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A methodology for systematic assessment of the resource costs in a water resources system is presented. It is based on the development of integrated hydro-economic simulation and optimization models at the river basin scale. These models can be also used for some other aspects of the economic analysis required by the WFD, as assessment of the oppor...
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... hydrologic-economic optimization model of the Adra's water resource system downstream the Beninar reservoir has been developed. The network flow (Fig. 1) consists of a reservoir and two aquifers that supply water to two agricultural and one urban demand. Irrigation1 demand, which correspond to the portion of the Campo de Dalías demand that is supplied by the water transfer, receives water from the reservoir through the Canal1 (Canal Benínar-Aguadulce). Downstream the reservoir, the ...
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Citations
... Other DSS may be configured to include hydroeconomic components. Examples include AQUA-TOOL (Andreu et al., 1996;Andreu-Álvarez et al., 2005;Pulido-Velazquez et al., in press), OASIS (Randall et al., 1997), MODSIM (Labadie and Baldo, 2000), MIKE BASIN (Jha and Das Gupta, 2003), CALSIM , WEAP (Yates et al., 2005), WSM DSS (Todini et al., 2006), and WaterWare (Cetinkaya et al., 2008). ...
Future water management will shift from building new water supply systems to better operating existing ones. The variation of water values in time and space will increasingly motivate efforts to address water scarcity and reduce water conflicts. Hydro-economic models represent spatially distributed water resource systems, infrastructure, management options and economic values in an integrated manner. In these tools water allocations and management are either driven by the economic value of water or economically evaluated to provide policy insights and reveal opportunities for better management. A central concept is that water demands are not fixed requirements but rather functions where quantities of water use at different times have varying total and marginal economic values. This paper reviews techniques to characterize the economic value of water use and include such values in mathematical models. We identify the key steps in model design and diverse problems, formulations, levels of integration, spatial and temporal scales, and solution techniques addressed and used by over 80 hydro-economic modeling efforts dating back 45-years from 23 countries. We list current limitations of the approach, suggest directions for future work, and recommend ways to improve policy relevance.
... Esta orientación, aunque se ha aplicado en algunas regiones de Australia, California o incluso experimentalmente en las cuencas españolas del Segura, Júcar y Guadiana en las que existe gran presión sobre el recurso, no puede aplicarse con carácter general porque persisten condicionantes institucionales restrictivos[MMA (2007)]. Alternativamente, en ausencia de verdaderos mercados del agua, se han desarrollado modelos hidro-económicos mediante los que se compara la asignación actual (beneficios y precios) y la situación donde se igualan los beneficios marginales del recurso en sus distintos usos[Andreu et al. (2005) y Heinz et al. (2007] 13 .En nuestro caso, teniendo en cuenta que circunscribimos la investigación al ámbito urbano de una determinada ciudad, este coste debería estar incluido en el precio de venta en alta del agua a la ciudad, dado que es en ese ámbito en el que se produce habitualmen- ...
Urban water utilities are a typical case of a public service with regulated prices. This paper examines the costs of the service, which must be understood if rates are to be set and controlled on an appropriate basis. We adopt a highly practical approach. In the first place, we establish two cost classifications in order to establish the level and structure of the costs of the utility, analysing the difficulties inherent in calculation. We then go on to analyse the municipal water and sewerage service in the city of Zaragoza. This case study is of particular interest in a context where public information about the cost of such utilities and the cost systems employed is in short supply.The analysis reveals the practical difficulties inherent in the accurate classification and quantification of costs and highlights the weaknesses of the systems applied by both local entities and river basin agencies to capture the true economic costs of providing the utility. Our estimates suggest that costs are currently understated, and that the cost structure is taken as a point reference but not a key factor to determine the structure of water rates.
