Integrated hydrologic–economic modelling for analyzing water acquisition strategies in the Murray River Basin

We describe a coupled hydrologic–economic spreadsheet model for the Murray-Darling Basin that allows analyses of water allocation and use by different sectors including agriculture and environment under alternative policy scenarios. The model is a simple, lumped optimisation model which includes partitioning of rainfall into runoff and evapotranspiration, a reach by reach water balance of the river system, irrigation demand and revenue generation. Groundwater is not considered because groundwater use is a small part of the overall water use. The model is used to optimize profit, diversions and flows subject to hydrological and economic constraints determined by the policy scenario. We use the model to examine approaches of acquiring water for reallocation to the environment, and their impacts on irrigation water use and regional income from agriculture. We show that the optimal approach for acquisition depends on: economic factors, including the cost of water and the profits generated by its use; institutional factors, such as restrictions to trade between regions; and, hydrological factors, particularly the connectivity of and losses within the river network. The volume of water to be acquired does not, in general, equal the volume to be allocated. For a downstream site, water must be acquired from upstream, and more water must be acquired than is to be allocated: the volume acquired is that to be allocated plus transmission losses between the locations of acquisition and allocation. For upstream sites, it is optimal to acquire some water from downstream, and less water must be acquired than is to be allocated: the volume acquired is that to be allocated, less the transmission losses no longer incurred between the locations of acquisition and allocation. The volumes of water that must be acquired to satisfy an allocation target and maintain flows in the river system are affected by restrictions on trade between sub-catchments.