hydro-economic models: coupling of two different domains in water management ingo heinz institute of...
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Hydro-economic models: coupling of two different domains in water management
Ingo Heinz
Institute of Environmental Research
University of Dortmund
Germany
Harmoni-CA Forum & ConferenceOsnabrueck, 5-7 April 2006, Germany
What is ‘economics’ in water management?
• Explain the socio-economic and political processes in watersheds
• Find out the economic values of different water uses (trade-offs between e.g. discharge and ecology)• Find out the economic net-benefits of water for different water users (trade-offs between e.g. agriculture and hydro-power)
• Determine the most efficient water management strategies and water policies (e.g. water pricing)
Economics in the EU Water Framework Directive (WFD)
1. Economic analysis of water use Art. 5:
* Forecasts of water supply and demand
* Costs and prices of water services
* Investments and extent of cost recovery
2. Incentive water pricing (incl. the ppp) Art. 9
3. Most cost-effective measures in water use Art. 4 + 11
4. Cost recovery of water services Art. 9
5. Cost-benefit analysis of measures (derogation from the Directive’s objectives) Art. 4
How can hydro-economic models help?
• Simulation of the processes in watersheds:
* Water availability and water demand
* Water quality
* Water ecology
* Extreme events (shortage, flooding)
* Costs / benefits of water management measures
* Cost recovery
* Water prices and contribution to cost recovery
How can hydro-economic models help?
• Optimisation of the processes in watersheds:
* Water allocation among different water uses (abstraction, discharge, storage, shipping, natural habitats, recreation)
* Water allocation among different water users (households, agriculture, industry, power plants)
* Economically efficient measures in water management (water supply, water quality, aquatic ecosystems, flood control)
* Cost recovery and water pricing
* Water policies (regulations, water markets, subsidies)
Ringler, Berger, Cai, Rosegrant, Obeng-Asiedu et al.
Integrated Hydro-Economic Model:
Maipo (Chile), GLOWA Volta (Africa), etc.
Andreu Alvares et al. Aquatool DSS:
PRB Jucar river basin (Spain), etc.
Assimacopoulos et al. WaterStrategyMan WSM:
Island of Paros (Greece), etc.
Models: three examples
Integrated Hydro-Economic Model Ringler, Berger, Rosegrant, Cai, Obeng-Asiedu et al.
(Germany, USA, Africa)
Purpose Optimal allocation of water resources among competing water users
Objective Maximisation of total economic net-benefits from water use
Outcomes • Optimal price for water abstraction• Water price resulting from water trading
Aquatool DSS Andreu Alvares et al. (Spain)
Purpose • Optimal allocation of water resources among competing water users• Most cost-efficient measures in water use
Objective • Simulation of economic processes in watersheds• Maximisation of total economic net-benefits from water use
Outcomes • Marginal resource costs at optimal allocation• Marginal environmental costs at constraints• Water price resulting from water trading
WaterStrategyMan Assimacopoulos et al. (Greece)
Purpose • Optimal allocation of water resources among competing water users• Most cost-efficient measures in water use
Objective • Simulation of economic processes in watersheds• Maximisation of total economic net-benefits from water use
Outcomes • Optimal prices for abstraction, water use and pollution• Financial, environmental and resource costs
Forecast water supply and demand Art. 5 ✔ ✔ ✔
Maximise total economic net-benefits across all water users
✔ ✔ ✔
Find out the most cost-effective measures in water management at given constraints Art. 5 + 11
✔ ✔ ✔
Calculate financial, environmental and resource costs Art. 5
✔ ✔
Determine charges on using infrastructure, and on environmental and resource costs Art. 9
✔
Cost-benefit analysis trade-offs between dif- ferent water uses versus stakeholder values Art. 4
✔
What do hydro-economic models provide currently?
Some basic essentials in
hydro-economic models
Optimal allocation of scarce water resources
V = i (NBi) max
V: Total economic value from water
NBi: Economic net benefits from water for user i
NBi = NBWSi - Pi
NBWSi: Economic nets benefit for i without water shortage
Pi: Economic losses due to water shortage for i (= „penalty“)
Marginal net benefits for user i: MNBi
Water delivery
MNBi*
W*
Economic losses dueto water shortage„penalty“: Pi
WS
Net economic benefits for user i: NBi
Condition for optimal water allocation
.... and in dependence on constraints r, such as total availability of water resources and environmental limits (e.g. minimum streamflow in rivers) :
wp*i,r: „shadow prices“
MNB*1 = MNB*2 = ... = MNB*i = MNB*n =
= wp*i: unit water costs for each water user i
wp*i can vary between different river basins and periods
The concept of water scarcity rent
Marginal net benefits for user i: MNBi
Water delivery W*
Limited wateravailability
Uniteconomicwater value
Marginalcost ofinfrastructure
Water scarcity rent= resource cost
WS
No watershortage
Condition for optimal water allocation
MNB*1 = MNB*2 = ... = MNB*i = MNB*n =
= wp*i: unit water value for each water user i
Model Penalty functions
Water scarcity rent
Ringler, Berger, Cai, Rosegrant, Obeng-Asiedu et al.
