Water Markets Research Group, Wai Makete Rangahau Ropu

Spillway in hydro system

The WMRG is a group of researchers studying smart markets for hydrological resources. A smart market is an auction that manages physical constraints (such as minimum river flows) through a computer model. Such markets are now in active operation for electricity, natural gas, radio spectrum, and a range of other commodities, all over the world. We have developed smart market concepts for ground and surface water, nitrate runoff, phosphorus runoff, sediment runoff, and impervious cover. The smart market contains explicit constraints that ensure sustainability. The use of a smart market simplifies the process of reallocating water, solving the problems of “first come first served”, while ensuring environmental sustainability.

Current researchers include John F. Raffensperger, Mark W. Milke, E. Grant Read, Thomas A. Cochrane, Shane Dye, and their students, including Antonio Pinto, Stephen Starkey, and Indra Mahakalanda.

Alumni include Yongliang Bai (visiting colleague from Chinese University of Geosciences), Manfred Plagmann (MBA student), Rebecca Teasley (postdoctoral researcher), and Ranga Prabodanie (PhD student).

We have presented our work to many groups in New Zealand, and would be happy to meet on request.

Research outputs

Antonio Pinto is studying smart markets for sediment and runoff. Antonio's work could help reduce flooding, while improving the quality of lakes, streams, and estuaries. This work also has potential for reducing consent application costs for developers, while ensuring much better environmental outcomes. To operate the market, a regulator would first use hydrology flow models to calculate the amount of runoff and sediment from each user that reaches a given location. Based on these models, the regulator would solve a mathematical optimisation to calculate the best way to allocate runoff and sediment rights among users, while ensuring that total runoff and sediment at the location stays below required limits. This market approach could incentivise people to tear up concrete and plant green space. Most importantly, this exciting new approach to managing land use could drastically reduce the costs of flood management and damage.

Ranga Prabodanie completed a PhD thesis in smart markets for nitrate. This interesting and complicated research has the potential to reduce the size of the oceans' dead zones, and improve the quality of lakes, streams, and aquifers, while improving farmers' risk levels. Hydrology transport models calculate the amount of nitrate from each user that leaches to a given location, and a mathematical optimisation calculates the best way to allocate nitrate among users, while ensuring that the total nitrate at the location stays below required limits. This market approach could incentivise people to fence their pasture, build wetlands, and manage sewage plants more effectively.

Pinto, Antonio, John F. Raffensperger, Thomas Cochrane and E. Grant Read, “A proposed smart market design for sediment discharge,” J. Water Resources and Mgmt., 2012, forthcoming.

Prabodanie, R. A. Ranga, John F. Raffensperger, E. Grant Read and Mark W. Milke, “LP models for pricing diffuse nitrate discharge permits,” Annals of Operations Research, 2011, DOI: 10.1007/s10479-011-0941-0, Aug 2011.

Raffensperger, John F., “Matching Users’ Rights to Available Ground Water,” Ecological Economics, v70, n6, pp. 1041–1050, http://dx.doi.org/10.1016/j.ecolecon.2011.01.015, 15 April 2011.

Raffensperger, John, and Thomas Cochrane, “A Smart Market for Impervious Cover,” Water Resources Management, v. 24, no. 12, pp. 3065 - 3083, Sep 2010.

Prabodanie, Ranga, John F. Raffensperger, and Mark Milke, “A Pollution Offset System for Trading Non-point Source Water Pollution Permits,” J. of Environmental and Resource Economics, 2010, v. 45. n. 4, pp. 499-515.

Raffensperger, John F., Mark W. Milke, and E. Grant Read, “A Deterministic Smart Market Model for Ground Water,” Operations Research, v57, n6, Nov-Dec 2009, pp. 1333 - 1346. Winner, Best Paper prize, from the INFORMS section on Energy, Natural Resources and Environment, Nov 2011.

William, Gerard, Mark Milke, and John F. Raffensperger, “Survey of New Zealand Hydrologists on Water Policy and Information Needs,” NZ Journal of Hydrology, 48(1), pp. 1-12, 2009.

Pinto, Antonio, Thomas Cochrane, John F. Raffensperger, (2008) “A Proposed Smart Market for Sediment Discharge,” ORSNZ Conference, Victoria University, Wellington, NZ, 24-25 Nov 2008.

Raffensperger, John F., (2008) “Generalized smart markets for water resources,” INFORMS Conference, Washington D.C., 12-16 Oct 2008.

Raffensperger, John F., (2007) “Smart markets for water: answer to Australia’s water crisis?” 19th National Conf. of the Australian Soc. for Operations Research, RMIT Univ., Melbourne Victoria, 3-5 Dec 2007.

Raffensperger, John F., (2007) “An Operations Research Framework for Water Ethics,” invited conference presentation, PKU-UNESCO International Symposium on Ethics of Water Resource Management, Yingjie International Conference Center, Peking University, November 6, 2007.

Prabodanie, Ranga, and Raffensperger, John F. (2007), “Cleaning the Water: a Smart Market for Nitrates,” MODSIM Conference, Christchurch NZ.

Plagmann, Manfred, and Raffensperger, John F. (2007), “A Smart Market for Ground Water using the Eigenmodel Approach,” MODSIM Conference, Christchurch NZ.

Raffensperger, John F. and Milke, Mark (2006), “How to Solve Our Water Crisis: a Demo Spot Market for Ground Water,” MODFLOW and More Conference, International Ground Water Modeling Center, Colorado School of Mines, Colorado, 23 May.

Raffensperger, John F., Milke, Mark (2005) “A Design for a Fresh Water Spot Market,” Water Science & Technology: Water Supply, 5 (6), pp. pp. 217-224.

Raffensperger, John F., and Milke, Mark (2005), “Trading of consented groundwater allocations via auctions,” Conf. of the NZ Hydrological Assoc., 28 Nov - 2 Dec, Auckland, NZ.

Raffensperger, John F. and Milke, Mark (2005) “National Workshop on Consent Trading: New Options for New Zealand,” NZ Hydrological Society Conference (NZHS-IAH-NZSSS), Auckland, NZ, 28 Nov - 2 Dec 2005.

Raffensperger, John F. and Milke, Mark (2005) “Trading of consented groundwater allocations via auctions,” NZ Hydrological Society Conference (NZHS-IAH-NZSSS), Auckland, NZ, 28 Nov - 2 Dec 2005.

Raffensperger, John F. and Milke, Mark (2005) “A Design for a Fresh Water Spot Market,” Rethymno, Crete: International Water Association Conference on Economics, Statistics, and Finance, July 2005.

Contact us

For any enquiries please contact business@canterbury.ac.nz

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