Water Transfers in Water Resource Systems

Lund, Jay R.; Israel, Morris

doi:10.1061/(asce)0733-9496(1995)121:2(193)

Cited by 90 publications

(43 citation statements)

References 12 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The certainty inherent in the exercise price can make options an attractive hedge against spot market price volatility, while providing the additional advantage of postponing transfer decisions (and full payment) until better information is available. Both leases and options improve market flexibility relative to permanent transfers alone, allowing water users to more rapidly adapt to changing conditions while meeting their reliability goals with a reduced volume of ''firm'' capacity [Lund and Israel, 1995b]. As leases and options have become more widely available, there has been increased interest in how water users might coordinate the use of these instruments to achieve the dual objectives of maintaining water supply reliability and lowering supply costs.…”

Section: Introductionmentioning

confidence: 99%

Developing portfolios of water supply transfers

Characklis

Kirsch

Ramsey³

et al. 2006

Water Resources Research

View full text Add to dashboard Cite

[1] Most cities rely on firm water supply capacity to meet demand, but increasing scarcity and supply costs are encouraging greater use of temporary transfers (e.g., spot leases, options). This raises questions regarding how best to coordinate the use of these transfers in meeting cost and reliability objectives. This paper combines a hydrologic-water market simulation with an optimization approach to identify portfolios of permanent rights, options, and leases that minimize the expected costs of meeting a city's annual demand with a specified reliability. Spot market prices are linked to hydrologic conditions and described by monthly lease price distributions which are used to price options via a riskneutral approach. Monthly choices regarding when and how much water to acquire through temporary transfers are made on the basis of anticipatory decision rules related to the ratio of expected supply to expected demand. The simulation is linked with an algorithm that uses an implicit filtering search method designed for solution surfaces that exhibit high-frequency, low-amplitude noise. This simulation-optimization approach is applied to a region that currently supports an active water market, with results suggesting that temporary transfers can reduce expected water supply costs substantially, while still maintaining high reliability. Also evaluated are trade-offs between expected costs and cost variability that occur with variation in a portfolio's distribution of rights, options, and leases.

show abstract

Section: Introductionmentioning

confidence: 99%

Developing portfolios of water supply transfers

Characklis

Kirsch

Ramsey³

et al. 2006

Water Resources Research

View full text Add to dashboard Cite

show abstract

“…Efficient water pricing is normally equivalent to pricing at marginal social cost (Lund and Israel, 1995). When the price of water reflects its marginal cost, including environmental externalities and other opportunity costs, the resource will be put to its highest-valued uses (Rogers et al, 2002).…”

Section: Economic Efficiencymentioning

confidence: 99%

Incentive pricing and cost recovery at the basin scale

Ward

Pulido-Velázquez

2009

Journal of Environmental Management

View full text Add to dashboard Cite

“…It must procure enough water each year to cover the volume of its export cuts. The statewide water market in California, from which the EWA purchases most of its assets, encompasses several types of water transfers, three of the most common of which are longterm, spot market, and contingent transfers or option purchases [Lund and Israel, 1995b;Howe, 1997;Howitt, 1998]. …”

Section: California's Water Marketmentioning

confidence: 99%

Optimization of environmental water purchases with uncertainty

Hollinshead

Lund

2006

Water Resources Research

Self Cite

View full text Add to dashboard Cite

[1] Water managers are turning increasingly to market solutions to meet new environmental demands for water in fully allocated systems. This paper presents a threestage probabilistic optimization model that identifies least cost strategies for staged seasonal water purchases for an environmental water acquisition program given hydrologic, operational, and biological uncertainties. Multistage linear programming is used to minimize the expected cost of long-term, spot, and option water purchases used to meet uncertain environmental demands. Results prescribe the location, timing, and type of optimal water purchases and illustrate how least cost strategies change as information becomes available during the year. Results also provide sensitivity analysis, including shadow values that estimate the expected cost of additional dedicated environmental water. The model's application to California's Environmental Water Account is presented with a discussion of its utility for planning and policy purposes. Model limitations and sensitivity analysis are discussed, as are operational and research recommendations.

show abstract

Water Transfers in Water Resource Systems

Cited by 90 publications

References 12 publications

Developing portfolios of water supply transfers

Developing portfolios of water supply transfers

Incentive pricing and cost recovery at the basin scale

Optimization of environmental water purchases with uncertainty

Contact Info

Product

Resources

About