Category: Planning & Management

394302 - Reducing supply and financial risk through cooperative supply management: supply capacity sharing across multiple utilities

Monday, Jun 4
8:30 AM – 5:30 PM

Water utilities have historically elected to meet growing demands through independent expansion of supply infrastructure. However, rapidly-growing regions with multiple utilities and limited infrastructure expansion options have begun to consider multi-utility, cooperative management of existing resources as an alternative to expensive supply expansion. Sharing capacity of a single supply (e.g., reservoir) between neighboring utilities, despite spatial and temporal correlation in demand and hydrology, provides a hedge against long-term planning uncertainty in demand growth for any individual utility by allowing for readjustment of capacity ownership over time. Without this ability, each utility bears the financial risk of underestimating demand growth, a significant challenge in this era of decreasing per capita demands. Cooperative sharing agreements can be adapted to changing hydrologic and demand conditions to spread this risk among partners. Such cooperative agreements have yet to be explored and are of interest to utilities concerned by future hydrologic uncertainty and unreliable long-term demand forecasts. This research evaluates several multi-utility capacity sharing strategies within an ensemble simulation framework involving many hydrologic futures in order to identify robust agreement structures. Using Jordan Lake, a reservoir in the Research Triangle of North Carolina whose capacity is currently being allocated among a number of utilities, as a test bed, this analysis demonstrates the impacts and limitations of each agreement under grounded, realistic conditions. Results may inform agreements for future projects, minimizing long-term financial exposure of cooperating partners through more efficient use of existing resources, and helping to mitigate future uncertainly.

Co-Authors: Gregory Characklis, Chapel Hill, NC – University Of North Carolina at Chapel HIll, Department of Environmental Sciences and Engineering, Center on Financial Risk in Environmental Systems and Gillings School of Global Public Health

David E. Gorelick

Graduate Research Assistant
University of North Carolina at Chapel Hill, Center on Financial Risk in Environmental Systems and Gillings School of Global Public Health
Winston Salem, North Carolina

David Gorelick, graduate research assistant and first-year doctoral student for the Center on Financial Risk in Environmental Systems, in the Department of Environmental Sciences and Engineering, Gillings School of Global Public Health at the University of North Carolina at Chapel Hill. Current esearch focuses on the long-term financial risk to water utilities of infrastructure investment and inter-utility cooperation amid incorrectly-projected future water demand. Past work includes investigation of algal and cellulosic biofuels as viable options for domestic energy production, as well as incorporation of innovative short-term drought mitigation instruments to water utility decision-making and their influence on utility management objectives.