A Methodology to Model Water Demand based on the Identification of Homogenous Client Segments. Application to the City of Barcelona

Water management has become a vital concern for both water supply companies and public administrations due to the importance of water for life and current scarcity in many areas. Studies exist that attempt to explain which factors influence water demand. In general, these studies are based on a small sample of consumers and they predict domestic water consumption using ordinary least squares regression models with a small number of socioeconomic variables as predictors, usually: price, population, population density, age, and nationality. We have followed a different approach in two ways; one, in the scope of the study: we have included in the study all consumers of the Barcelona area and as many socioeconomic variables as possible (all the available data from official statistics institutions); and also in the methodology: first, we have segmented clients into homogeneous socioeconomic groups that, as we show later in the Barcelona case, also have homogeneous water consumption habits. This allows for a better understanding of water consumption behaviours and also for better predictions through modeling water consumption in each segment. This is so because the segments’ inner variability is smaller than the general one; thus, the models have a smaller residual variance and allow for more accurate forecasts of water consumption. The methodology was applied to the Barcelona metropolitan area, where it was possible to construct a database including both water consumption and socioeconomic information with more than one million observations. Data quality was a primary concern, and thus a careful exploratory data analysis procedure led to a careful treatment of missing observations and to the detection and correction or removal of anomalies. This has resulted in a stable division of the one million water consumers into 6 homogeneous groups and models for each of the groups. Although the methodology has been developed and applied to the Barcelona area, it is general and thus can be applied to any other region or metropolitan area. Copyright Springer Science+Business Media B.V. 2012