OutlineBackground

CB ruleCosts

BenefitsSurveyResults

Conclusions

A Blueprint for a Cost-Benefit Analysis of aWater Use Conflict. Hydroelectricity Versus

Other UsesResearch Program: Cost-Benefit Analysis of River Regulation:

The case of Eman and Ljusnan

Per-Olov Johansson & Bengt Kristrom

13 augusti 2009

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

OutlineBackground

CB ruleCosts

BenefitsSurveyResults

Conclusions

Agenda

Outline

1 Background

2 CB-rule

3 Costs

4 Benefits

5 Results

6 Conclusions

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

OutlineBackground

CB ruleCosts

BenefitsSurveyResults

Conclusions

PurposeMethodThe problemImportant issues for a CBADonje scenarios

Purpose

To develop a framework for CBA within the field

To illustrate how to use the framework

To follow our science → statistics → economics philosophy

Add a tool for decision making

Transparency. Replicability.

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

OutlineBackground

CB ruleCosts

BenefitsSurveyResults

Conclusions

PurposeMethodThe problemImportant issues for a CBADonje scenarios

Method

Measurements of the effects of changed water flows at Donje

Focus groups: Interviews in Bollnas

Web survey: N=200 Bollnas county and surroundings

Replacement power: Externalities covered through literaturesurvey.

Regulating power: Forsund - Hjalmarsson

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

OutlineBackground

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BenefitsSurveyResults

Conclusions

PurposeMethodThe problemImportant issues for a CBADonje scenarios

The problem

Effects on aquatic organisms, recreation, esthetical values, andso on

But: hydroelectricity cost-effective and essentially emissionneutral

How do we aggregate costs and benefits of a perturbation ofthe regulation of a given hydropower plant?

Choice of object of study

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

OutlineBackground

CB ruleCosts

BenefitsSurveyResults

Conclusions

PurposeMethodThe problemImportant issues for a CBADonje scenarios

Important issues for a CBA

Contract between seller and buyer of ”water rights” as a cornerstone of a general equilibrium CBA

This contract used in the CVM (web survey)

Tax system in status quo

(Partial) foreign ownership

Transmission modelled as a natural monopoly

Regulation and other system services

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

OutlineBackground

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Conclusions

PurposeMethodThe problemImportant issues for a CBADonje scenarios

Electricity trade

Trade with energy certificates

Trade with emission permits

Externalities caused by replacement power (generated abroad)

Downstream hydrological effects

Environmental gains (esthetic and other)

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

OutlineBackground

CB ruleCosts

BenefitsSurveyResults

Conclusions

PurposeMethodThe problemImportant issues for a CBADonje scenarios

The plant

Constructed: 1953

Effect: 67 MW

No. of aggregates: 3

Turbine type: Francis

Type of Station: Underground

Head of dam: 33.4 meter

Normal annual generation: 340 GWh (?)

Regulation: Winter 0.5 (=0.25+0.25) m3s−1 .

Summer 10 m3s−1 .

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

OutlineBackground

CB ruleCosts

BenefitsSurveyResults

Conclusions

PurposeMethodThe problemImportant issues for a CBADonje scenarios

The Donje plant

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

OutlineBackground

CB ruleCosts

BenefitsSurveyResults

Conclusions

PurposeMethodThe problemImportant issues for a CBADonje scenarios

The Klumpstrommen

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

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CB ruleCosts

BenefitsSurveyResults

Conclusions

PurposeMethodThe problemImportant issues for a CBADonje scenarios

Scenarios

Based on discussions with stake holders, economists, andecologists two scenarios were used

Scenario 1 Winter: 0.25 m3s−1 → 3m3s−1 in Klumpstrommen

Scenario 2 Winter+Summer: 0.25 m3s−1 → 3m3s−1

10 m3s−1 → 20 m3s−1

A scenario with ”natural flow” was considered but not used

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

OutlineBackground

CB ruleCosts

BenefitsSurveyResults

Conclusions

PurposeMethodThe problemImportant issues for a CBADonje scenarios

Status quo winter (ice free)

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

OutlineBackground

CB ruleCosts

BenefitsSurveyResults

Conclusions

PurposeMethodThe problemImportant issues for a CBADonje scenarios

Scenario winter (ice free)

