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Effect of Risk on the Cost of Water

Author(s): D. Stephenson

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Keywords: Cost; Demand; Probability; Risk; Water

Abstract: By ignoring risk in water resources and water demand, engineers can make mistakes and thereby increase the cost of water. Water resources availability can be described with a probability distribution. The risk of insufficient water is a function of the capacity of the project. That is the larger the reservoir on a river the less the risk of it running dry. Even during the operational phase the probability of different inflows must be matched with an acceptable probability of being able to meet demands. The probability of water demand reaching a target figure also influences the design capacity of the project. The effect of a lower demand than predicted could be to increase water costs and thereby reduce consumption even further. A time simulation is required to cost alternatives with different probabilities. On the one hand uncertainty (in river flow) increases the cost of water storage (conversely to reduce risk in supply rate the cost must increase). On the other hand, higher uncertainty in demand increases costs and should dampen capital expenditure (see Fig. 1). The consequences of over-or under-design are described and a probabilistic method for determining the optimum design capacity is advocated.

DOI:

Year: 2003

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