Uganda: Hydro-economic analysis for the Nile Basin Collaborative Water Resources Assessment

1. Introduction

The Nile Basin Initiative (NBI) is a partnership of the 10 Nile Basin riparian states with a shared vision objective to promote sustainable socio-economic development through the equitable utilization of and benefit from the shared Nile Basin water resources. NBI has three programs, namely, the Basin-Wide Program implemented by the NBI Secretariat located in Entebbe, Uganda, the Eastern Nile Subsidiary Action Program (ENSAP) implemented by the Eastern Nile Technical Regional Office (ENTRO) located in Addis Ababa, Ethiopia, and the Nile Equatorial Lakes Subsidiary Action Program (NELSAP) implemented by NELSAP Coordination Unit located in Kigali, Rwanda.

The ENSAP and NELSAP focus on preparation and implementation facilitation of investments in water infrastructure in the Eastern Nile sub-basins and the Nile Equatorial Lakes sub-basins, respectively. The Basin-Wide Program has a geographic scope of the entire Nile Basin and focuses on facilitating the dialogue among the riparian countries, carrying out analytic work (such as strategic water resources analysis) to inform the dialogue, formulation of transboundary policies, strengthening basin monitoring and data sharing and capacity development for cooperative water resources management.

To support the on-going strategic water resources analysis, the Nile-Sec intends to employ the services of an individual consultant (the Consultant) to undertake hydro-economic modeling of the Nile Basin and identify potential alternative water resources development and management pathways that provide best (or acceptable, etc) basin-wide as well as sectoral (including country specific) economic benefits, hereinafter referred to as ‘the Assignment’.

This document presents the terms of reference for the Assignment. The Consultant will be selected competitively based on Nile-Sec’s procurement procedures.

2. Context

2.1 Background

The NBI Secretariat (Nile-Sec) launched its strategic water resources analysis in 2015 and completed the first phase in 2016. The strategic water resources analysis is aimed at developing options of measures (water resources infrastructure and management options) for meeting the growing water demand in the Nile Basin sustainably reducing the stress on the river system and minimizing water allocation related tensions among the riparian countries.

The first phase of the analysis focused on water supply and demand assessment and yielded estimates of water availability and water demands/uses as of 2014 and projections into 2050. Further, a Nile Basin water resources model was developed, which included existing water infrastructure and those planned to be implemented in the 2050 time horizon. According to plans compiled from the Nile Basin countries, irrigated agriculture is expected to expand approximately by 60 percent of the 2014 baseline. Further, irrigation water demand is expected to remain the main water user (estimated to consume up to 75 – 80 % of water) in the foreseeable future. The first phase assessed scenarios of water resources development and management under no- or little cooperation among the riparian countries, i.e. development is assumed to happen incrementally and on a project by project basis, rather than one that considers the basin-wide perspective and upstream-downstream tradeoffs. Though individual countries may have water resources master plans, those plans are scoped within the basin boundaries in the respective country. This implies that the additional benefits of potentially synergistic projects are not considered, and negative interdependencies across national boundaries are also ignored.

The primary objective of the second phase of the strategic analysis is to generate viable water resources management measures and infrastructure growth configurations that provide attractive economic benefits both from basin-wide as well as specific country perspectives. This requires integration of economic perspectives in water resources modeling and analysis of the basin with credible data on costs and benefits from implementation and operation of water infrastructure for key water uses under the various socio-economic circumstances of the riparian countries.

2.2 Why hydro-economic modeling for the Nile Basin?

With respect to priorities for water resources development and management, the Nile Basin can be divided into three: the upstream parts, which cover all upstream water source states, where the priority focus of the governments is to expand water infrastructure for food and energy production as well as enhancing access to safe drinking water. At the other extreme is the most downstream country – Egypt, which has advanced water infrastructure in place that harnesses the Nile for more than 95 per cent of current uses. Water management in Egypt, compared to most upstream countries, focuses a lot more on managing the available resources than on expansion of new hydraulic infrastructure. Sudan can be considered to be in intermediate level with a relatively developed irrigation and hydropower infrastructure but having a lot more room for expansion of the irrigation infrastructure to harness the potential from its land resources.

