2.1
This chapter sets out some key understandings of the term water use efficiency (WUE), and outlines the purpose of various Government funded water use efficiency programs. It provides an overview of the types of programs in operation, and the distribution of funding across Australia.
Definitions of water use efficiency
2.2
The term WUE can refer to many different approaches, and submissions to the inquiry have used the term in a range of contexts.
2.3
The Department of Agriculture and Water Resources (DAWR) noted that WUE can be defined in two main ways – efficiency in the use of water, and in the production of crops:
There are a number of different ways in which water use efficiency can be defined including technical efficiency and economic efficiency.
Technical efficiency can arise from improvements in technology or the methodology employed by farmers or water delivery bodies, including for example moving from flood irrigation to spray or drip irrigation which results in maintaining or increasing production levels with less water.
Economic efficiency where higher value crops can be grown, multiple crops can be grown over a year or through the operation of water markets whereby supply and demand forces enable water to be traded and used to achieve higher value outputs.
2.4
Dr David Adamson, Dr Adam Loch, Associate Professor Sarah Wheeler and Professor Jeff Conner provided a range of definitions relating to irrigation:
Water-use efficiency can be defined via agronomic, engineering or economic approaches. Irrigation efficiency is the ratio between water diverted and water consumed by crops; field application efficiency is the ratio of crop irrigation water requirements and water delivered to fields; water-use efficiency is crop yield per unit of water diverted (e.g. kg/m3); while water-use productivity refers to the dollar value of water produced per unit of water applied. From an economic and farm perspective, water-use productivity is probably the most important measure as it represents the actual net dollar value earned by the farm(er).
2.5
Professors Quentin Grafton and John Williams discussed this topic by reference to irrigation efficiency, which permits like-for-like comparisons:
For the purpose of this submission we define water use efficiency as irrigation efficiency. Irrigation efficiency is the physical ratio of the amount of water beneficially consumed by growing crops to the volume of water either extracted from the water resource or the volume of water actually delivered to a farmer’s field.
2.6
The Gwydir Valley Irrigators Association, by contrast, defined WUE in terms of the amount of crop that can be produced per unit of water:
Irrigation water use efficiency is best defined as production per megalitre of applied water. To enable equitable comparisons between irrigation systems in assessing their ability to provide water use efficiency outcomes whilst maintaining production, the GVIA utilised and therefore, recommends the adoption of Gross Production Water Use Index (GPWUI). This index combines total seasonal water use (rainfall and irrigation) with soil moisture and yield. This index means that comparisons can be made across years and across farms. The higher the GPWUI the more water efficient the crop.
2.7
Similarly, Mr Peter Smith characterised WUE in terms of production per megalitre of water applied to a crop:
Water use efficiency is defined as the amount of production per unit of water applied. (It is not really a true ‘efficiency’ because it does not compare categories with the same units – it is better termed a ‘water use index’.) Irrigation efficiency is defined as the amount of water applied compared to the amount of water used productively (it is a true ‘efficiency’). The quest for improved irrigation efficiency as a way to improve water use efficiency is premised on the notion that too much water is currently being used in the production of produce i.e. that overwatering or excessive losses are occurring. Where this is the case, improving irrigation efficiency will be achieved by reducing water use while maintaining or perhaps improving productivity, which amounts to an improvement in water use efficiency (or water use index).
2.8
The Committee has the view that the primary purpose of this inquiry is to assess the efficacy and value for money of the WUE programs funded and implemented by the Government. As such, this report will consider how those programs have affected irrigators’ production per megalitre of water (their water use efficiency) as well as the ratio of water consumed to water diverted (irrigation efficiency). This approach takes into account the balance of environmental, community and agricultural outcomes and cost-benefit returns.
National Water Initiative
2.9
The National Water Initiative (NWI) aims to bring a nationally-consistent approach to the management, measurement, pricing and trading of water. As mentioned in chapter 1, it has been subject to ongoing reviews since its agreement in 2004. The Productivity Commission is currently conducting a review of the NWI, with its draft report released for comment in September 2017 and the final report due to be presented to the Government by 31 December 2017.
2.10
The Productivity Commission has been tasked with the role of monitoring the progress of the NWI. The current review is the first activity in an ongoing program of work which includes assessing progress against the objectives and outcomes of the NWI every three years. The Productivity Commission has noted that:
For this first review the terms of reference have been widened to consider future reform priorities and the scope for improving the NWI to enable necessary reform.
