The Impact of Large Scale Deployment of Distributed Electricity Generation on Water Resources in Australia

The occurrence of the worst drought conditions in eastern Australia since Federation has heightened debate about the efficient allocation of scarce water resources among competing end-users. This has manifested in the widespread use of water restrictions, debate over desalination and stormwater harvesting in major cities, and conflict between the States and Commonwealth over control of the Murray-Darling Basin. Only recently has this debate spilled over into the energy domain. The proposed expansion of coal mining in certain areas has focused attention on the allocation of water resources in urban catchment areas. The worsening drought situation in south-east Queensland has forced the State Government to cut the water usage of Tarong North and Swanbank coal-fired power stations by 40 and 20 percent, respectively. Given that electricity supply in Australia is currently dominated by coal-fired generation (approximately 85 percent) this has raised the possibility of reduced water supply to power stations in other jurisdictions. This paper seeks to assess the impact of large scale deployment of distributed electricity generation on reducing water use in power generation in Australia. We employ a bottom-up partial equilibrium model of the electricity sector, the Energy Sector Model (ESM), and a physical simulation of the economy, the Australian Stocks and Flows Framework (ASFF), to gauge the effects of significant uptake of distributed generation on water consumption for electricity generation. The interaction of these simulations is a significant advance to integrated assessment of economic and environmental impacts. The results of this assessment may inform, and be informed by, social analysis. 1