Thursday, November 13, 2008

Peripheral Canal Economics

The PPIC report is the most influential economic study on the peripheral canal. This is unfortunate, because it is poorly done.

Read my assessment here. This review assumes the reader has a working knowledge of the PPIC report.

In Short: The key assumptions underlying their cost calculations are undocumented, and greatly exceed all reputable forecasts. When it comes to future population growth, they made up a huge number, then fabricate a reference to justify it. On desalination costs, they provide no references, and when I asked the authors if they could provide some - they were unable and said the costs reflected their professional judgement. There are plenty of references on desalination costs, it's just that they are all well below their assumptions.

If it were not for these phony numbers buried in Appendix F, their entire argument supporting the peripheral canal would collapse. A study that is very impressive in many ways (approach, detailed models, some impressive researchers, nicely produced) is built on a foundation of rotten data.

Update: Even worse than the desalination cost assumption is their assumed cost of water recycling. They put this at over $1400af, when new facilities are operating at less than half this cost. Finally, I should point out that the approach of evaluating the costs for only a single, far distant year (2050) is not considered sound economics (they should evaluate the stream of costs/benefits over time), and tilts their analysis in favor of a peripheral canal.

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