Estimating the Economic Value of Interannual Reservoir Storage in Water Resource Systems
Authors: Majed Khadem, Charles Rouge, Julien Harou, Kristi Hansen, Josue Medelline Azuara, Jay Lund
Journal: Water Resources Research
Publication Date: 19 October, 2018
Department of: Mechanical, Aerospace and Civil Engineering
What’s the economic value of water stored in dams?
There are many competing economic and environmental uses for water, and these demands vary across regions and over time. During a drought, waters value can increase several times as enough supply will maintain production of the highest value goods and irrigated crops. Given droughts happen without warning, and are of unknown duration, how much water should water managers ‘save’?
Researchers at the University of Manchester have developed a systems modelling approach which determines how much water managers should store (across complex constellations of dams) such that the region’s economic prosperity is maximised. This involves estimating the economic contribution of the water stored in each dam.
The approach was applied to California’s Central Valley water resource system, including 30 reservoirs, 22 aquifers, and 51 water demand sites which creates over 40 billion USD of revenue annually in agricultural production alone. In some reservoirs (e.g. Shasta dam pictured above) average stored water values exceeded 0.05 USD per cubic metre. It is estimated that improving water management to consider the economic value of stored water could decrease California’s water scarcity costs by over 100 million USD annually.
- As of 2017, nearly 4,000 new dams are being planned or built world-wide
- Roughly 80% of London’s water supply is stored in reservoirs
- Globally, 844 million people lack access to sufficient water. Adequate water quantity and quality is the UN’s 6th sustainable development goal.