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

OutlineBackground

CB ruleCosts

BenefitsSurveyResults

Conclusions

PurposeMethodThe problemImportant issues for a CBADonje scenarios

Scenario winter (ice period)

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

OutlineBackground

CB ruleCosts

BenefitsSurveyResults

Conclusions

PurposeMethodThe problemImportant issues for a CBADonje scenarios

Summer status quo

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

OutlineBackground

CB ruleCosts

BenefitsSurveyResults

Conclusions

PurposeMethodThe problemImportant issues for a CBADonje scenarios

Summer scenario

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

OutlineBackground

CB ruleCosts

BenefitsSurveyResults

Conclusions

CB rule

General equilibrium perspective

Contract between owner (Fortum) and buyer (inhabitants inthe county of Bollnas) for Scenario 1 and Scenario 2.

What benefits and costs are generated by 1 and 2 i GE?

dW M = dΠFc + WTPflow + WTP local −WTAE + dT

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

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BenefitsSurveyResults

Conclusions

Costs

Loss of electricity: 3.7 GWh and 14.3 GWh, respectively

Price forecasts: lower (350-380), upper(350-880), 20 years

Discount rate 3%

MC existing plants 30 SEK/MWh

Variable cost, new plants = 0 (Elforsk, Vattenfall)

Future investments at Donje unaffected

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

OutlineBackground

CB ruleCosts

BenefitsSurveyResults

Conclusions

Nord Pool spot market

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

SE

K/M

Wh

1996 2000 2004 2008

100

300

500

700

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BenefitsSurveyResults

Conclusions

Benefits

Local environmental gains (survey)

Downstream gains (≈ 0)

Environmental costs, replacement power (Danish coal,EcoSenseLE )

NOx , SO2, particulates, NMVOC, CH4, and N2O

NotCO2

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

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Representativity

1 0 0 1

16−19

20−24

25−44

45−64

65−79

Est. Official Age Sample

% %

Figur: Estimated population pyramids for Bollnas based on official dataand sample data

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

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Conclusions

Employment

Occupational categories

Searching employment 0.03Employed 0.66

Home worker 0.01Other 0.00

Own business 0.06Parental leave 0.03

Pension 0.12Sick leave 0.05

Student 0.04

Tabell: Stated occupancy in the questionnaire. Percentages

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

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WTP question

Proposal to change of the winter season water flow in theBollnasstreams. The Proposal entails an increase of the winterseason water flow from 0.25 m3s−1 to 3 m3s−1. There will be nochange in the summer season water flow. This means that thewater flow will increase from the power station to Varpen (note:this was described in a map not included here) The proposal isdepicted in a series of pictures in the sequel. The total costs for theProposal is not known with certainty at the present time. Supposethat the referendum is held when the cost has become known. If amajority supports the proposal, it will be undertaken. A ”yes”entails each household paying a given sum over a period of 5 years.

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

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WTP question c’td

Would you be prepared to pay anything for the proposal? Ifyou are unsure about your exact WTP, you can use an intervalof choice.

State the largest sum that you would be prepared to pay forthe proposal. (Ask about lower and upper if choose interval)

I vote ”no” to the proposal independently of the cost because(state reasons)

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

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BenefitsSurveyResults

Conclusions

WTP, average for S1 and S2

Estimator JM03 Weibull Midpoints BK09

Mean 286 258 301 264Standard error 45 33 41 –

Tabell: Estimated mean WTP for different estimators

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

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Point estimates

Point estimates

Item Point estimate S1 Point estimate S2

dΠF -66 -254

WTP local 18 18

WTPflow 0 0

−WTAE -2 -7∑-50 -243

Tabell: Illustrations of point estimates Scenario 1 and 2. Million SEK.

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

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Conclusions

Point estimates

Sensitivity analysis

Price trajectories

Discount rate

Demand reduction (tax wedges)

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses

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Conclusions

Conclusions

Purpose 1: Develop and illustrate framework

Purpose 2: Ecology - Statistics - Economy

To develop: Price forecasts, regulation services, environmentalimpact.

Per-Olov Johansson & Bengt Kristrom A Blueprint for a Cost-Benefit Analysis of a Water Use Conflict. Hydroelectricity Versus Other Uses