Cost considerations (treatment systems)

Cost is an important factor when identifying suitable treatment systems or a treatment train for a particular site. It is critical to assess the full range of potential costs prior to the detailed design phase of the project. Scale, efficiency and cost are all important considerations when planning treatment systems or treatment trains in agricultural production systems.

Quick facts

Treatment systems are cost-effective

for nutrient removal removal and can be cheaper than on-farm practices[2].

The effectiveness of a treatment system or treatment train depends on its ability to intercept water from an agricultural production area and the subsequent level of removal of target pollutants. Each type of treatment system varies in terms of its capacity to intercept water (scale of treatment), efficiency in removing specific pollutants and in its costs. The costs involved in designing, constructing, operating and maintaining a treatment system and any opportunity cost (i.e. foregone agricultural production from the site) need to be considered early in the planning process, as this can determine the feasibility of a treatment system. Treatment systems often incur a mixture of upfront costs (e.g. design and construction) and on-going costs (e.g. maintenance) that arise over the project lifetime. All costs arising in the future should be estimated and valued upfront (i.e. discounted to present value) and added to one-off up-front costs to produce the total cost (called total present value cost) for the project as a whole[1].

Key considerations

Cost of treatment system

• Upfront versus on-going costs - upfront costs include planning, project management, site investigations, design, approvals, construction, and planting. Opportunity costs (e.g lost revenue) may also be relevant where land is taken out of production. On-going costs are those incurred after the treatment system has been constructed, such as operational costs, maintenance and monitoring. Keeping accurate records of all costs incurred is helpful to calculating the cost-effectiveness of treatment systems.
• There can be significant differences in project costs depending on the type of treatment system, location, soils, local expertise and availability of materials and plants. Any cost assessment should be conducted with understanding of local conditions and materials. Significant costs can also be incurred when the system design does not consider the availability of materials and long-term operation and maintenance requirements.
• In-kind contributions – Inputs to a treatment systems project such as labour and machinery provided by a landholder or other project participants should be sought to reduce costs, and recorded as part of the overall project cost.

Treatment performance

• Change in performance over time – the performance of some treatment systems will change over time, so likely increases or decreases in performance will need to be considered when calculating cost-effectiveness. This can be incorporated into the calculations by way of a discount rate[5][4][3].
• Runoff nutrient concentrations - an important consideration for siting treatment systems is that many systems operate more effectively when the inlet nutrient concentrations are relatively high[5][4]. This may outweigh other factors such as the size of the wetland treatment system, or the cost incurred per hectare[4]. For bioreactor beds, economies of scale, where the cost per kilogram of nutrient removed decreases as scale increases, are more evident[3].

Co-benefits

• Co-benefits, such as other ecosytem services and values, should be considered in addition to the pollutant removal function of the treatment system, for example water capture and reuse, saving money by purchasing less water.
• Reef Credits or water quality offsets can provide a way to offset the cost of treatment systems.

On-farm or regional scale

The scale of the treatment system (i.e. the catchment area treated) is an important consideration when determining cost-effectiveness. Some systems will be relatively cheap and effective at removing certain pollutants but will only treat surface runoff or groundwater from a small catchment area on a farm (e.g. only part of a paddock or block). These types of systems are often located immediately adjacent to the production footprint (e.g. edge of field) and have minimal operating requirements and hence fewer ongoing costs.

In some situations, it could be cheaper or easier to construct a single large treatment system (i.e. treating run-off from multiple blocks/paddocks or properties) than multiple smaller systems[7]. A large or regional scale treatment system may be capable of delivering reductions of multiple pollutants, with the costs potentially able to be spread across multiple landowners or regional authorities.

The figure below shows key considerations when assessing the upfront (upper box) and on-going (lower box) costs of small scale (left side) and large scale (right side) treatment systems.

Cost-effectiveness

Cost-effectiveness of treatment systems can be calculated through a number of different mechanisms which consider the costs involved and the physical quantities of target pollutants removed. A single treatment system can be designed to deliver reductions for a single pollutant (e.g. dissolved inorganic nitrogen), however, it is also possible for a treatment system to deliver reductions of several pollutants (e.g. dissolved inorganic nitrogen and phosphorus). Calculating the cost-effectiveness of the former type of treatment system is more straightforward compared to the latter. For example, if it can be determined that a particular treatment system is designed to remove a specified amount of dissolved inorganic nitrogen (DIN), then the cost-effectiveness is expressed as $/kg DIN removed. If a single treatment system delivers reductions of multiple pollutants, then the calculation and presentation of cost-effectiveness becomes more complex. A methodology for calculating the cost-effectiveness when bundles of pollution reductions are delivered from a single project has recently been proposed[6].

