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Options of optimal dam capacity under externality and uncertainty

Author

Listed:
  • Harold Houba
  • Kim Hang Pham Do

    (School of Economics and Finance, Massey University, Palmerston North, New Zealand)

  • Xueqin Zhu

    (Environmental Economics and Natural Resources Group, Wageningen University, Wageningen, The Netherlands)

Abstract

This paper analyses the relation between optimal dam capacity and water management in a unified approach. Having extended a hydropower generation model, we investigate 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. Our 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. We also provide the implication of the optimal solution for three real world cases of dam construction, i.e. for flood control, for irrigation and for hydropower generation.

Suggested Citation

  • Harold Houba & Kim Hang Pham Do & Xueqin Zhu, 2018. "Options of optimal dam capacity under externality and uncertainty," Discussion Papers 1807, School of Economics and Finance, Massey University, New Zealand.
    • Handle: RePEc:mas:dpaper:1807
    as

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    File URL: https://econfin.massey.ac.nz/school/publications/discuss/2018/DP1807.pdf
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    References listed on IDEAS

    as
    1. Houba, Harold & Pham Do, Kim Hang & Zhu, Xueqin, 2013. "Saving a river: a joint management approach to the Mekong River Basin," Environment and Development Economics, Cambridge University Press, vol. 18(1), pages 93-109, February.
    2. Houba, Harold & Pham Do, Kim Hang & Zhu, Xueqin, 2011. "Saving the Mekong River Basin," MPRA Paper 37407, University Library of Munich, Germany.
    3. Haddad, Mohamed S., 2011. "Capacity choice and water management in hydroelectricity systems," Energy Economics, Elsevier, vol. 33(2), pages 168-177, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    river-basin management; dam capacity; welfare optimisation; externalities;
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • O21 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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