Economic Model for Reservoir Planning

The model's objective is to maximize net economic efficiency benefits subject to hydrologic system constraints. The model is designed to handle system increments which are unique and interdependent. Since firm water, the product of the system, is dependent on existing reservoir sizes, configurations, hydrologies, and operating policies, an operating scheme is incorporated in the optimization. A price-sensitive demand curve which changes according to a prescribed growth rate is used. Firm water demand is thus sensitive to changes in price and time as opposed to most fixed demand requirement approaches. Known reservoir cost relationships which are a function of project capacity determine costs. A forward dynamic programming algorithm is used for solution. The model is tested with an application to the Eel River Project in Northern California. The discount rate, growth rate, and demand elasticity are parameterized and tested over several values.