Abstract
Optimization of water resource management is very important to reduce water shortage risk and increase economic benefit. Water option can be used as a flexible instrument in water resource management. In this study, chooser options are designed for water managers to buy additional water in drought periods and sell redundant water in wet periods. To make optimal decisions under uncertainties including probability distributions and intervals, an inexact two-stage mixed-integer programming (ITSMIP) model is applied. To illustrate the role of chooser options in water resource management, a case study is presented. Factors which influence the willingness of buying the chooser options are analyzed and the optimal water allocation plans are also provided. The results demonstrate that chooser options can help water managers mitigate the impact of water shortage and increase utilization efficiency of water resource greatly.
Highlights
Water shortage is becoming increasingly severe due to climate change, ever growing population, industrialization and environmental pollution
Chooser options are designed for water managers to buy additional water in drought periods and sell redundant water in wet periods
This type of option allows water manager to choose the option to be either a put or a call at some prespecified future time depending on the information about water inflow and requirements
Summary
Water shortage is becoming increasingly severe due to climate change, ever growing population, industrialization and environmental pollution. Burke et al [4] developed an approach for water banking by integrating hydrologic and economic aspects They concluded that an interproject banking scheme might be appropriate for increasing the efficient use of water. Huang and Loucks [15] proposed a hybrid model of inexact optimization and two-stage stochastic programming model in which uncertainties are expressed as probability distributions and intervals They applied the model to a case study of water resource management and provided useful decision support for water managers. The model is applied to a case study and the effect of chooser options on water resource decision making and factors which influence the willingness of buying the chooser options under uncertainty is analysed.
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