The population in the Lower Hunter is forecast to grow by 20% over the next 20 years, and so too will the demand for water, wastewater and stormwater services.

Meeting the increased demand for water and the community’s expectations will involve new sources of water supply (including new climate-independent water sources), demand management, and measures to improve waterway health. The aim is for the region to remain a productive, liveable and resilient region, rather than one incurring ever more frequent water restrictions and an increased risk of being unable to meet community expectations for minimum levels of water supply during drought conditions. Meeting the community’s evolving expectations for water security could involve significant investment in long-lived assets with a range of economic, social and environmental outcomes.

In this context, Hunter Water in partnership with Department of Planning, Industry and Environment (DPIE), is coordinating the Lower Hunter Water Security Plan — a whole of government approach to ensure long-term water security for the Lower Hunter. The Plan was released for public exhibition today.

As part of developing the Lower Hunter Water Security Plan, Hunter Water engaged Frontier Economics to undertake economic, funding and distributional analysis of a range of potential portfolios of water supply and demand measures. Our work aimed to answer several key questions:

• Which portfolios are likely to provide the greatest economic, social and environmental value to the community?
• How could the costs of these investments be recovered from those who benefit from them?

Our analysis entailed two streams:

Economic analysis
This ‘efficiency’ analysis used economic modelling including cost-benefit and adaptive pathway (or real options) analysis to identify:

• portfolios that provide the greatest economic, social and environmental value from existing and new investments in water security across the Lower Hunter and linked water supply systems
• portfolios that deliver value by being able to contribute to flexible and resilient decision-making in the presence of key uncertainties, including measures that may be ‘no-regrets’
• decisions regarding shared investments across the Lower Hunter, Central Coast and Upper Hunter water systems that could impact the value of existing or future investments across the linked water supply systems.

Funding and distributional analysis
This ‘equity’ analysis used regulatory and financial analysis to identify:

• cost recovery and funding pathways for the water supply and demand measures necessary to deliver water security
• distributional outcomes of the water supply and demand measures in terms of who might pay and who might receive the benefits across the relevant communities.

Our analysis found that there are portfolios of water supply and demand measures that are likely to provide significant economic, environmental and social value to the community in the face of significant risks and uncertainties (such as climate change and demand). This includes identifying the significant value the proposed Belmont Desalination plant is likely to deliver to the community in managing both growth and drought in the Lower Hunter region. We note that the NSW Department of Planning, Industry and Environment has recently provided Hunter Water planning approval for the Belmont Desalination plant.