Value of water resources used for hydroelectric generation

  • Image, Value of water resources for hydroelectric generation.

    Water is an important source of energy that contributes to New Zealand’s energy supply and the economy. As the main source of renewable energy in New Zealand, the use of water supports the production of the electricity industry. Tracking the value of this water as a natural resource – along with land form, slope, and elevation, which all help to generate hydroelectricity – shows the economic benefits derived from water use for current and future generations. Changes in flow regimes and climate can affect these values.

    We report on the value of water resources used to generate hydroelectricity. This value includes both the returns received from current use (resource rent), and expected benefits from future use (asset value).

    We classified Value of water resources used for hydroelectric generation as a national indicator.

    Key findings

    The asset value of water used in hydroelectric generation was $9.8 billion for the year ended March 2015.

    For the year ended March 2015: 

    • The asset value was 2.0 percent higher than the 2007 value of $9.6 billion. 
    • Returns to hydroelectricity operators from the use of water (resource rent) was $586 million. 
    • Hydroelectric generation accounted for 56.0 percent of New Zealand’s electricity generation (23,728 of 42,362 gigawatt hours).

    From 2007 to 2015:

    • Total hydroelectric generation peaked at 24,950 gigawatt hours (57.5 percent of total generation) in 2011.

    Figure 1

    Figure 2

    In 2015, 38 hydro-generation plants in New Zealand had an operating capacity of 10 megawatts or greater.  Of these, 19 were in the North Island, with seven in the Waikato region.  Generating schemes in the South Island were concentrated in the Canterbury, Otago, and Southland regions.

    The value of water resources for electricity generation is determined using the System of Environmental-Economic Accounting 2012 – Central Framework (SEEA). This is the United Nations’ standard framework for compiling asset accounts of natural resources.  Asset accounts record the stocks and changes in environmental assets in both physical and monetary terms and show the role of natural resources in national wealth.

    Monetary asset values are calculated by discounting the resource rent of the environmental asset using the net present value approach. Resource rents reflect the surplus value accruing to the user of an environmental asset calculated after all costs and normal returns are taken into account (United Nations, 2012, p.40). It is the current market value after accounting for both supply and demand factors, and reflects the immediate impacts of resource use on the economy. The asset value represents the discounted future income stream of water resources used for hydroelectric generation, and the benefits to accrue to future, as well as current, generations.

    Note that under the net present value approach, renewable monetary estimates for water resources are estimates of the net discounted income stream from the resource. The estimate is not a measure, for example, of the value of the stock of water in dams at that particular point in time. In fact, a hydro dam may be dry at the time of the balance date used, but is still valued on the basis of the expected future availability of water.

    We used economic data from the national accounts (Statistics NZ, 2015) and energy production data from the Ministry of Business, Innovation and Employment (MBIE, 2015) to derive the resource rent for water resources used for hydroelectric generation. We used a discount rate of 6 percent to derive the asset value, consistent with Treasury advice for undertaking cost-benefit analyses for water and energy assets (see Current discount rates).

    Asset value of water and other renewables for electricity generation: 2007-15 provides more detail on resource rent and asset values for other forms of renewable energy sources, including water used for electricity generation.

    Data are available from 2007 to 2015 (March years) to align with the latest available national accounts and to ensure consistency in the industrial classification data.

    Data quality 

    Topic Classification   Relevance Accuracy 
     Impact on the economy  National indicator

    Image, Direct relevance.

    Direct

     Image, High accuracy.

    High

    See Data quality information for more detail.

    References

    Ministry of Business, Innovation and Employment (MBIE) (2015). Energy in New Zealand 2015. Retrieved from www.mbie.govt.nz.

    Statistics NZ (2016).  National Accounts (Industry Production and Investment): Year ended March 2015. Retrieved from www.stats.govt.nz.

    Stats NZ (2017).  Asset value of water and other renewables for electricity generation: 2007–15. Retrieved from www.stats.nz.

    United Nations (2012). System of Environmental-Economic Accounting. Retrieved from http://unstats.un.org.

    Archived pages

    See Contribution of hydroelectricity to total electricity generation (archived April 2017).

    Published 27 April 2017 

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