An approach to economic analysis of water resource systems under high rainfall uncertainty

Abstract

Most water supply systems are sized somewhat arbitrarily by either designing them to yield a firm supply for the worst drought of record or some smaller amount which way be decided by available resources. The first size estimate for most systems should be that capacity which maximizes expected net benefits, thus incorporating probability into the economic analysis. This is especially true for regions of high precipitation uncertainty. If, after that problem is solved, the client desires to choose another project size, the trade-offs are clearer. This paper will illustrate the principle by an example of sizing a small reservoir (tank) for the northeastern Brazilian semi-and tropics (SAT).