Cost-Benefit Framework for Optimal Design of Water Transfer Systems

Abstract

Water transfer systems are increasingly seen as a response to regional water stresses. The expensive capital cost of such massive projects calls for satisfying the desired requirements with a minimum investment, i.e., achieving a high rate of return on investment. This paper develops a new theoretical cost-benefit analysis framework considering the tradeoffs between investment cost and expected water shortage loss to determine the optimal water transfer capacity for water transfer systems. The optimal capacity is determined through theoretical and hydro-economic analysis considering the compensation effects of the capacity of existing reservoirs and reservoir inflow variability. Theoretical analysis show that the ratio between the slopes of the investment cost and water shortage loss functions, which is obtained analytically with the optimality condition, is equal to the water shortage probability (i.e., 1-reliability) when cost and loss functions are linear. Application to the Biliuhe water transfer system, northeast China, further demonstrates the equivalence between the proposed approach and reliability based simulation approach, as well as the advantage of the proposed approach in simplicity, accuracy and computational efficiency. Furthermore, effects of model parameters, demand uncertainty, inflow variability and probability distribution type on the optimal design of the water transfer system are discussed. This paper demonstrates that the proposed approach provides a theoretical basis for explicitly addressing the uncertainties in the design process of water transfer systems.