Water Journal : Water Journal December 2012
small water & wastewater systems water DECEMBER 2012 71 Under current regulatory and institutional frameworks the responsibility for the installation and operation of small systems can be the responsibility of private parties, rather than the utility doing the planning. This can lead to uncertainty regarding the ongoing capacity and capability of the systems, leading to pessimistic demand, revenue or performance scores. Incorporating and valuing flexibility Flexibility is a key benefit of decentralised systems (Pinkham et al., 2004). Flexibility is not just about investment in time but also technology choices and treatment levels better matching discharge, end use or waste contamination level. Using small systems allows the best technology and option to be used at each location at different points in time. This can allow the inclusion of integrated solutions, recycled water of different standards, and different sources where appropriate. However, in an MCA process it is difficult to describe, cost and score a non-uniform and adaptable option. This often results in a generic small system option being selected or a series of separate options (e.g . demand management option, decentralised recycled water option, stormwater recycling option) being scored, which loses many of the flexibility benefits. The issues associated with rolling-up options into generic bundles are discussed in more detail later. If demand or growth profiles are slower than expected, distributed systems are favoured as they use smaller amounts of capital spread over time. This moves capital costs to the future and lowers net present value (Mitchell et al., 2007). There is also a poor understanding of how to value the flexibility and lower levels of risk associated with shorter asset lives (Office of Financial Management, 2007). Although there are methods to include flexibility into the assessments (Mukheibir et al., 2012), the less well understood the methods and the benefits are, the more likely they are to be ignored or undervalued. This will lead to poorer scores for small systems in cost as well as flexibility. ensuring consistent assessment in terms of boundaries In almost all circumstances the costs and benefits will vary depending on the system boundaries used, both in space and in time, and whose perspective is used to determine costs or benefits (Mitchell et al., 2007). Clearly defining the project objectives is critical to setting boundaries for analysis. For small systems, too narrow a focus will limit the potential benefits, particularly benefits associated with integrated water solutions. For example, if a project objective is to increase water supply the benefits of a distributed recycled water system on the wastewater network, treatment and disposal will not be taken into account. Alternatively, if only a new development is considered in the analysis benefits from providing nearby existing customers with recycled water may be excluded. Identifying and including benefits and externalities It is difficult to identify externalities, let alone measure and value them. While there is extensive information on how to evaluate sustainability impacts, there is little information on how to value sustainability impacts in the urban water industry (Fane, Blackburn and Chong, 2010). Although this issue is common to all options it can particularly disadvantage small systems and distributed recycled water options, as they are likely to have external benefits such as social learning and improved conditions of open space. As it is unlikely that resources will be available to evaluate every externality for every option value, judgements may be used to identify the externalities that are significant and important (Etnier, 2005). This means the choice of which stakeholders get to determine these values becomes pivotal to the outcome, and may introduce bias towards better- understood solutions and benefits. Often in water-planning assessments, the stakeholders are industry and sectoral representatives. Their perspectives on these value judgements are likely to be rather different from representatives of end-users, particularly local end-users. Choosing the most appropriate metrics and values How to measure against criteria, and how to combine the scores in a fair and robust way, is the subject of much debate for MCA. However, the choice of unit for water savings and the choice of demand values used and the number of criteria selected can particularly bias against small systems. For water savings a common metric is unit costs of water supplied to water conserved. The three most common techniques to calculate this measure (annualised unit cost, present value per total volume saved or supplied, and average incremental cost) can give quite different results (Mitchell et al., 2007). Annualised unit cost has difficulty accounting for options where yield changes over time, which is the case for staged decentralised options. It also tends to favour large-scale options, as the ultimate yield (at full demand) is often used rather than some average over time, providing a low annualised unit cost, even though there will be many years of idle capacity. Mitchell et al. (2007) recommend using average incremental cost or levelised cost. However, levelised cost still favours water supplied in earlier years, i.e. the large, lumpy investments. Some measures use a water demand value in their calculation (for example, levelised cost, net present value). Results can vary substantially depending on whether average or peak demand or even ultimate capacity is used. The variation in these numbers is greatest for large centralised investments, and the use of ultimate peak capacity can greatly favour centralised investments over smaller decentralised ones. Finally, there can be a tendency to use a large number of criteria in MCA. The more criteria that are used, the less impact each criteria is likely to have on the outcome and the more likely criteria will overlap or double count to some extent (Ferguson and Gough, 2011). How the MCA Method Can Bias Against Small Systems The discussion above examines decision- making and MCA application issues that can bias results against small systems in comparison to larger centralised alternatives. There are also some inherent issues with the MCA method that can bias against small systems including: • Missing distribution of impacts; • Grouping distributed options to realise comparable scale loses the value of individual advantages. Missing impact distribution The distribution of impacts for small systems and centralised alternatives is often different, and this difference is unaccounted for in many types of analysis. MCA assumes the distribution is the same, yet many small system alternatives rely on individuals or smaller groups for funding and ongoing management. By ignoring the distribution of impacts MCA does not allow the consideration of important differences between the options. The influence of distribution can sometimes be implicitly included through increased risk profiles or additional criteria to understand willingness to pay or acceptance. However, the introduction of extra criteria increases the chance of double counting, or diluting the importance of other relevant criteria.
Water Journal February 2013
Water Journal November 2012-1