Abstract
What is the economic value of storing water for future droughts, and what are the consequences of this valuation for water management? One way to answer this question is to ask: ‘what is the valuation, which if used, would maximize a region's economic use of water?’ This prescriptive valuation can be done by linking classical hydro-economic models to global search methods. Another way to answer this question is to ask: ‘what do historical water management operations reveal about water's economic value?’ Indeed, past reservoir uses reveal the empirical inter-temporal valuations of past water managers. Although they may not have been optimized in a formal sense, in mature water resource systems with economic water demands, reservoir storage rules evolve via a socio-political process to embody societies' valuation of water. This empirical, ‘positive’, or descriptive valuation is captured by calibrating a hydro-economic model such that carry-over storage value functions enable simulated storage to match a historical benchmark. This paper compares both valuations for California's Central Valley revealing that carryover storage values derived from historical operations are typically greater than prescribed values. This leads to a greater reliance on groundwater use in historical operations than would have been achieved with system-wide optimization. More generally, comparing the two approaches to water valuations can provide insights into managers' attitudes as well as the impact of regulatory and institutional constraints they have to deal with – and that are not necessarily included in optimization models.
Highlights
What can water storage valuation tell us of the difference between optimal and historical water management decisions? Economic valuation of water across space and time informs water allocation and the design of the physical and regulatory infrastructure that supports it; this valuation reflects the hydrological, economic, institutional and ecological situation of a river basin [1,2]
The analysis will consider both this ensemble of solutions and a “representative solution” obtained by simulating the system using for each reservoir the average pmin and pmax across all solutions within the zone of concentration
This paper proposes a methodology to derive comparable descriptive and prescriptive valuations of water storage
Summary
What can water storage valuation tell us of the difference between optimal and historical water management decisions? Economic valuation of water across space and time informs water allocation and the design of the physical and regulatory infrastructure that supports it; this valuation reflects the hydrological, economic, institutional and ecological situation of a river basin [1,2]. What can water storage valuation tell us of the difference between optimal and historical water management decisions? Modeling-based approaches that derive water values aim to integrate these various aspects within a river basin model. Such ap proaches can be descriptive or prescriptive, used to examine historical or optimal water management decisions respectively. Prescriptive approaches use optimization to find a “best” system-wide allocation strategy according to a benefit-maximization criterion, and get an economically “efficient” valuation of water as a by-product of optimization [4,5,6]. Water values in descriptive models come from the actual allocation whereas in prescriptive models, they correspond to value extracted from optimal use. Descriptive valuations are generally set to reflect the rules that direct water management rather than reproduce historical operations – i.e., historical outcomes of this rule system
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