9th Annual Water Pricing Summit
Rohan Harris | 30th October 2011OGW 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.