Treatment wetlands and bioreactors with relatively high influent nitrogen concentrations are more cost-effective at removing nitrogen[3][4]. Therefore, it can be expensive to treat water with very low pollutant concentrations and other options should be considered such as best management practices or wetland restoration.

Calculation of cost-effectiveness

There are three commonly used methods for calculating and reporting cost-effectiveness of treatment systems:

1. Annualised cost-effectiveness[3][4]

   Cost effectiveness ($/kg)= annualised present value cost ($/year) / annual pollutant removal (kg/year)

   Annualised present value cost is calculated from total present value cost ($)

   Total present value cost includes up-front cost and on-going costs

   Costs arising in future years are discounted back to present value using a discount rate (commonly 7% p.a.)

2. Cost effectiveness: Total Present Value

   Cost effectiveness ($/kg/yr) = total up-front cost ($) + total present value of ongoing costs ($) / annual pollutant removal (kg/year)

3. Cost effectiveness: Simple

   cost effectiveness ($/kg/yr) = total up-front cost ($) / annual pollutant removal (kg/year)

   (Note that method 3 does not address ongoing costs such as maintenance).

In methods 1 and 2 it may be necessary to discount the annual removal rates if removal rates are expected to vary through time (e.g. as performance of a bioreactor decreases[3]).

The calculation of these measures of cost-effectiveness requires adequate upfront cost data (including in-kind costs, e.g landholder labour or machinery use) and actual or estimated operational and maintenance costs[4].

Method 1 above has advantages in that it can be used to compare widely different treatment system types over varying timeframes. However, consistent cost data is needed to ensure meaningful and comparable results. Also, projects implemented in different years will need to have costs adjusted using an inflation index[4]

Some hydrological modelling packages include a life cycle costing tool that can be used to assess and compare different treatment options at the start of a project (an individual device or a treatment train). The discount rate and inflation rate in the model can be modified to reflect the given project and the timeframe of analysis set. Similarly, default costs for planting, earthworks and establishment costs should always be checked and refined to ensure that they are reflective of local costs that will apply to a project.

Disclaimer

In addition to the standard disclaimer located at the bottom of the page, please note the content presented is based on published knowledge of treatment systems. Many of the treatment systems described have not been trialled in different regions or land uses in Queensland. The information will be updated as new trials are conducted and monitored. If you have any additional information on treatment systems or suggestions for additional technologies please contact us using the feedback link at the bottom of this page.

References

1. ^ Boardman, AE, Greening, DH, Vining, AR & Weimer, DL (2001), Cost-benefit analysis: concepts and practice, Pearson, Prentice Hall, Upper Saddle River, New Jersey, USA.
2. ^ Christianson, L, Tyndall, J & Helmers, M (2013), 'Financial comparison of seven nitrate reduction strategies for Midwestern agricultural drainage', Water Resources and Economics, vol. 2-3, pp. 30-56.
3. ^ a b c d e Department of Agriculture and Fisheries, A preliminary cost-effectiveness analysis of denitrifying bioreactors in the Lower Burdekin. [online], Queensland. Available at: https://www.publications.qld.gov.au/dataset/treatment-system-technologies-to-improve-water-quality/resource/a1a78b8c-27c7-48a2-903e-9acb293b2534.
4. ^ a b c d e f g Kavehei, E, Hasan, S, Wegscheidl, C, Griffiths, M, Smart, JCR, Bueno, C, Owen, L, Akrami, K, Shepherd, M, Lowe, S & Adame, MF (22 November 2021), 'Cost-Effectiveness of Treatment Wetlands for Nitrogen Removal in Tropical and Subtropical Australia', Water. [online], vol. 13, no. 22, p. 3309. Available at: https://www.mdpi.com/2073-4441/13/22/3309 [Accessed 21 December 2021].
5. ^ a b Kavehei, E, Roberts, ME, Cadier, C, Griffiths, M, Argent, S, Hamilton, DP, Lu, J, Bayley, M & Adame, MF (November 2021), 'Nitrogen processing by treatment wetlands in a tropical catchment dominated by agricultural landuse', Marine Pollution Bulletin. [online], vol. 172, p. 112800. Available at: https://linkinghub.elsevier.com/retrieve/pii/S0025326X21008341 [Accessed 27 April 2022].
6. ^ Rolfe, J, Windle, J, McCosker, K & Northey, A (2018), 'Assessing cost-effectiveness when environmental benefits are bundles: Agricultural water management in Great Barrier Reef catchments', The Australian Journal of Agricultural and Resource Economics, vol. 59, pp. 1-21.
7. ^ United States Environmental Protection Agency (2000), Constructed wetlands treatment of municipal wastewater: manual., US Environmental Protection Agency, Ohio.

Last updated: 28 June 2022