As communities make decisions about the renewal of their water infrastructure, they should be able to compare that true costs of alternative systems.
For example, a small-scale, water recycling plant may have a higher initial capital cost than a share in a large scale, centralised water treatment plant, but may avoid ongoing environmental costs, and be easier to update as new technology is developed.
Full Cost Recovery Pricing
The Value of Water: Inquiry into Australias management of urban water - Australian Parliament, December 2002 - Executive Summary PDF
It has been possible to keep water prices low because neither the costs of taking the water from the environment nor of protecting the catchments from which it is collected are required to be included in the current "full cost recovery" pricing regimes.
Similarly, the costs of stormwater runoff are not attributed. A block of land covered with impervious surfaces such as roofs and carparks is charged no more in drainage fees than a similar sized block with a large garden and minimal runoff.
Life Cycle Costing
Life Cycle Costing of Urban Water Systems - S.N. Tucker, V.G. Mitchell and L.S. Burn - CSIRO Building, Construction and Engineering
Water, wastewater and stormwater infrastructure has been traditionally costed from either a capital or operating cost point of view.
Life cycle costing involves combining the estimated capital, maintenance, operating and replacement costs over the whole life of an infrastructure facility into a single value, which takes into account expenditure occurring at different stages in the life of the infrastructure.
Costing of Decentralised Water Systems
Appropriate cost analysis for decentralised water systems - PDF - Simon Fane and Cynthia Mitchell, Institute for Sustainable Futures, University of Technology Sydney
Many sustainable urban water strategies such as local wastewater reuse, rain tanks for household water use and stormwater collection for beneficial usage involve decentralised water systems.
Such systems are often less resource intensive, more ecologically benign and more precautionary that the conventional centralised alternative.
Decentralised water systems also have a number of advantages which impact on the analysis of option costs. These include a potential for:
- location specific solutions.
- targeting costly operations and augmentations to existing systems.
- a variety of business models.
- qualitatively different technical, health, and environmental risk profiles.
- meeting demand incrementally as it occurs.
- avoiding the large financial risks inherent in big projects.
In recent years, the interest in sustainable urban water, including decentralised water systems, has seen a number of studies conducted which assess the cost effectiveness or life cycle costs of these strategies. While each of these studies is based on analysis of costs and site water balances, there has been wide variation in the approaches taken to accounting for costs and benefits. This variation can cloud effective decision making, impede benchmarking and inadvertently exclude decentralised options.