Author(s): Stephen Zhang; Vladan Babovic
Linked Author(s): Vladan Babovic
Keywords: Uncertainty; Flexibility; Alternative Water Resource; Risk Management
Abstract: Long term security of water supply has to be met amid huge uncertainties from social, political, technical, and economical aspects. As one of the water-stress countries, Singapore has limited conventional water resources and progressively architects its water supply system through acquiring and maintaining multiple water resources. The rationale and merits of such a policy can not be understood based on traditional project valuation methods, and this paper provides the decision support for the policy by evaluating alternative water resources from multiple perspectives under various economical-technical-political uncertainties. It is found that incorporating alternative water resources can improve the water supply system from financial, political, and socioeconomical perspectives concurrently. Alternative water resources provide flexibilities to the water supply system and are fundamental and effective means to deal with risk. The evaluation of alternative water resources in an integrated real option approach in the local contexts, gives specific tangible accounts of the value of the alternative water resource and complements the general prescriptive IWRM framework.
Year: 2009