PROJECTS

Water Market Design for Waikato River Basin, New Zealand

The problem

Mighty River Power faced competition from farmers and various urban authorities for water supply. The hydro electricity generator operates on a cascade of rivers in the North Island of New Zealand. Water rights were not explicitly defined, and various users believed they had customary rights to water from the catchment. Mighty River Power was concerned that water upstream abstractions would reduce the value of its generation plant. The company wanted to know if introducing tradeable water rights would provide a win-win solution.

How we helped

Castalia advised Mighty River Power how a market for tradeable water rights could be designed. We modelled expected market values and how a market could improve water resource allocation. We also advised on strategies Mighty River could follow in such a hypothetical market to maximize the value of its generation assets.

Impact

Our work gave Mighty River Power the information it needed to participate in the policy debate on the best system for allocation of water rights between competing users. While other stakeholders did not support the creation of a water market the dialogue enabled by our work helped Mighty River Power achieve improvements in water allocation.