2.11
The Intergovernmental Agreement on a NWI sets out the objective of the Initiative, stating that:
Full implementation of this Agreement will result in a nationally-compatible, market, regulatory and planning based system of managing surface and groundwater resources for rural and urban use that optimises economic, social and environmental outcomes by achieving the following:
i.
clear and nationally-compatible characteristics for secure water access entitlements,
ii.
transparent, statutory-based water planning,
iii.
statutory provision for environmental and other public benefit outcomes, and improved environmental management practices,
iv.
complete the return of all currently overallocated or overused systems to environmentally-sustainable levels of extraction,
v.
progressive removal of barriers to trade in water and meeting other requirements to facilitate the broadening and deepening of the water market, with an open trading market to be in place,
vi.
clarity around the assignment of risk arising from future changes in the availability of water for the consumptive pool,
vii.
water accounting which is able to meet the information needs of different water systems in respect to planning, monitoring, trading, environmental management and on-farm management,
viii.
policy settings which facilitate water use efficiency and innovation in urban and rural areas,
ix.
addressing future adjustment issues that may impact on water users and communities, and
x.
recognition of the connectivity between surface and groundwater resources and connected systems managed as a single resource.
2.12
The Intergovernmental Agreement also sets out the following eight key elements to achieving these objectives:
i.
Water Access Entitlements and Planning Framework,
ii.
Water Markets and Trading,
iii.
Best Practice Water Pricing,
iv.
Integrated Management of Water for Environmental and Other Public Benefit Outcomes,
v.
Water Resource Accounting,
vii.
Knowledge and Capacity Building, and
viii.
Community Partnerships and Adjustment.
2.13
The Productivity Commission’s draft report concludes that, as a result of past water reform, there have been significant improvements to ‘the way in which water resources are managed and water services are delivered, and this has resulted in significant benefits for the community’.
2.14
In regards to current progress, the Commission notes that ‘progress has slowed [which] is inevitable given that many key water reforms have, to a large extent, already been implemented’. However the Commission goes on to add that ’there are key areas of reform that remain unfinished’. The draft report provides a summary of progress which is set out in Box 2.1.
Box 2.1
1. Water access entitlements and planning frameworks
All jurisdictions, except Western Australia and the Northern Territory, have created statutory based, clear and secure long term water rights for consumptive uses.
Water planning arrangements have been established for the majority of areas of intensive water use across Australia. Most jurisdictions have more than 80 per cent of water use managed under water plans. This means the sharing of water resources between consumptive uses and the environment has been established in consultative processes, informed by scientific and other assessments.
2. Water markets and trading
Water markets have been established that have allowed water to be traded to higher value uses and other steps have been taken to improve the efficiency of water markets, most notably in the Murray Darling Basin.
3. Best practice water pricing and institutional arrangements
Urban service providers are generally pricing at the levels required by the NWI, despite some instances of underpricing.
Independent economic regulators set prices or revenues for major urban water suppliers in New South Wales, Victoria, South Australia, Tasmania and the ACT. Western Australia, the Northern Territory, Queensland and regional New South Wales are exceptions in various forms.
Cost reflective pricing outcomes are generally being achieved for most existing irrigation infrastructure, but new irrigation infrastructure has tended to be underpriced. Queensland, Western Australia and Tasmania could make better use of economic regulation.
There is inconsistent recovery of water planning and management costs from users across Australia.
4. Integrated management of water for environmental and other public benefit outcomes
Environmental sustainability has been supported by formal provisions of water for the environment and progress has been made on rebalancing overallocated systems.
All jurisdictions have managers with responsibility for environmental flows, and some arrangements are in place to coordinate water use in shared resources.
5. Water resource accounting
Water metering, accounting and compliance systems are in place in all jurisdictions.
6. Urban water reform
Water reuse, water use efficiency, water sensitive urban design and innovation has improved since the introduction of the NWI.
Jurisdictions have taken action to address water quality issues, with some evidence of success.
7. Knowledge and capacity building
There have been advances in knowledge and capacity across areas identified in the NWI.
8. Community partnerships and adjustment
All jurisdictions have set in legislation, or policy, minimum requirements for stakeholder engagement and consultation when developing and reviewing water plans.
State and Territory Governments have delivered improved decision making through open and timely consultation with stakeholders. This has been supported by the publication of supporting information at key decision points.
Commonwealth water use efficiency programs
2.15
DAWR argued that ‘Australian Government policies and programmes to promote improved water use efficiency, which are underpinned by NWI principles, almost invariably lead to improvements in the productivity of water, with consequent improvements to local and regional economic performance’.
