Capacity Choice of Dams under Rivalry Use and Externalities

Harold Houba, Kim Hang Pham Do and Xueqin Zhu
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Xueqin Zhu: Wageningen University, the Netherlands

No 14-143/II, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This paper studies the relation between optimal dam capacity and water management under rivalry uses and externalities. We extend the hydropower generation model, based on Haddad (2011), by including the competing use of water resource, non-linear building cost of dam capacity and externalities in a welfare optimization model. We obtain the optimal dam capacity for multi-functional dams such as providing infrastructure for industrial and households water use, conjunctive use of hydropower generation and irrigation; storing water in the wet season for use in the dry season, and mitigating flooding damages. The optimal solution shows that optimal dam capacity is characterized by the marginal benefits of hydropower generation, the marginal costs of flooding damages, and the constraining factors. Moreover, the optimal water management can be achieved by using derived sea sonal prices in a decentralized manner.

Keywords: OR in environment and climate change; river-basin management; dam capacity; welfare optimization; externalities (search for similar items in EconPapers)
JEL-codes: C71 C72 D62 (search for similar items in EconPapers)
Date: 2014-10-30
New Economics Papers: this item is included in nep-ene, nep-env and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20140143

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