... Esta orientación, aunque se ha aplicado en algunas regiones de Australia, California o incluso experimentalmente en las cuencas españolas del Segura, Júcar y Guadiana en las que existe gran presión sobre el recurso, no puede aplicarse con carácter general porque persisten condicionantes institucionales restrictivos [MMA (2007)] . Alternativamente, en ausencia de verdaderos mercados del agua, se han desarrollado modelos hidro-económicos mediante los que se compara la asignación actual (beneficios y precios) y la situación donde se igualan los beneficios marginales del recurso en sus distintos usos [Andreu et al. (2005) En nuestro caso, teniendo en cuenta que circunscribimos la investigación al ámbito urbano de una determinada ciudad, este coste debería estar incluido en el precio de venta en alta del agua a la ciudad, dado que es en ese ámbito en el que se produce habitualmen-te la competencia por el recurso 14 . Esto implicaría la internalización del coste del recurso como parte de los costes de operación del servicio urbano (salvo caso de autoabastecimiento ). ...
By ignoring the opportunity cost of water use, water is undervalued, which can lead to significant errors in investments and water allocation decisions. The marginal resource opportunity cost (MROC) varies in time and space, as resource availability, demands, and users' WTP vary. This spatial and temporal variability can only be captured by basinwide hydro-economic models integrating water demands and environmental requirements, resources, infrastructure, and operational and institutional restrictions. This paper presents a method for the simulation of water pricing policies linked to water availability, and the design of efficient pricing policies that incorporate the basinwide marginal value of water. Two approaches were applied: priority-based simulation and economic optimization. The improvement in economic efficiency was assessed by comparing the results from simulation of the current system operation and the pricing schedule. The difference between the benefits for the simulated current management and the upper bound benefits from optimization indicates the maximum gap that could be bridged with pricing. In the application to a synthetic case, a storage-dependent step pricing schedule derived from average MROC values led to benefits that capture 80% of the gap of net benefits between management without pricing and the economically optimal management. Different pricing policies were tested, depending not only on reservoir storage but also on previous inflows. The results show that the method is useful for designing pricing policies that enhance the economic benefits, leading to more efficient resource allocations over time and across the competing uses.
Economic ideas and processes are becoming increasingly integrated with more traditional engineering and hydrologic models
of water management problems. Combining economic management concepts and performance indicators with an engineering-level
of understanding of a hydrologic system can provide results and insights more directly relevant for water management decisions
and policies. When such models are developed and used with involvement of stakeholders, they can become a basis for shared
understanding of water problems as a foundation for negotiated management and policy solutions. When implemented with optimization
software, integrated hydro-economic models also can suggest promising innovative solutions for policy-makers to consider.
Their applications to river basin management problems are reviewed. Economic and integrated economic-engineering-hydrologic
modeling is then discussed in the context of the evolving European Water Framework Directive. Relevant items are cost recovery
and water pricing, cost-effectiveness of water management measures, and public participation in decision processes.
Integrated hydrologic and economic optimization models at the basin scale provide a framework for policy design, implementation, and evaluation in water-stressed basins. Despite the considerable potential that basin scale analysis offers, few basin-wide studies have examined tradeoffs among efficiency, equity, and sustainability when analyzing the design of water resource programs. This paper develops a basin scale framework to identify hydrologic and economic impacts of alternative water pricing programs that comply with environmental regulations for protecting water quality. Key issues are examined that confront integrated hydroeconomic basin models: linking water and economics, spatial and temporal scale integration, and quantity-quality relationships. Economic efficiency is defined and measured for each of two urban water pricing arrangements that comply with urban water quality protection regulations. Alternative measures of equity are analyzed in both spatial and temporal dimensions. Sustainability is evaluated physically for protecting the water supply and financially for long-term revenue viability. The approach is illustrated from results of a dynamic nonlinear programming optimization model of water use in North America's Rio Grande basin. The model optimizes the net present value of the basin's total economic benefits subject to constraints on equity, sustainability, hydrology, and institutions. It is applied to assess impacts of a two-tiered pricing program that complies with recently implemented drinking water quality standards for the basin's two largest U.S. cities: Albuquerque, New Mexico, and El Paso, Texas. Results suggest that two-tiered pricing of urban water supply has considerable potential to perform well in meeting the aims of efficiency, equity, and sustainability. Findings provide a general framework for designing water pricing programs that comply with environmental regulations.
