9th Annual Water Pricing Summit

OGW Principal Consultant, Rohan Harris presented a paper on “Valuing Water Using a Market Approach” at the 9th Annual Water Pricing Summit 2011, which was well received by attendees as highly innovative and achievable.

The presentation outlines:

The approach used to value water used for hydro electricity generation involves

  • Valuing water in storage using a forward electricity price market
  • Showing the relationship between the value of water in storage and dam levels
  • Showing how to estimate the value of the real option

How this approach could be used to value potable surface water storage supplies

  • Simulating a forward market for potable water, by modelling the merit order dispatch in the face of uncertain future states
  • Valuing water in store given the opportunity cost derived from this ‘simulated’ forward price curve.
  • Showing how the value of the option could be calculated

Read the paper here.

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