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Investigating the value of keeping options open for water infrastructure in the Lower Hunter, New South Wales

Steven Rust, Ben Silberberg, Emma Turner and Basil Sharp

Utilities Policy, 2020, vol. 62, issue C

Abstract: Policy discussions around the world have increasingly focused on the need for resilient water and wastewater systems. The use of small-scale, ‘incremental’, measures that maintain substitutability in investment choices can improve a system's adaptability. Using past shifts/shocks, we estimate an option value for unforeseen events that can change the yield-demand balance for potable supply. For a hypothetical dam, we find avoided costs ranging from $11.1 m to $78.1 m for amounts of extra time ranging from one to ten years; and for a permanent desalination plant, the avoided costs ranged from $33.6 m up to $234.7 m for the same amounts of extra time.

Keywords: Water resilience; Option value; Hunter water corporation (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jup.2019.100980

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