To date, water resources planning in the Nile Basin is mainly a national affair. With the exception of the NBI’s attempts to develop multi-sector regional/sub-basin level water resources plans, so far, there is no basin-wide water resources plan for the basin. The absence of such agreed upon basin wide plan has twofold implications. First, national water resources development plans are limited within the boundaries of the respective countries and, as a result, fail to harness opportunities for maximizing basin-wide benefits and to minimize negative impacts from interdependencies downstream. This might make these plans sub-optimal seen from basin-wide perspective. For instance, the location, size and operation rules of water storage dams could be determined to maximize benefits in the entire basin affected by these storage dams if these national plans consider the basin as their planning unit. Second, the water resources management efforts in most downstream countries are not informed by what is happening upstream. Therefore, potential for maximizing the economic benefits from the available water resources is not fully utilized due to lack of a-priori information on plans upstream. The strategic water resources analysis is intended to fill part of this gap by conducting basin-wide analysis and exploration of options for coordinated water infrastructure development and management options.

The Nile Basin is not endowed with large water resources compared to its size and the population that depend on it for its livelihood. The situation is expected to exacerbate due to climate change and rapid economic and population growth. Therefore, increasingly studies are required that explore more and more options for efficient water resources development and management in the Nile Basin. The integration of economic aspects provides better insights and generates options for economically efficient water allocation between sectors. This can help countries to make smart choices while at the same time enhancing the overall productivity of water as it will be allocated to where it makes more economic benefits than just analysis that focus on physical quantity of water alone. Hydro-economic modeling/optimization is a tool that can help in exploring ways for economically efficient water resources management. By incorporating economic benefits into the engineering/bio-physical modeling of the river basin, it can generate new insights that help decision makers make economically more efficient choices in their water resources planning exercises.

The strategic water resources analysis has a basin-wide scope and it covers aspects of water resources development (infrastructure) as well as water resources management options. It is informed by country plans for development and, hence, is firmly anchored in national water resources development planning. The inclusion of economic aspects to generate scenarios of water resources management and development trajectories in the Nile Basin, the Nile-Sec aims to inform the national water resources planning process and thereby possibly influence decisions for a more efficient water resources management in the Nile Basin.

The following are the key questions the Nile-Sec is attempting to answer through the hydro-economic analysis:

i. What are the economically efficient policy options (technology, infrastructure development, price and market, water and benefit allocation arrangements between sectors / countries) for the development and management of the Nile Basin – assessed in terms of (a) the marginal value of water in various sectors and localities and (b) the net benefits as well as their distribution?

i. How do these policy options perform under various “economic futures” of the basin in terms of economic growth rates (GDP, power and food demand, population) and regional economic integration?

3. Objective of the Hydro-economic analysis

The overall objective of the assignment is to provide policy recommendations for economically efficient water resources management and development strategies for the Nile Basin to feed into NBIs Collaborative Water Resources and Options Assessment.

4. General approach

The overall approach to the assignment shall include the following:

It has to be based on well acceptable and proven methodologies for hydro-economic modeling and optimization

To the extent possible the Assignment shall be based on data collected from the Nile Basin countries;

Process is as important as result: the Assignment shall combine technical analysis with a stakeholder process to ensure the methodology, data, assumptions and final results are accepted by Nile Basin stakeholders and NBI governance. When requested, participate in Regional Experts Group workshop. This workshop will be used for dual purposes. On one hand, it will be used as platform for raising awareness on hydro-economic modeling/optimization and its importance in basin water resources planning and management thereby enhancing stakeholder buy-in in. On the other, the workshop will serve stakeholder consultation setup for getting feedbacks on the methodology of the assignment.

Use NBI analytic tools: to the extent possible, the Assignment shall be executed making maximum use of NBI analytic tools, and working with NBI analysts.

5. Scope of work

Step 1: Inception.

i. Review results of the strategic water resources analysis to comprehend the scope of planned water resources infrastructure in the Nile Basin;

ii. Write up the existing hydro-economic work incl. list of reference – will be an introductory section of the technical report

iii. Refine key questions that the will be answered through the hydro-economic analysis (based on the questions presented in this tor above);

iv. Review the capabilities of Nile Basin DSS as providing the modeling basis for the assignment;

v. Develop the concept of the analytic framework for the hydro-economic modeling and optimization. The analytic framework is highly encouraged to build on Nile Basin DSS but, if requirements dictate, the client is flexible to consider other relevant analytic systems.

vi. Develop the methodology for the assignment. This methodology shall be reviewed and agreed upon with the client and its stakeholders.

vii. Submit inception report that covers, at minimum, refined questions the assignment will address, concept for the modelling framework, detailed methodology and work plan.

