Download Hydro-economic models: coupling of two different domains

Harmoni-CA Forum & Conference
Osnabrueck, 5-7 April 2006, Germany
Hydro-economic models: coupling of two
different domains in water management
Ingo Heinz
Institute of Environmental Research
University of Dortmund
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)
Models: three examples
Ringler, Berger, Cai,
Rosegrant, ObengAsiedu 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.
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
What do hydro-economic models provide currently?
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 different water uses versus stakeholder values Art. 4
✔
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
MNBi*
W*
Economic losses due
to water shortage
„penalty“: Pi
WS
Water delivery
Net economic benefits for user i: NBi
Condition for optimal water allocation
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
.... 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“
The concept of water scarcity rent
Marginal net benefits for user i: MNBi
Water scarcity rent
= resource cost
Unit
economic
water value
Marginal
cost of
infrastructure
W*
Limited water
availability
WS
No water
shortage
Water delivery
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
Water scarcity rent
functions
Unit economic
value of water:
Ringler, Berger,
Cai, Rosegrant,
Obeng-Asiedu et
wp
*i
al.
Andreu Alvares Shadow prices
et al.
of constraints:
wp*i,r
Assimacopoulos
et al.
Unit financial,
environmental and
resources costs:
wp*i
Coupling water models with
economic models
Model
Ringler, Berger,
Cai, Rosegrant,
Obeng-Asiedu et
al.
Andreu Alvares
et al.
Assimacopoulos
et al.
Holistic
Modular
✔ ✔ ✔
✔ ✔
✔
✔ ✔
✔
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.
Environmental
pressures
Mozart
OutputExchangeItems
Area, CropCode, Droughtdamage, Saltdamage,
WaterlogDam, InundDam, AvgGroundwaterlevel,
SprinkType, SprinkDemandSW, SprinkDemandGW
AgriCom
InputExchangeItems
OutputExchangeItems
CropPrice, CropValue, ActualPhYield, LabourCosts,
EnergyCosts, WaterLevyCosts, FixedCapitalCosts
InputExchangeItems
Scenarios and
Investment
AM-DSS
Economic net
benefit
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).
Rain module
OutputExchangeItem
+Quantity = "Precipitation"
+ElementSet = "MyRainGrid"
+DataOperationDescriptor = "None"
"Average (temporal)"
"Accumulate (temporal)"
"Average (spatial)"
River model
InputExchangeItem
+Quantity = "LateralFlow"
+ElementSet = "LateralInlets"
Rainfall-Runoff
model
InputExchangeItem
+Quantity = "Rainfall"
+ElementSet = "Sub-catchments"
OutputExchangeItem
+Quantity = "Outflow"
+ElementSet = "Outlets"
+DataOperationDescription = "None"
"TimeAverage (temporal)"
"MaxValue (temporal)"
OutputExchangeItem
+Quantity = "WaterLevel"
+ElementSet = "River"
+DataOperationDescriptor =
"None"
"Interpolate (spatial)"
Mozart model
OutputExchangeItem
+Quantity = "Sprinkling Type„
+ElementSet = "PlotByDw85„
+DataOperationDescriptor = "None"
GetValues() call
Agricom model
InputExchangeItem
+Quantity = "Sprinkling Type„
+ElementSet = "District water code:85"
AM-DSS
InputExchangeItem
+Quantity = "ActualPhYield"
+ElementSet = "Default"
OutputExchangeItem
+Quantity = "EconomicNetBenefit„
+ElementSet = "Default„
+DataOperationDescriptor="None"
OutputExchangeItem
+Quantity = "ActualPhYield"
+ElementSet = "District water code:85"
+DataOperationDescription = "None"
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.