ClimateChangeCorp.com | Strategy
Peak water threatens Australian industry
6 Mar 2009 | Author: Giles Parkinson
Businesses are jostling with local irrigators for water and praying for a desalination solution
Peak water? The idea that water supplies in any particular region might be permanently diminishing is a frightening prospect for those who rely on it to live and do business.
Australians have long had to deal with the challenges of drought-stricken areas, but changing rainfall patterns, and their potential to cause shortages, along with rising costs and potential lost production are causing Australian investors to start taking note.
Companies in deep
Citi analyst Elaine Prior says changing rainfall patterns triggered by climate change are causing increased water risks for many of Australia’s top 100 companies. These include water scarcity for mines, manufacturers, electricity generators, and wine groups, rising water costs, potential threats to their “social licence” to operate, and even having to manage excess water from increased rainfall patterns in the north of the country. “The onus is very much on companies to become water efficient,” Prior says.
The state of South Australia and its capital city of Adelaide are facing chronic water shortages, caused by drought both local and elsewhere, which has meant that its biggest water source, the Murray River, is suffering from its lowest flows on record.
Adelaide itself is facing critical water shortages within 18 months, before a new $A1.4 billion desalination plant is completed at the end of 2010. The steelworks at Whyalla, owned by OneSteel, is also facing cuts to production because of the Murray shortages, while beer and wine group Foster’s has been forced to buy water to on the traded market to supplement irrigation allocations for its vineyards.
According to Prior, the areas from where Foster’s sources its grapes – the Mediterranean climates of southern Australia, southern Africa, south America and California – correlate to the regions predicted by the Intergovernmental Panel on Climate Change to experience lower water availability in coming decades.
Heavy industry competing with agriculture
This time last year, the mine management team at the massive Cadia Hill gold and copper mine, owned by the ASX-listed Newcrest Mining, were holding weekly meetings to ensure they had enough water to maintain production.
Cadia is located in the drought-stricken central west of New South Wales and the fact that it is competing for water resources with local irrigators whose allocations were reduced to low or zero means Newcrest has had to work hard to diversify its water sourcing, including recycling water from its own operations, and taking recycled water from the sewage plant at the nearby city of Orange.
Fortunately for the company, and the irrigators, unseasonally heavy summer rains have eased the situation. Spokesman Daryl Corp says the mine now has storage to last at least the next 12 months.
Water forces cut backs
But production cuts are not uncommon. In 2007, the Queensland electricity generators Tarong and Swanbank were forced to cut production when their water supply was restricted due to drought. That had an impact on coal sales from the nearby Tarong coal mine, owned by Rio Tinto, which suffered a cut in sales.
The huge brown coal energy generators in Victoria’s Latrobe Valley were forced to buy excess water to maintain production that same year, forcing electricity prices to soar.
Aluminium smelters at Gladstone in north Queensland were forced to cut production by 25 per cent in 2003 because of drought, before cyclonic rains filled the nearby dams virtually overnight.
And it is not just water shortages that have the potential to affect Australian companies. Climate change is also predicted to cause increased rainfall in some northern regions. Cylconic rains in 2007 flooded the pit of Rio Tinto’s Ranger Uranium mine forcing operations to halt, and sparking fears about the firm’s ability to contain run-off that could contaminate the adjoining Kakadu National Park.
Map showing surface water abstraction stress to rivers
http://www.feow.org/threatmaps.php?image=6
Water stress is defined as the ratio of water use (i.e., surface water withdrawn for domestic, agriculture and livestock use) to water availability (measured as discharge by subbasin, which were delineated at 25,000 sq. kilometers, globally). Water stress, therefore, measures the relative use of water to what is replenished naturally by precipitation and snow melt.
The price of water
Prior says the major issue facing Australian companies is water shortage rather than water costs. “Some companies actually complain that water is too cheap,” she says.
This is likely to change as the country attempts to develop a national water plan, although work on the Murray Darling river network, which traverses four states and services numerous industries, has been made difficult by the various competing interests and the inability of the Federal Government to impose its will on individual states.
However, a 10-year, $12.9 billion water plan has been developed to address the issues caused by drought, over-allocation and inefficient supply of water. There are currently more than $9 billion worth of major desalination projects either under construction or subject to tender in Australia.
A wind-farm powered desalination plant in Kwinana, Western Australia, provides 17 per cent of the water needs of that state’s capital city Perth, another is being contemplated for that region, while the cities of Adelaide, Melbourne and Sydney are fast-tracking investments in major desalination plants, along with the fast growing urbanised area of south-east Queensland. This is causing sharp rises in the cost of municipal water.
One great irony is that while drinking recycled water is commonplace in European and Asian capitals, it has been fiercely resisted in Australia, despite chronic water shortages and restrictions in some capital cities.