Step 2. Develop the valuation functions for key water uses, implement the modelling framework, provide baseline assessment.

i. Implement the agreed upon modelling framework preferably in the DSS

ii. Develop the typology (types, classes) of economic water users based on the water users (infrastructure) implemented in strategic water resources assessment

iii. Develop economic valuation functions for each of the typology elements (key sectors)for the model:

a. Irrigation

b. Hydropower

c. M&I

d. Optional: Flood control, Wetland Ecosystems

iv. Develop the baseline technology and economic parameters (database with documentation) to used in the valuation functions

v. Develop the description of the baseline in terms of key parameters and constraints:

a. Technology

b. Prices and markets

c. Infrastructure

d. Institutional arrangement (esp. re: implicit inter-basin and inter sector water allocation)

vi. Conduct a baseline assessment, calculating (a) the marginal value of water in various uses / localities (b) the net benefits and their distributions incl. sensitivity on key parameters/constraints

vii. Provide a write up (technical paper) covering this stage

Step 3. Develop “Economic Framework Scenarios” on possible global/regional economic futures

i. Define ca two – three consistent “Economic Framework Scenarios” for the basin (ca . 2050) along the lines of

a. population growth,

b. economic growth

c. aggregate food and power demand,

d. economic integration / trade in the basin,

e. economic integration and trade (protectionist versus open) in global economy

f. Technology development and diffusion

ii. Provide consistent projections of the parameters for the economic valuation function for these futures

iii. Conduct assessment of the baseline under the various futures, calculating (a) the marginal value of water in various uses / localities (b) the net benefits and their distributions incl. sensitivity on key parameters/constraints

iv. Develop the technical note to cover this stage

Step 4. Develop “Policy / Management Options” to asses for performance under various futures

i. Develop the description of the policy options in terms of their rational, the key parameters and constraints:

a. Technology policy

b. Infrastructure development policy

c. Institutional arrangement

i. Policy re: inter-basin water allocation

ii. Policy re: inter-sectoral water allocation incl. minimum flow constraints

ii. Iterate the policy options with NBI and the National Expert Group

iii. Iteratively conduct assessment of policy options under various futures, calculating (a) the marginal value of water in various uses / localities (b) the net benefits and their distributions incl. sensitivity on key parameters/constraints

iv. Develop the technical note to cover this stage

Step 5. Validate and consult the findings as required with the national expert group and the Nile basin economist forum, develop the final report (not necessary

i. Discuss, validate and provide training session to the Collaborative Water Resources Expert Group. This is captured here – but needs to be designed along the process and may entail contributing to ca. two – three workshops of the Expert Group in the basin

ii. Discuss, validate in a Nile Basin Economist Forum format – again the exact timing in the work process to be determined. This would be held back to back with one of the above meetings.

iii. Develop the final technical note. This shall be in the format of an NBI Technical Report Series. It shall include very good visualization and graphical representations of the key messages!

iv. Develop a policy brief write up with the NBI communications team to capture key messages in an accessible language

6. Deliverables

No

Description

Indicative Due date

Month since start

1

Step 1: Inception report

1

2

Step 2: Valuation functions, model setup, baseline

3

3

Step 3: Economic Framework Scenarios

3

4

Step 4: Policy Options

8

5

Step 5: Finalization

10

7. Schedule

The Assignment will be executed in close coordination with other activities of the second phase of the strategic analysis, which will run April 2018 – March, 2019. Specific schedule for implementation of the Assignment will be prepared at the beginning of the Assignment.

8. Qualifications and experiences of the consultant

The consultant shall have the following minimum educational qualifications and experiences

  • Ph.D. degree in economics with main research on hydro-economic modeling of river basins

  • Previous track record in hydro-economic modeling and optimization studies for the Nile Basin.

  • Demonstrated track record (at least 5 publications in major peer reviewed journals) of conducting hydro-economic modeling and optimization of river basins shared by more than three riparian countries;

  • Experience working in a multi-disciplinary team involving water resources modelers.

9. Level of Effort and Implementation arrangement

The Consultant shall sign a lump-sum contract with the Nile-Sec.

The contract duration will be over 12 months starting on/about 1 April 2018.

The total level of effort for this assignment is estimated to be approximately 100 man-days. The Client shall pay the consultant a total professional fee of (amount) based on a daily professional fee of (rate) as per the financial offer.

Further, the client shall reimburse travel related costs of the consultant for up to (4) travels to the Nile Basin region. The Consultant reports to the DED-HBWP/WRM or his designate.

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