measures
BAU	734 (0)	707 (0)	315 (0)	7497 (0)	89 (0)
BC1	694 (-5.5)	668 (-5.6)	305 (-3.1)	6,945 (-7.4)	135 (+50.7)
BC2	694 (-5.5)	668 (-5.6)	332 (+5.5)	6,724 (-10.3)	163 (+82.9)
IWCM	627 (-14.5)	652 (-7.9)	307 (-2.4)	6,184 (-17.3)	186 (+107.9)
SWH	580 (-20.9)	676 (-4.6)	315  (0)	6,635 (-11.5)	106 (+18.5)
WWR	712 (-3)	651 (-8)	315 (0)	7,046 (-6)	137 (+53)

Table E6: Jurisdictional NPCs for all options

Jurisdiction	Net Present Cost ($m)
	BAU	BC1	BC2	IWCM	SWH	WWR
Water authority	1,374	1,301	1,301	1,244	1,204	1,319
Local Government	80	75	86	84	80	80
Developers	181	182	207	201	181	202
Citizens	51	96	96	96	51	53
Society	2,423	2,061	1,877	968	1,722	1,753
Total	4,108	3,716	3,568	2,593	3,238	3,407

24. Inclusion of building scale strategies for water efficiency and rainwater harvesting for all new and renovated buildings generates an overall 11.1% ($458 m) reduction in costs that accrue to local government, the water authority, developers and society. Local government and society are proportionally higher beneficiaries and citizens experience higher costs to create these benefits. These decreases in costs are driven by a reduced requirement for water resources and infrastructure, and reduced impacts on waterways.

25. Inclusion of building scale strategies for water efficiency, rainwater harvesting and street scale stormwater management for all new and renovated buildings creates an overall 16.1% ($661 m) reduction in costs that accrue to local government, the water authority, developers and society. Local government and society are proportionally higher beneficiaries and citizens experience higher costs to create these benefits. These decreases in costs are driven by a reduced requirement for water resources and infrastructure, and reduced impacts on waterways.

26. An Integrated Water Cycle Management (IWCM) strategy that includes reuse of wastewater, rainwater harvesting and water efficient buildings provides an overall 36.9% ($1,515 m) reduction in costs that accrue to local government, the water authority, developers and society. Local government and society are proportionally higher beneficiaries and citizens experience higher costs to create these benefits. These decreases in costs are driven by a reduced requirement for water resources and infrastructure, and reduced impacts on waterways.

27. Stormwater harvested from regional stormwater management storages in new urban areas and treated to potable standards for injection into water distribution infrastructure generates an overall 21.2% ($870 m) reduction in costs that accrue to local government, the water authority, developers and society. The Water Authority and society are proportionally higher beneficiaries and citizens experience slightly higher costs to create these benefits. These decreases in costs are driven by a reduced requirement for water resources and infrastructure, and reduced impacts on waterways.

28. Wastewater Reuse using existing or modular treatment plants and distribution via a third pipe network for toilet, outdoor and open space uses at all new buildings provided an overall 17.1% ($701 m) reduction in costs that accrue to local government, the water authority, developers and society. The Water Authority and society are proportionally higher beneficiaries with citizens and developers experiencing slightly higher costs to create these benefits. These decreases in costs are driven by a reduced requirement for water resources and infrastructure, and reduced impacts on waterways.

29. An investigation into the sensitivity of the Options to changes in costs demonstrated that the relative value of Options were mostly insensitive to the selected changes in costs. The IWCM, SWH and WWR Options show consistent high value for the Ballarat region. However, a substantial reduction in the costs of pollutants discharging to waterways creates a significant change in the viability and economic ranking of the BC2, IWCM and WWR Options.

30. Reductions in pollutants loads discharging to waterways via stormwater runoff and wastewater discharges is a significant contributor to the value of the IWCM Option that includes wastewater reuse and rainwater harvesting, to the WWR Options that includes wastewater reuse and to the BC2 Option that includes streetscape stormwater management measures.

Economic report: Ballarat Economics