2.16
Water productivity is a key element of WUE programs which are designed to address the twin problems of environmental sustainability and declining water delivery infrastructure in rural Australia. In demonstration of the importance of water efficiency gains, DAWR cites the estimate that, in 2008‑09, 34 per cent (1 888GL) of water supplied by irrigation in the Murray-Darling Basin was lost. Reducing that proportion will serve to allow more water for environmental purposes or to be used productively on farms in the region. As DAWR notes, ‘More efficient use of available environmental water allows for higher [Sustainable Diversion Limits], and, hence a reduction in the Basin Plan’s 2 750GL environmental water recovery target, thereby reducing the social and economic impacts of water recovery’.
2.17
DAWR stated that Australian Government investment in WUE programs is designed to follow three primary themes:
‘Reducing existing over allocation of water systems through more efficient use of available water resources’,
‘Capturing surplus water in systems to enable irrigation agriculture to expand through programmes’, and
‘Enhancing water security and resilience to meet the challenges associated with system and flow variability’.
2.18
This section outlines some of the main categories of WUE programs in Australia and the level of funding they receive. Collectively, the Australian Government’s WUE programs total more than $15 billion in spending.
Sustainable Rural Water Use and Infrastructure Program
2.19
The $10 billion Sustainable Rural Water Use and Infrastructure Program (SRWUIP) is an umbrella program funding over 50 individual programs with the objective of helping to ‘secure a long term sustainable future for irrigated agriculture and communities, deliver substantial and lasting returns to the environment and improve the health of rivers, wetlands and freshwater ecosystems’.
2.20
Projects funded under SRWUIP include on- and off-farm irrigation upgrades and projects supporting rivers and wetlands, as well as those that improve water knowledge and market reform. The DAWR website identifies three components of the SRWUIP:
Irrigation infrastructure projects,
Water purchase measures, and
2.21
Mr John Robertson, an Assistant Secretary in DAWR’s Water Division, explained that SRWUIP has ‘a high-level monitoring and evaluation plan’ for the program as a whole, as well as specific monitoring and evaluation processes for the individual projects which make up SRWUIP.
Irrigation infrastructure projects
2.22
While irrigation infrastructure works can be classified as either on-farm or off-farm, many of the projects funded by the Australian Government involve elements of each. That is, different programs may fund not only over-arching off-farm infrastructure (such as network supply channels) but also projects for specific upgrades on individual farms.
On-farm irrigation upgrades
2.23
Over 2 000 projects designed to improve on-farm water efficiency have been funded in the Murray-Darling Basin under SRWUIP. Examples of the types of works included are ‘laser levelling, reconfiguration of irrigation layouts, installation of new infrastructure such as recycling systems, piping, and drip or spray systems to improve in-field application systems’.
2.24
DAWR notes that on-farm projects ‘have made it possible to access significant volumes of water that would have otherwise been lost to seepage and evaporation’.
2.25
Irrigators receive funding under SRWUIP for on-farm projects and then provide a proportion of the consequential water savings to the Australian Government for environmental watering. DAWR noted that irrigators, on average, retain approximately 30 per cent of the water saved through the upgrades.
2.26
Overall water efficiency, as calculated from over 1 000 projects funded under the On-Farm Irrigation Efficiency Program, is expected to increase by an average of 18 per cent. This program has funded over 1 500 individual projects (to October 2017) and total Australian Government funding across five rounds was $559 million.
Off-farm irrigation upgrades
2.27
DAWR detailed the purpose of off-farm irrigation projects:
Australian Government off-farm programmes delivered in the Basin aim to improve the efficiency and productivity of water use and management of private irrigation networks. These programmes deliver water savings by reducing the loss of water from irrigation networks and farms through seepage, evaporation and escapes and contribute to the Australian Government’s water recovery task.
2.28
The work undertaken under such projects includes, in the Murray-Darling Basin, the modernisation of over 900 kilometres of irrigation network channels.
2.29
The nearly $1 billion Goulburn-Murray Water Connections Project Stage 2 is the largest Australian Government irrigation infrastructure project under SRWUIP. DAWR estimates that the upgrades – including the modernisation of supply channels and establishment of direct connections for customers – will increase system delivery efficiency from 70 per cent to 85 per cent.
2.30
The New South Wales State Priority Project – Private Irrigation Infrastructure Operators Program in NSW has received $879 million of Commonwealth funding for a combination of on- and off-farm projects including channel modernisation, improved irrigation delivery infrastructure and upgrading of pumps and on-farm infrastructure. Fourteen overall projects and 514 individual irrigator projects have been included.
Improved water knowledge
2.31
A further form of project funded under SRWUIP serves to increase water efficiency through improved water knowledge and science.
2.32
The Irrigation Hotspots Assessment Program ($2 million) and the Irrigation Modernisation Planning Assistance Program (over $6 million) are funded through the SRWUIP. The programs served to identify ‘key areas of water loss’ and provide the basis for modernisation plans.
