HR: 1340h
AN: H13G-1388    [Abstracts]
TI: Developing Portfolios of Water Supply Transfers
AU: * Characklis, G W
EM: charack@email.unc.edu
AF: Department of Environmental Sciences and Engineering, Rosenau Hall, CB#7431 School of Public Health, University of North Carolina at Chapel Hill, Chapel Hill, NC 27599-7431 United States
AU: Kirsch, B R
EM: bkirsch@email.unc.edu
AF: Department of Environmental Sciences and Engineering, Rosenau Hall, CB#7431 School of Public Health, University of North Carolina at Chapel Hill, Chapel Hill, NC 27599-7431 United States
AU: Ramsey, J
EM: jramsey@powelgroup.com
AF: Powel Group, 239 Menzies Street, Suite 210, Victoria, BC V8V 2G6 Canada
AU: Dillard, K E
EM: kedillar@unity.ncsu.edu
AF: Department of Mathematics, Center for Research in Scientific, Computation, Box 8205, North Carolina State University, Raleigh, NC 27695-8205 United States
AU: Kelley, C T
EM: tim_kelley@ncsu.edu
AF: Department of Mathematics, Center for Research in Scientific, Computation, Box 8205, North Carolina State University, Raleigh, NC 27695-8205 United States
AB: Most cities rely on firm water supply capacity to meet demand, but increasing scarcity and supply costs are encouraging greater use of temporary transfers (e.g., spot leases, options). This raises questions regarding how best to coordinate the use of these transfers in meeting cost and reliability objectives. This work combines a hydrologic-water market simulation with an optimization approach to identify portfolios of permanent rights, options and leases that minimize expected costs of meeting a city's annual demand with a specified reliability. Spot market prices are linked to hydrologic conditions and described by monthly lease price distributions which are used to price options via a risk neutral approach. Monthly choices regarding when and how much water to acquire through temporary transfers are made on the basis of anticipatory decision rules related to the ratio of expected supply-to-expected demand. The simulation is linked with an algorithm that uses an implicit filtering search method designed for solution surfaces that exhibit high frequency, low amplitude noise. This simulation-optimization approach is applied to a region that currently supports an active water market, with results suggesting that the use of temporary transfers can reduce expected water supply costs substantially, while still maintaining high reliability levels. Also evaluated are tradeoffs between expected costs and cost variability that occur with variation in a portfolio's distribution of rights, options and leases. While this work represents firm supply capacity as permanent water rights, a similar approach could be used to develop portfolios integrating options and/or leases with hard supply infrastructure.
DE: 1884 Water supply
DE: 6309 Decision making under uncertainty
DE: 6334 Regional planning (1880)
DE: 6344 System operation and management
SC: Hydrology [H]
MN: Fall Meeting 2005