The Queensland government invested $A2.4 billion in a recycled water project before losing a referendum on whether to pipe some of it into the municipal drinking supply. Now most of the water is used for industrial purposes, including for the Tarong and Swanbank generators.
Australians have long had to deal with the challenges of drought-stricken areas, but changing rainfall patterns, and their potential to cause shortages, along with rising costs and potential lost production are causing Australian investors to start taking note.
Companies in deep
Citi analyst Elaine Prior says changing rainfall patterns triggered by climate change are causing increased water risks for many of Australia’s top 100 companies. These include water scarcity for mines, manufacturers, electricity generators, and wine groups, rising water costs, potential threats to their “social licence” to operate, and even having to manage excess water from increased rainfall patterns in the north of the country. “The onus is very much on companies to become water efficient,” Prior says.
The state of South Australia and its capital city of Adelaide are facing chronic water shortages, caused by drought both local and elsewhere, which has meant that its biggest water source, the Murray River, is suffering from its lowest flows on record.
Adelaide itself is facing critical water shortages within 18 months, before a new $A1.4 billion desalination plant is completed at the end of 2010. The steelworks at Whyalla, owned by OneSteel, is also facing cuts to production because of the Murray shortages, while beer and wine group Foster’s has been forced to buy water to on the traded market to supplement irrigation allocations for its vineyards.
According to Prior, the areas from where Foster’s sources its grapes – the Mediterranean climates of southern Australia, southern Africa, south America and California – correlate to the regions predicted by the Intergovernmental Panel on Climate Change to experience lower water availability in coming decades.
Heavy industry competing with agriculture
This time last year, the mine management team at the massive Cadia Hill gold and copper mine, owned by the ASX-listed Newcrest Mining, were holding weekly meetings to ensure they had enough water to maintain production.
Cadia is located in the drought-stricken central west of New South Wales and the fact that it is competing for water resources with local irrigators whose allocations were reduced to low or zero means Newcrest has had to work hard to diversify its water sourcing, including recycling water from its own operations, and taking recycled water from the sewage plant at the nearby city of Orange.
Fortunately for the company, and the irrigators, unseasonally heavy summer rains have eased the situation. Spokesman Daryl Corp says the mine now has storage to last at least the next 12 months.
Water forces cut backs
But production cuts are not uncommon. In 2007, the Queensland electricity generators Tarong and Swanbank were forced to cut production when their water supply was restricted due to drought. That had an impact on coal sales from the nearby Tarong coal mine, owned by Rio Tinto, which suffered a cut in sales.
The huge brown coal energy generators in Victoria’s Latrobe Valley were forced to buy excess water to maintain production that same year, forcing electricity prices to soar.
Aluminium smelters at Gladstone in north Queensland were forced to cut production by 25 per cent in 2003 because of drought, before cyclonic rains filled the nearby dams virtually overnight.
And it is not just water shortages that have the potential to affect Australian companies. Climate change is also predicted to cause increased rainfall in some northern regions. Cylconic rains in 2007 flooded the pit of Rio Tinto’s Ranger Uranium mine forcing operations to halt, and sparking fears about the firm’s ability to contain run-off that could contaminate the adjoining Kakadu National Park.
Map showing surface water abstraction stress to rivers
http://www.feow.org/threatmaps.php?image=6
Water stress is defined as the ratio of water use (i.e., surface water withdrawn for domestic, agriculture and livestock use) to water availability (measured as discharge by subbasin, which were delineated at 25,000 sq. kilometers, globally). Water stress, therefore, measures the relative use of water to what is replenished naturally by precipitation and snow melt.
The price of water
Prior says the major issue facing Australian companies is water shortage rather than water costs. “Some companies actually complain that water is too cheap,” she says.
This is likely to change as the country attempts to develop a national water plan, although work on the Murray Darling river network, which traverses four states and services numerous industries, has been made difficult by the various competing interests and the inability of the Federal Government to impose its will on individual states.
However, a 10-year, $12.9 billion water plan has been developed to address the issues caused by drought, over-allocation and inefficient supply of water. There are currently more than $9 billion worth of major desalination projects either under construction or subject to tender in Australia.
A wind-farm powered desalination plant in Kwinana, Western Australia, provides 17 per cent of the water needs of that state’s capital city Perth, another is being contemplated for that region, while the cities of Adelaide, Melbourne and Sydney are fast-tracking investments in major desalination plants, along with the fast growing urbanised area of south-east Queensland. This is causing sharp rises in the cost of municipal water.
One great irony is that while drinking recycled water is commonplace in European and Asian capitals, it has been fiercely resisted in Australia, despite chronic water shortages and restrictions in some capital cities.
The Queensland government invested $A2.4 billion in a recycled water project before losing a referendum on whether to pipe some of it into the municipal drinking supply. Now most of the water is used for industrial purposes, including for the Tarong and Swanbank generators.
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