Design and Management of Multi-purpose Dams under Climate

Change

Yuan Niu
Department of Agricultural and Resource Economics
University of Connecticut
Email: yuan.niu@uconn.edu

Farhed A. Shah
Department of Agricultural and Resource Economics
University of Connecticut
Email: farhed.shah@uconn.edu

Selected Paper prepared for presentation at the 2018 Agricultural & Applied Economics Association
Annual Meeting, Washington, D.C., August 5-August 7

Copyright 2018 by Yuan Niu and Farhed Shah. All rights reserved. Readers may make verbatim copies of
this document for non-commercial purposes by any means, provided that this copyright notice appears
on all such copies.
 Design and Management of Multi-purpose Dams under
Climate Change

1. Introduction

In recent decades, dam construction has increased rapidly in many parts of the world, especially

in developing countries. According to the International Commission On Large Dams (ICOLD),

there are currently more than 58,500 large dams worldwide (http://www.icold-

cigb.net/article/GB/world_register/general_synthesis/general-synthesis). A majority of these

existing dams serve predominantly one purpose, such as irrigation, hydropower generation, non-

agricultural water supply, or flood control. Nonetheless, about 30% of the large dams are built to

serve more than one purpose. While it is true that designing and management of multipurpose

dams are more complex exercises, the importance of such dams is also likely to increase with

climate change. Several societal benefits from a single investment are provided by a

multipurpose dam. Furthermore, such a dam can improve a community’s ability to address

challenges posed by changing climatic and hydrological conditions. This may be done at an

existing dam, for example, via periodic adjustment of priority given to flood control relative to

other purposes for which the dam was constructed. At the same time, it should be recognized

that changes in temperature and precipitation patterns as well as incoming sediment flows may

have profound effects on the desired capacity of dams that are planned to be built in the near

future.

This paper presents an optimal control model in order to help policy makers determine the best

original reservoir capacity of a planned multipurpose dam that is subject to sedimentation and
how the priorities over the functions of an existing or planned dam may evolve with climate

change. Specifically, our objectives are to: (1) introduce an optimal control model for such a

dam; (2) test the model empirically under alternative climate change scenarios; (3) perform a

sensitivity analysis with respect to key parameters; and (4) derive a set of decision-making

recommendations for dam managers. We also hope to point researchers toward some directions

for further investigation. The rest of the paper is organized as follow. In Section 2, a literature

review is presented followed by Section 3 that explains the basic components and assumptions of

our theoretical model. The background of two illustrative case studies along with empirical

results and discussion of sensitivity analysis are presented in Section 4. Finally, a summary of

the main findings and policy recommendations are to be found in Section 5.

2. Literature Review

Climate change is likely to have a significant bearing on the water and sediment flows to dams,

thereby impacting their operation. Several researchers have pointed this out. For example,

Blackshear et. al (2011) indicate that climate change, by inducing alterations in evaporation,

river discharge, temporal precipitation patterns, frequency of extreme meteorological events, and

glacial melt rate, has the potential to make an appreciable impact, both positive and negative, on

hydroelectric production in every part of the world. Specific countries and regions have been

examined in detail. Cole et. al (2014) address Africa’s increasing reliance on hydropower in light

of climate change. Charalampos et al (2013) provide a case study considering climate change

impacts on dams in the Mesta/Nestos river basin in Greece, where they mention that the largest

impact would be on hydropower generation as it is sensitive to the amount, timing, and

geographical pattern of precipitation as well as temperature. In US, the Department of Energy’s

report (2017) shows that the trend toward earlier snowmelt and change of runoff seasonality may

reduce the federal hydropower reservoirs’ ability to mitigate the variability.

At the same time, changes in sediment load to dams may also result from global temperature and

precipitation changes. Huang and Makar (2014) assess such changes for two reservoirs in United

States. This study shows that the sediment load will decrease in Elephant Butte Reservoir in New

Mexico and increase in Bighorn Lake in Montana and Wyoming. Zhu et al. (2008) estimate a

change in sediment flux from -0.7% to 13.7% as a result of changes in rainfall ranging from -

0.7% to 17.8% in upper Yangtze River in China. Furthermore, climate change is also increasing

flood over-topping risks (https://robertscribbler.com/2016/07/11/climate-change-is-pushing-lake-

okeechobee-water-levels-higher-and-thats-bad-news-for-algae-blooms-flood-risk/) in regards to

existing dams.

