Evaluating the Impact of Alternative Hydro-Climate Scenarios on Transfer Agreements: Practical Improvement for Generating Synthetic Streamflows

Abstract

Utilities are increasingly considering the use of temporary water transfers to augment their supplies during periods of drought, an alternative that is often less expensive than expanding safe yields through new infrastructure. Understanding the volume and timing of transfers is important for developing contracts between buyer and seller and can be challenging due to the transient nature of drought, a situation complicated by the uncertainties associated with climate change. While transfer arrangements have received some attention in the literature, the effects of climate change on such agreements remain unexplored. This paper investigates these impacts using an improved method for developing new hydro-climate scenarios. A technique for producing stochastic time series of inflows is described, one which effectively replicates the autocorrelation present in the historic record. Unlike autoregressive (and similar) models that assume complete stationarity, the modified fractional Gaussian noise (mFGN) method preserves the seasonal patterns in the correlation structure, thereby providing some advantages when modifying historical streamflow records to reflect alternative hydro-climate scenarios. Alternative scenarios are developed for the Research Triangle region of North Carolina, an area with several utilities currently seeking to use a system of risk-based transfer agreements as a means to meet demand during droughts. This study simulates hydrologic conditions and transfer activity from 2010 to 2025 under a variety of climate scenarios. Results indicate that increased variability in inflows, with no change in the mean, corresponds to slight increases in transfer activity. However, when increased variability is paired with modest decreases in expected inflows (7%), transfer activity is doubled.