Unit economic value of water:
wp*i
Andreu Alvares et al.
Shadow prices of constraints:
wp*i,r
Assimacopoulos et al.
Unit financial, environmental and resources costs:
wp*i
Coupling water models with
economic models
Model Holistic Modular
Ringler, Berger, Cai, Rosegrant, Obeng-Asiedu et al.
✔ ✔ ✔
Andreu Alvares et al. ✔ ✔ ✔
Assimacopoulos et al. ✔ ✔ ✔
AgriCom Mozart DSS – AMDSS
(Dirksen, Blind, Nagandla, Bomhof, Heinz et al., The Netherlands, Germany)
A modular approach using the Open Modeling Interface and Environment – OpenMI
Created in the HarmonIT project (2002 – 2005)
Mozart model = Hydrological model
Mozart represents relationships between environmental pressures (inundation, water logging, salinity and water shortage) and yield damage fractions.
AgriCom model = Economic model
AgriCom calculates yield losses, costs and benefits in agriculture on the basis of Mozart’s calculations results for different environmental conditions (such as for dry and heavy rain conditions).
DSS component
DSS calculates the economic net benefits for each of the selected strategies, i.e. installing more irrigation equipments, improving drainage systems.
AgriCom
CropPrice, CropValue, ActualPhYield, LabourCosts, EnergyCosts, WaterLevyCosts, FixedCapitalCosts
OutputExchangeItems
AM-DSSScenarios and
Investment
InputExchangeItems
InputExchangeItems
Economic net benefit
MozartEnvironmental pressures
Area, CropCode, Droughtdamage, Saltdamage, WaterlogDam, InundDam, AvgGroundwaterlevel, SprinkType, SprinkDemandSW, SprinkDemandGW
OutputExchangeItems
As one typically exchanges a Quantity on an ElementSet, this combination is grouped into an ExchangeItem. A model can have exchangeItems as input (InputExchangeItem) or can provide them as output (OutputExchangeItem).
Rainfall-Runoff model
River model
+Quantity = "LateralFlow"+ElementSet = "LateralInlets"
OutputExchangeItem
+Quantity = "WaterLevel"+ElementSet = "River"+DataOperationDescriptor =
"None""Interpolate (spatial)"
+Quantity = "Rainfall"+ElementSet = "Sub-catchments"
+Quantity = "Outflow"+ElementSet = "Outlets"+DataOperationDescription = "None"
"TimeAverage (temporal)""MaxValue (temporal)"
Rain module
+Quantity = "Precipitation"+ElementSet = "MyRainGrid"+DataOperationDescriptor = "None"
"Average (temporal)""Accumulate (temporal)""Average (spatial)"
InputExchangeItem
OutputExchangeItem
InputExchangeItem
OutputExchangeItem
AM-DSS
+Quantity = "ActualPhYield"+ElementSet = "Default"
OutputExchangeItem
+Quantity = "EconomicNetBenefit„+ElementSet = "Default„+DataOperationDescriptor="None"
InputExchangeItem
Mozart model
+Quantity = "Sprinkling Type„+ElementSet = "PlotByDw85„+DataOperationDescriptor = "None"
OutputExchangeItem
Agricom model
+Quantity = "Sprinkling Type„+ElementSet = "District water code:85"
+Quantity = "ActualPhYield"+ElementSet = "District water code:85"+DataOperationDescription = "None"
OutputExchangeItem
InputExchangeItem
GetValues() call
GetValues() call
Benefits from coupling techniques (such as OpenMI)
• Allow separated models to be updated• Link models with different spatial representation • Link models with different temporal resolutions• Link models with different terminologies & units• Link models based on different concepts• Allow two-way interactions at every time step• Allow optimisation feedback loops• Allow coupling further models• Make integrated water resource management easier.
Future challenges
Identify the needs for considering socio-economic and water policy aspects in IWRM
Develop economic models tailored to watersheds
Improve the properties of coupling techniques to link water models with economic models
Apply and improve hydro-economic models in watersheds together with the stakeholders.