The economics literature on multipurpose dams and climate change is quite sparse, particularly

in relation to the designing of dams and coordinating their different purposes. For single purpose

dams, there are now several papers that address different dimensions. A recent example is Xie

and Zilberman (2014), which develops a theoretical economic model for determining optimal

capacities of diversion dams incorporating stochastic water inflows. Taking an institutional

approach, Branche (2017) introduce the concept of sharing the water uses of multipurpose

reservoirs in a coordinated manner and Hadjerioua et al. (2015) estimate the economic benefits

of multipurpose reservoirs in the United States. However, none of the existing studies present a

conceptual framework for design or management of multi-purpose dams, particularly while

accounting for climate change.

Our model is built upon Palmieri et al. (2003), which uses dynamic optimization methodology to

analyze life cycle management of a dam that has a given reservoir capacity and is subject to

sedimentation. Following this work, we use Gould’s gamma function (Morris and Fan, 1998) to

calculate the reliable reservoir water yield, but modify its form using a climate change

adjustment factor from Lee, Yoon and Shah (2009) and introduce potential dependence of

incoming sediment on climate change as well. Also, we make reservoir capacity a choice

variable and allow for multiple purposes.

3. Conceptual Framework and Methodology

The overall goal of the model is to maximize lifetime net present value of the multi-purpose

dam, whose purposes include irrigation, power generation and flood control. Initial reservoir

capacity declines over time at the rate of sedimentation. We use our model to determine optimal

initial dam capacity while allowing annual incoming sediment as well as water inflow to be

impacted by climate change. Before presenting the full model, we first discuss four key

components of its net benefit function: (1) hydroelectric and irrigation benefits; (2) flood control

benefits; (3) costs of dam construction, maintenance, and removal and (4) climate change factors.

3.1 Hydroelectric and Irrigation Benefits

We assume that all water stored in the wet season is utilized in the dry season of the same year.

In other words, for the sake of simplifying our analysis, we take the dam to be an annual as

opposed to multi-year storage dam. The annual output of services from stored water is
represented by a water yield function called Gould’s gamma function, based on Morris and Fan

(1998):

4 ∙ 𝑆!! ∙ 𝑉!" − 𝑍𝑝𝑟 ! ∙ 𝑠𝑑 ! + 4 ∙ 𝐺𝑑 ∙ 𝑠𝑑 !

𝑊!! (𝑆!! ) =
𝐺𝑑
4 ∙ (𝑆!! + 𝑉 ∙ 𝑠𝑑 ! )
!"

where 𝑊!! is the reservoir yield at time t; 𝑆!! is the remaining reservoir capacity for

hydroelectric and irrigation purpose at year t; 𝑉!" is the mean annual water inflow for base year;

𝑍𝑝𝑟 is the standard normal variate of p%; 𝐺𝑑 is adjustment factor to approximate the Gamma

distribution; and 𝑠𝑑 is the standard deviation of incoming flows. The reservoir yield 𝑊!! is the

water available for use in hydropower; the amount of this water that will also be used for

irrigation purposes is 𝛽 ∗ 𝑊! 𝑆! , 𝛿! , where β is a parameter such that 0 < β < 1. Note, that the

energy demand from hydropower is high in the hot/summer season when crops also mostly

needed the water, supporting co-releases for both purposes in this season. The prices of water for

these services, 𝑃! and 𝑃! , multiplied by their respective yields result in monetary values of

annual hydropower and irrigation benefits.

3.2 Flood Control Benefit

The value of the difference between expected damages when there is no dam and when the dam

exists is postulated as the flood control benefits. Only economic damages (properties, crops,

services, etc.) are considered in this model. The maximum level of the flood damage, 𝐷, is

assumed to be positively related to annual mean water inflow 𝑉!" . For the sake of simplification,

we focus on the case in which the total water inflow is always less than the total water volume

that can destroy the whole community downstream. In this case, 𝐷 is less or equal to 𝐷 (Flood
damage from destroying the whole community downstream). Also, when annual mean water

inflow 𝑉!" is less or equal to a certain level, there is no damage threatened to the downstream

community at all, the flood control benefit equals to zero. Figure 1 and 2 below show the

relationship between reservoir capacity, flood damage, and the flood control benefits.

Figure 1

Flood Damage (D)

!
𝐷

𝐷!
⬚

𝐷 = Damage with Dam

0 𝑆!

Figure 2

Flood control Benefit ($)

𝐹𝐵(𝑆! )

!!!!
𝐹𝐵

0 𝑆̅ 𝑆!

We assume the total reservoir capacity 𝑆! is available for flood control, while some fraction of

the capacity is simultaneously also providing the other benefits. Following Pattanapanchai et al.,

(2002), the flood control benefit is represented as:

𝐹𝐵 𝑆! = 𝛾[𝑆! ]!/!

