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A risk-based decision model for rainwater resource supply in forward contracts

Author

Listed:
  • Yu Zhang

    (Nanjing Hydraulic Research Institute
    Nanjing Hydraulic Research Institute)

  • Haifei Sha

    (Nanjing Hydraulic Research Institute)

  • Xiufeng Wu

    (Nanjing Hydraulic Research Institute
    Nanjing Hydraulic Research Institute)

  • Shiqiang Wu

    (Nanjing Hydraulic Research Institute)

  • Jiangyu Dai

    (Nanjing Hydraulic Research Institute
    Nanjing Hydraulic Research Institute)

  • Bin Xu

    (Hohai University)

  • Lei Yu

    (Nanjing Hydraulic Research Institute)

  • Qianqian Yang

    (Nanjing Hydraulic Research Institute
    Nanjing Hydraulic Research Institute)

Abstract

Rainwater is a supplemental source of water, in addition to surface water and groundwater. In the future market, forward contract is a common mode of trading, but it requires supplier to provide a fixed quantity of supply, which may result in suppliers being unable to fulfill their contracts due to uncertainties. Therefore, determining the contract volume of rainwater resource and evaluating its risk is important for contract negotiations. This paper aims to propose a contract volume risk decision model based on rainfall uncertainty and efficiency uncertainty of rainwater harvesting system (RHS), to provide decision support for determining contract volumes in rainwater resource forward transactions. A mathematical model is first introduced to quantify the uncertainty of rainfall. Then RHS’s efficiency is proposed to indicate how much rainwater resource is able to be provided by RHS per unit amount of rainwater. An optimal operation model is established for simulating the operation of RHS. Uncertainty description of RHS’s efficiency is developed from this RHS simulation model based on the historical rainfall records. Furthermore, the risk of rainwater resource supply is defined as the probability of not being able to fulfill the contract volume and a solution method is proposed. Afterwards, two sets of decision-making processes are proposed for different negotiation scenarios. Finally, this decision support approach is validated using a real-world example, and the results show that the approach provides effective and reasonable support for decision making in rainwater resource forward trading.

Suggested Citation

  • Yu Zhang & Haifei Sha & Xiufeng Wu & Shiqiang Wu & Jiangyu Dai & Bin Xu & Lei Yu & Qianqian Yang, 2022. "A risk-based decision model for rainwater resource supply in forward contracts," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 36(6), pages 1919-1936, April.
    • Handle: RePEc:spr:waterr:v:36:y:2022:i:6:d:10.1007_s11269-022-03115-2
    DOI: 10.1007/s11269-022-03115-2
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    References listed on IDEAS

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    1. Tomasz Zubala, 2022. "The Working Conditions and Optimisation of a Large Rainwater Harvesting and Treatment System in an Area at a Risk of Erosion," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 36(1), pages 135-152, January.
    2. Vargas-Parra, M. Violeta & Villalba, Gara & Gabarrell, Xavier, 2013. "Applying exergy analysis to rainwater harvesting systems to assess resource efficiency," Resources, Conservation & Recycling, Elsevier, vol. 72(C), pages 50-59.
    3. Ahmad, Shakeel & Jia, Haifeng & Chen, Zhengxia & Li, Qian & Xu, Changqing, 2020. "Water-energy nexus and energy efficiency: A systematic analysis of urban water systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 134(C).
    4. Su, Ming-Daw & Lin, Chun-Hung & Chang, Ling-Fang & Kang, Jui-Lin & Lin, Mei-Chun, 2009. "A probabilistic approach to rainwater harvesting systems design and evaluation," Resources, Conservation & Recycling, Elsevier, vol. 53(7), pages 393-399.
    5. Bekchanov, Maksud & Bhaduri, Anik & Ringler, Claudia, 2015. "Potential gains from water rights trading in the Aral Sea Basin," Agricultural Water Management, Elsevier, vol. 152(C), pages 41-56.
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