Approaches to assessing the value of precise positioning Alan Smart ACIL Allen Consulting 24 January 2014
Many approaches to estimating economic value Economic welfare analysis Benefit cost analysis Value added analysis Options value Input output multiplier analysis Computable General Equilibrium modelling For a full discussion of approaches see separate notes or email a.smart@acilallen.com.au Slide 2
Components of value TOTAL ECONOMIC VALUE USE VALUES NON USE VALUES DIRECT USE VALUE ECOLOGICAL FUNCTION VALUE OPTION VALUE EXISTENCE VALUE BEQUEST VALUE Outputs Benefits Benefits Benefits Benefits petroleum and minerals transport communications property and construction agriculture Fishing forestry tourism public administration flood control climate sustainable water resources sustainable natural resource management Biosecurity biodiversity protection from fires, floods and natural disasters improved management of climate change Insurance defence satisfaction that resource is there preservation of environment and conservation values national security Long baseline for historical analysis altruistic preserving national assets for the next generation Slide 3
Economic welfare analysis Total economic value Price PERFECT MARKET CONSUMER SURPLUS = consumer surplus + producer surplus Market Price PRODUCER SURPLUS Supply curve Demand curve Benefit cost analysis is a subset of welfare analysis O Equilibrium quantitiy Quantity Slide 4
Can be used to estimate value of priced and non- priced services Non priced services free data, environment, national security, defence, etc. Methods include: Stated preference willingness to pay surveys Revealed preference estimate trade off people are willing to make to access the service e.g. choice modelling Slide 5
Characteristics of some (foundation) geospatial data Short run marginal cost of additional supply is low Close to zero when supplied through web based applications Approach has been used to estimate the value of different pricing policies for open spatial data held by government Houghton (2011) estimated that moving from average pricing to marginal cost pricing on geospatial data released by GA was worth $60 million over five years from 2001-02 Slide 6
Issues with welfare analysis - public goods Public goods are Non rival consumption by one consumer does not exclude consumption by another consumer Non excludable supplier cannot exclude consumption by another Geospatial data when provided free to air has characteristics of a public good Unpriced spill-overs into other markets These spill-overs are high in for geospatial and precise positioning data and services Spill overs not captured by welfare analysis on its own Multipliers can be one approach to overcome this problem not perfect Slide 7
Issues with welfare analysis Estimating the demand curve can be challenging Survey methods have weaknesses A static analysis Does not take into account dynamic changes in the economy Does not take into account spill overs to other sectors Slide 8
Computable general equilibrium modelling A computerised model of the national and global economy Estimate direct productivity impacts on sectors Productivity impacts of applications Levels of adoption CGE modelling to estimate economy wide impacts Used in 2012 study of precise positioning in Australia Slide 9
Augmented GNSS What was assessed Any augmentation requiring ground based reference stations in Australia Includes Differential GPS RTK standalone and networked (CORS) Precise point positioning (RAIMS plus static monitors in aviation) Slide 10
Productivity and adoption Slide 11
Adoption waves 3 2.5 2 Productivity improvement 1.5 1 0.5 0 0 5 10 15 20 25 30 Basic augmentation Integrations with set out Integration with GIS Integration with operations Slide 12
Levels of adoption in 2012 Slide 13
Agriculture Controlled traffic farming 60 % + savings in labour and 50 % in fuel Inter row sowing yield gains of 10 % No significant use in horticulture, wine or livestock but potential. Slide 14
Site surveying Ground control for aerial surveys savings in field staff of 75 % Engineering surveys and machine guidance staff savings of 30% to 40% plus Infrastructure surveys 70% savings in staff time Geophysical surveys 10% reduced down time. Slide 15
Mine site surveying 30% to 40 % savings in labour costs Autonomous haul trucks overall productivity from 1% to 15% Machine guidance 10% productivity Machine guidance and automated mining Slide 16
Comparing evaluation scenario with counterfactual Reference case = counterfactual Slide 17
CGE Model Slide 18
National economic results 2012 low 2012 high 2020 low 2020 high $m $m $m $m GDP 2,288 3,717 7,832 13,715 National income 1,633 2,670 5373 10,115 Private consumption 560 853 2,630 5,904 Investment 623 1,010 2,111 3,717 Exports 1,211 1,986 3,884 5,833 Imports 240 344 1,229 2,560 Slide 19
Sector impacts higher output by 2012 1200 1000 800 600 400 200 0 Grains Dairy beef Other crops Mining Construction Utilities Road transport Transport, storage and Rail Aviation Maritime activities $m High case Low case Slide 20
2500 2000 1500 1000 500 0 Sector impact potential additional output by 2020 Slide 21 Grains Dairy beef Other crops Mining Construction Utilities Road transport Transport, storage and Rail Aviation Maritime activities $m High case Low case
Conclusions in 2012 Significant economic benefits have accrued from the use of augmented GNSS The main sectors benefitting have been agriculture, mining, construction, utilities and road transport Significant potential for much greater benefits but will require Greater coverage by compatible augmentation services Greater levels of adoption by the above sectors Innovation in applications linking augmented GNSS with other sensors, data capture, remote vehicles and possibly augmented reality. Rail, maritime and aviation slower to adopt partly because of legacy systems and partly because of the need to consult on regulation and international standards. Slide 22
Things to think about - SBAS SBAS benefits for airlines More efficient flight paths Fuel savings High integrity Safety Adoption will depend on availability of SBAS capable navigation systems on Australian commercial and light aircraft There are competing (and legacy) systems RAIMS BaroVNAV ILS GBAS Potential for benefits to be realised in regional air space and regional airports Slide 23
Things to think about - SBAS Benefits would also accrue to other sectors of the economy notably agriculture, construction, asset management, surveying, mining, maritime, road user charging, driver assistance systems, rail track management Realisation will be a function of accuracy and integrity requirements will require coordination Need to be clear about the counterfactual i.e. what will happen without SBAS Slide 24
Evaluation methodologies Current focus of policy makers is on hard numbers and a clear line of sight between application and benefit Benefit cost analysis (welfare analysis) useful for clear applications in specific sectors CGE modelling useful where multi sector analysis is required Slide 25
Thank you Slide 26