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Developing Portfolios of Water Supply Transfers (2005)
| Citations: | 14 - 4 self |
BibTeX
@MISC{Characklis05developingportfolios,
author = {Gregory W. Characklis and Brian R. Kirsch and Jocelyn Ramsey and Karen E. M. Dillard and Submitted To},
title = {Developing Portfolios of Water Supply Transfers},
year = {2005}
}
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Abstract
Developing Portfolios of Water Supply Transfers 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
Keyphrases
water supply transfer temporary transfer much water active water market spot lease specified reliability monthly lease price distribution reliability objective meeting cost supply-to-expected demand high frequency risk neutral approach monthly choice simulation-optimization approach spot market price implicit filtering search method permanent right supply cost firm water supply capacity hydrologic-water market simulation optimization approach solution surface anticipatory decision rule water supply transfer city low amplitude noise price option city annual demand
