Economic efficiency and investment timing for dual water systems

Abstract

A general methodology to evaluate the economic feasibility of dual water systems is presented. In a first step, a static analysis (evaluation at a single point in time) is developed. The analysis requires the evaluation of consumers' and producer's surpluses from water use and the capital cost of the dual (outdoor) system. The analysis is then extended to a dynamic approach where the water demand increases with time (as a result of a population increase) and where the dual system is allowed to expand. The model determines whether construction of a dual system represents a net benefit, and if so, what is the best time to initiate the system (corresponding to maximization of social welfare). Conditions under which an analytic solution is possible are discussed and results of an application are summarized (including sensitivity to different parameters). The analysis allows identification of key parameters influencing attractiveness of dual water systems.