ESA (Vic) 2015 Professional Development #10 - Anke Leroux 'Hedging Supply Risks: Optimal water porfolios'


From: Tuesday October 27, 2015, 12:30 pm

To: Tuesday October 27, 2015, 1:30 pm

The topic Water supply diversification has been proposed as a solution to the dwindling water reserves that have been observed as a result of population growth and climatic change. What is the best mix for our water supply? What proportion should we source from reservoirs? How much should come from other sources such as treated stormwater or desalinated seawater? We develop a dynamic portfolio model of water supply that hedges against the supply risks from all potential water sources, by taking into account the size of water reserves, uncertainties of water flows as well as differences in supply costs. Using historical data we derive the optimal portfolio shares for Melbourne. Comparisons with the observed contributions to total water stock under various conditions reveal unexploited hedging opportunities between reservoirs and stormwater harvesting as well as a general over investment in desalinated capacity. The optimal solution implies that future supply augmentations should target stormwater harvesting ahead of desalinated water. It is estimated that the optimization of the water supply portfolios is highly cost efficient. Register The speaker Anke Leroux is an environmental and natural resource economist and Senior Lecturer at Monash University. She obtained her PhD from the University of Cambridge. Her main research interests focus on problems of optimal natural resource use and conservation under conditions of risk, uncertainty and irreversibility. Her research has been applied to inform policy in the areas of optimal land use, biodiversity conservation, climate change adaptation, invasive species and water management. AnkeLeroux


Victorian Competition & Efficiency Commission (VCEC) Offices (Level 37)

2 Lonsdale Street, Melbourne Victoria

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