(Response to: “Water and Markets”)

By Viktor

(This is a reply to /comment on “Water and Markets.)”




I left today’s class discussion of “Woolf Farming & Processing” case without being totally convinced that removal of almond trees was the best way move forward for the case protagonist, andI was puzzledabout what he can do to become less dependent on water allocation from the state. First, I used Exh.14 to estimate the “Return on Water”, how much revenue is earned per acre-foot of water used. The table below highlights that almond tree is indeed the least useful asset in the farm in that sense. Second, it is very sensitive to soil salinity, which is constantly increasing due to using groundwater for irrigation. Finally, I explored whether building a small desalination plant on the farm could be a good investment to overcome challenge with fresh water supply. The cost of desalination water was assumed to be $3,000 per acre-foot as some public sources suggest. Breakeven analysis (see table below) conducted for 1,000 acres of almond trees indicates that it would be economically viable only if the cost of desalination is 3 times lower. Note that carbon footprint “cost” was not factored in for this energy intensive process and therefore the actual cost of treated water will be even higher.





About macomberjohnd

HBS Finance faculty interested in sustainability in the built environment including devices, structures, townships, and cities.

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