2.33
The Irrigation Hotspots Assessment Program ran from 2008 until 2011, and funded 12 projects. The funding was provided to nine irrigation water providers to identify their sources of water loss; all providers received funding under the Irrigation Modernisation Planning Assistance Program to develop a plan to respond to the identified hotspots of water loss. Six of the projects received funding from the Private Irrigation Infrastructure Operators Program in New South Wales to implement those plans.
2.34
The Irrigation Modernisation Planning Assistance Program began in 2008 and concluded in 2013, in which time it funded 23 projects. Project funding enabled the providers to receive independent expert assistance in developing a modernisation plan.
Water purchase projects
2.35
The Water Purchase Programme (previously known as Restoring the Balance in the Murray-Darling Basin Program), provides funding ($2.973 billion) to purchasing water entitlements in the Murray-Darling Basin.
2.36
Water purchase limits are capped at 1 500GL. As DAWR’s submission noted, the Australian Government has shifted its focus away from water entitlement purchases towards spending on infrastructure projects, and stated that ‘Government investments in the Basin go beyond water recovery; they are strategic investments in the future of irrigation in the Basin’.
Supply measures
2.37
DAWR defines supply measures as ‘works, river operations or rule changes that enable the use of less water while achieving equivalent environmental outcomes’. $1.265 billion has been committed to supply measures projects, with the aim of saving 650GL from the Basin Plan’s recovery target.
South Australian River Murray Sustainability Program
2.38
Funded by the Australian Government and delivered by the South Australian Government, the South Australian River Murray Sustainability Program (SARMSP) is funded to $265 million, including $120 million for irrigation efficiency improvements and water purchase and $120 million towards irrigation industry assistance. The remaining $25 million is for regional economic development.
2.39
One hundred and eighty six proposals have been assessed to September 2017. The South Australian Government is responsible for the assessment process, including technical due diligence to ensure that the proposed works will result in water savings and that the works are properly costed and fit for purpose.
National infrastructure programs
2.40
Beyond SRWUIP, the Australian Government has committed $2.5 billion towards two national programs to fast-track the construction of water infrastructure: the National Water Infrastructure Development Fund ($500 million) and the National Water Infrastructure Loan Facility ($2 billion).
2.41
The Development Fund is a ten-year program consisting of a feasibility component and a capital component. $59.5 million was committed to 39 feasibility studies – including approximately $40.4 million for northern Australian projects – to inform investment decisions on new or augmented water infrastructure programs including dams, pipelines, weirs and managed aquifer recharge.
2.42
The capital component ($440 million) of the Development Fund is available for state and territory governments ‘to accelerate and co-fund the construction of economically viable water infrastructure that will provide water to underpin the growth of regional economies and communities’.
2.43
Seventy six expressions of interest (EOI) to the Development Fund had been assessed (to September 2017). DAWR noted that EOIs are assessed by the Department, an independent panel of technical experts and an Australian Government interdepartmental governance board.
2.44
To October 2017, six projects, totalling $293.1 million, had received funding commitments under the National Water Infrastructure Development Fund.
2.45
The Loan Facility provides access for state and territory governments to concessional loans to co-fund the construction of economically viable water infrastructure. EOIs are currently assessed in the same way as for the Development Fund; in 2018 management of the EOI and assessment process will be transferred to the Regional Investment Corporation (RIC).
Distribution of funding across Australia
2.46
DAWR noted that ‘There is no specific pool of funding for activities outside the Murray-Darling Basin; funding is allocated to achieve government policy objectives’. Of the $2 billion allocated to water infrastructure modernisation and efficiency improvements by the Australian Government since September 2013, $1.8 billion has been on projects in the Murray-Darling Basin.
2.47
However, the National Water Infrastructure Development Fund and National Water Infrastructure Loans Facility are both available for projects where needed. As noted above, $40.5 million of the $59.5 million allocated to feasibility studies under the Development Fund has gone to projects in northern Australia.
2.48
DAWR also noted that funding under SRWUIP has been used in non-Murray-Darling Basin projects, including 13 irrigation schemes in Tasmania, two pipelines in Western Australia and several urban water projects.
Committee comment
2.49
There is no doubt that Australian Government investment in WUE programs is substantial. While funding is concentrated in certain regional areas, water use efficiency is a national issue and a range of different programs are funded across the country.
2.50
With such a substantial and ongoing financial investment, measuring and evaluating the impacts of these programs is critical. However this is also a complex and shifting task. The next chapter sets out evidence received regarding the effectiveness of water use efficiency programs – in particular in achieving long term sustainable environmental, community and agricultural outcomes.