Hydroeconomic Optimization of Water Management: Dealing with Scarcity at the Basin Scale

Abstract. Water scarcity is a key limiting factor for sustainable socioeconomic development especially in arid and semi-arid basins, and managing water effectively there often requires coherent and holistic policies and regulations at the basin scale. This study developed an integrated basin-scale hydroeconomic optimization model. The model reasonably details the representation of the hydrologic, infrastructural, water demand and regulatory components, with an objective to maximize overall economic benefits of irrigated crop production, water supply and hydropower generation, subject to resource, infrastructural, operational and policy constraints. A baseline calibration enhances the model’s reliability for analysing interconnected physical processes and decision-making, based on the interdependence of hydrologic and economic components. The model is applied to the Yellow River Basin (YRB), where water has been fully allocated and intense competition exists among different water users across the basin. Results show that the coupling of water availability decreases and water value increases along the river from upstream to downstream, implying a more challenging issue for downstream water security (especially the critical ecological requirements) and a larger requirement for water saving in upstream areas. Basin-wide management strategies highlighted in this study include: transferring water allocation to economically high-value production sectors; coordinating the operation of multiple reservoirs in the basin, taking advantage of the reservoirs that have inter-year operation capacity; monitoring and balancing water availability between upstream and downstream areas. The stabilization of water supply heavily relies on the coordinated operation of aquifers and reservoirs with inter-year storage capacity, which can effectively mitigate hydrologic variability and safeguard downstream water availability. Water valuation analysis based on marginal value underscores the potential benefits of water trading and inter-regional transfers. The results offer insights for basin-scale water management, showing potentials of re-allocation strategies for improving management flexibility and increasing water productivity. Insights from the YRB are meaningful as guides for managing basins worldwide that face similar challenges.