Nonlinear Optimisation Using Production Functions to Estimate Economic Benefit of Conjunctive Water Use for Multicrop Production

Nonlinear Optimisation Using Production Functions to Estimate Economic Benefit of Conjunctive Water Use for Multicrop Production

Uncertainty and shortages of surface water supplies, as a result of global climate change, necessitate development of groundwater in many canal commands. Groundwater can be expensive to pump, but provides a reliable supply if managed sustainably. Groundwater can be used optimally in conjunction with surface water supplies. The use of such conjunctive systems can significantly decrease the risk associated with a stochastic availability of surface water supply. However, increasing pumping cost due to groundwater drawdown and energy prices are key concerns. We propose an innovative nonlinear programing model for the optimisation of profitability and productivity in an irrigation command area, with conjunctive water use options. The model, rather than using exogenous yields and gross margins, uses crop water production and profit functions to endogenously determine yields and water uses, and associated gross margins, respectively, for various conjunctive water use options. The model allows the estimation of the potential economic benefits of conjunctive water use and derives an optimal use of regional level land and water resources by maximising the net benefits and water productivity under various physical and economic constraints, including escalating energy prices. The proposed model is applied to the Coleambally Irrigation Area (CIA) in southeastern Australia to explore potential of conjunctive water use and evaluate economic implication of increasing energy prices. The results show that optimal conjunctive water use can offer significant economic benefit especially at low levels of surface water allocation and pumping cost. The results show that conjunctive water use potentially generates additional AUD 57.3 million if groundwater price is the same as surface water price. The benefit decreases significantly with increasing pumping cost.

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