Proper Pricing Approach to the Water Supply Cost Sharing: A Case Study of the Eastern Route of the South to North Water Diversion Project in China

Abstract

Conflict in cost sharing is normal in complex water distribution system projects, such as the inter-basin water diversion project (IWDP). China’s South to North Water Diversion Project (SNWDP) is the largest IWDP in the world, with a complex relationship between upstream and downstream users of the water supply. Therefore, it is necessary to propose an applicable and unsophisticated cost-sharing method to deal with the complex relationship between upstream and downstream users. This paper proposes an improved cost-sharing method based on the continuity equation of water quantity and the balance equation of the project cost between upstream and downstream users. The fairness of sharing the joint cost between parties involved in the eastern route of SNWDP (ER-SNWDP) obtained using the proposed improved cost-sharing method is investigated by comparing its results with the existing cost-sharing method. The results demonstrate that the proposed method can overcome the non-convergence issue of the existing sharing formula and reduce the differences between upstream and downstream users’ sharing costs. The improved method provides a cost-sharing strategy that is more easily accepted by both the upstream and downstream users than the existing estimation approach. Therefore, the proposed pricing approach can provide technical guidance for decision makers in the effective operation of large-scale IWDPs in areas with quasi water markets.