The costs of uncoordinated infrastructure management in multi-reservoir river basins

Abstract

Though there are surprisingly few estimates of the economic benefits of coordinated infrastructure development and operations in international river basins, there is a widespread belief that improved cooperation is beneficial for managing water scarcity and variability. Hydro-economic optimization models are commonly-used for identifying efficient allocation of water across time and space, but such models typically assume full coordination. In the real world, investment and operational decisions for specific projects are often made without full consideration of potential downstream impacts. This paper describes a tractable methodology for evaluating the economic benefits of infrastructure coordination. We demonstrate its application over a range of water availability scenarios in a catchment of the Mekong located in Lao PDR, the Nam Ngum River Basin. Results from this basin suggest that coordination improves system net benefits from irrigation and hydropower by approximately 3–12% (or US$12-53 million/yr) assuming moderate levels of flood control, and that the magnitude of coordination benefits generally increases with the level of water availability and with inflow variability. Similar analyses would be useful for developing a systematic understanding of the factors that increase the costs of non-cooperation in river basin systems worldwide, and would likely help to improve targeting of efforts to stimulate complicated negotiations over water resources.