Irrigation scheme cost survey – update to 2022 figures

In 2012 IrrigationNZ conducted a survey on the cost of surface water irrigation schemes in Canterbury and reported the cost of delivering water to the farm gate as an annualised cost for each scheme, standardised as cost in NZ dollars per hectare per year ($/ha/year) and NZ dollars per cubic metre ($/m3) of water supplied (Survey of Costs of Surface Water Irrigation Schemes in Canterbury, 2012). irrigationnz.co.nz/KnowledgeResources/ Schemes/CostSurvey

In 2014 and 2016 the dataset was expanded to include Otago, Canterbury, Marlborough, and Northland irrigation schemes. The reports excluded any costs incurred inside the farm boundary and adjusted the cost for schemes that delivered water under pressure to reflect the relationship to schemes that deliver at zero pressure (i.e. open channel). The cost of all schemes was standardised to a supply reliability of 95 percent.

In 2023 IrrigationNZ updated the core information through a new survey of the original contributing schemes, drawing on end-of-financial-year 2022 data. The survey aimed to obtain a representative sample of the schemes rather than going back to all the original schemes that contributed in 2016. The survey was well supported, and 17 updated data points were obtained against the original 30 data points (allows 57 percent 2022 updated data).

The purpose of the 2023 report was to determine if there had been any substantive changes in the reported values of $/ha/year and $/m3 of water supplied, to inform scheme operators about where their current valuations and operating costs sit in relation to others in the industry.

Since 2016 many schemes have undergone significant capital and operational system redevelopment. Where this has resulted in changes in share pricing, annual and variable charges, and additional charges for environmental plans, this data has been considered and included in the cost analysis where appropriate.

In 2016 it was reported that the average cost of water supplied by irrigation schemes was $780/ha/year and $0.14/m3. However, following a minor calculation correction1, it was shown that these should have been $790/ha/year and $0.14/m3

The range of costs shown in 2016 and obtained for 2022 is significant and reflects the widely varying methods used by schemes to charge for water and value their shares. This range is not incorrect as it reflects the historical ownership and investment in schemes that allow different approaches to be adopted to the benefit of the shareholders or to reflect the investment being made by schemes to optimise and update their assets and operating systems.

To provide indexing of 2022 data against 2016 data, a subset of the original survey data has been analysed with a corrected spreadsheet to show changes in just the contributors from the 2023 survey. The subset of 2016 shows some differences from the whole dataset as some of the wider outliers, both high and low, were not averaged into the reported values. Many schemes have had major infrastructure upgrades in the last six years.

For comparative purposes, the subset of 17 scheme data points is:

• 2016 – $870/ha/year and $0.15/m3

• 2022 – $1,180/ha/year and $0.21/m3

This reflects a 34 percent and 40 percent shift, respectively.

Looking at the period from 2016 to 2022 the NZ general inflation index change is a 16.7 percent increase2

Hence, it can be inferred that the changes of 34 percent and 40 percent in $/ha/year and $/m3 of water supplied, respectively, are influenced by factors beyond inflation. After subtracting the underlying 16.7 percent inflation adjustment from the calculated change, the overall changes would be 17 percent and 23 percent in $/ha/year and $/m3, respectively.

When updating the data to 2022, various ongoing factors influencing water supply costs were indicated, such as the age of the scheme, the cost involved in its development or purchase, the infrastructure requirements, and differences in operational expenses.

The percentage changes set out above are calculated between the mean 2022 subset (green solid line) and the 2016 mean subset (blue solid line)

Although the 2016 study by IrrigationNZ has been updated to

2022, it only serves as a relatively basic cost comparison of the development and operational costs for irrigation schemes. The 2016 report was particularly relevant at the time due to a rapid increase in infrastructure development and government funding. However, there has been limited new infrastructure development since then, except for the Te Tai Tokerau Water scheme in Northland, which has considerably different numbers due to its purpose and smaller size.

IrrigationNZ responded to an external request for information in 2023 on the costs of water in the agrisector by providing an analysis of on-farm infrastructure and water supply costs.

“The capital outlay for pivot irrigators or vineyard drip systems typically ranges from $4,000 to $5,000 per hectare, while other precision control systems, such as fixed grids, can cost as much as $15,000 to $20,000 per hectare. Operating costs for on-farm pumping and labour can range from $2,000 to $6,000 per hectare depending on the scale and topography.

Getting water supply to the farm gate can also be expensive, with shareholding schemes charging both capital and operating costs, resulting in an initial outlay of $5,000 to $10,000 per hectare, and in some smaller-scale schemes, up to $25,000 to $40,000 per hectare (such as Tai Tokerau), followed by annual charges of $700 to $1,500 per hectare for the required level of supply reliability.”

For the full version of the Irrigation Scheme Cost Survey please go to www.irrigationnz.co.nz/KnowledgeResources/Schemes/CostSurvey *Note: Access to the full document is members only.

Stephen McNally Principal Technical Advisor IrrigationNZ