𝛾 is a benefit coefficient that depends on the land use, depth-damage function and distribution of

peak flow for each flood plain.

3.3 Costs of Dam Construction, Maintenance and Removal

Three types of costs are considered in our model. CC (S! ) is the dam’s total construction cost and

is computed as

𝐶𝐶 𝑆! = 𝑐 ∗ 𝑆!

where 𝑐 is the unit cost of dam construction. OMC is the annual maintenance and operation cost

of the dam; It is assumed to be a function of original reservoir capacity and is calculated as:

OMC = omc ∗ c ∗ S!

where 𝑜𝑚𝑐 is the maintenance and operation coefficient adjusted by specific dam project. The

third type of cost relates to salvage value, SV, of the dam at the end of its useful life, T. We

assume that the damages from allowing the dam to fail would be greater than the cost to remove

the facility. Given this assumption, SV is the cost of removing the dam in year T and is negative.

It is taken to be a function of initial storage capacity and is computed as:

𝑆𝑉 𝑆! = − η ∗ c ∗ 𝑆!
where η is a fraction.

3.4 Climate Change Factor

Climate change has a significant impact on both the annual mean water inflow and sediment

flows to dams in our model. The impact on the annual mean water flow occurs via an adjustment

factor 𝛿! , adapted from Lee, Yoon and Shah (2009). The resulting water yield function is:

4 ∙ 𝑆! ∙ (1 + 𝛿! ) ∙ 𝑉!" − 𝑍𝑝𝑟 ! ∙ 𝑠𝑑 ! + 4 ∙ 𝐺𝑑 ∙ 𝑠𝑑 !
𝑊! (𝑆! , 𝛿! ) =
𝐺𝑑
4 ∙ (𝑆! + ∙ 𝑠𝑑 ! )
(1 + 𝛿! ) ∙ 𝑉!"

Since the maximum level of the flood damage 𝐷 is the function of resulting water inflow

(1 + 𝛿! ) ∙ 𝑉!" , the factor 𝛿! will also impact D. We introduce an additional adjustment factor, 𝜃! ,

to account for the influence of climate change on incoming sediment. In the absence of climate

change, 𝑀! would be the incoming sediment that reduces the total reservoir capacity annually.

With climate change, this annual incoming sediment becomes 1 + 𝜃! 𝑀! .

3.5 Social Planner’s Problem

Based on the discussion of the components of the net benefit function, the social planner’s

problem can now be formulated. We seek to determine the total reservoir capacity by

maximizing lifetime net present value of the multi-purpose dam. The maximization problem for

the social planner can be written as:

!!
Max 𝑁𝑃𝑉 = 𝑃! ∗ 𝑊! 𝑆! , 𝛿! , 𝐾 + 𝑃! ∗ 𝛽 ∗ 𝑊! 𝑆! , 𝛿! , 𝐾 + 𝐹𝐵 𝑆! , 𝛿! − 𝑂𝑀𝐶 𝑆! 𝑒 !!" 𝑑𝑡
!! ,! !!!
 −𝐶𝐶 𝑆! + 𝑆𝑉(𝑆! ) ∗ 𝑒 !!!!

!!!
𝑠𝑢𝑏𝑗𝑒𝑐𝑡 𝑡𝑜: !"
= − 1 + 𝜃! 𝑀!

𝐹𝐵 ≤ 𝐹𝐵

𝐹𝐵 = 0, when 𝑉𝑖𝑛 ≤ 𝑉𝑖𝑛!"#

where initial total reservoir capacity 𝑆! and lifetime 𝑇 are to be chosen. The entire reservoir

capacity is assumed to be available for purpose of flood control, while 𝐾 is the fraction of the

total reservoir storage used for hydroelectric and irrigation purposes, such that 0 < 𝐾 < 1. It is

assumed that 𝐾 and 𝛾 , the flood control benefit co-efficient, have a negative relationship. In

other words, if 𝛾 increases, the importance of flood control should increase, causing 𝐾 to

decrease. As the strength of this relationship is likely to be case specific, ideally it should be

estimated for individual dams, but for illustrative purposes we use a hypothetical form that is the

same across dams.

4. Application

4.1 Background

The above conceptual framework is illustrated with two cases studies, Jinsha Dam and Aswan

High Dam. Both are multi-purpose dams, Jinsha Dam is under construction and planned to begin

operation in 2020. It is located in the middle of the Jinsha river cascade of dams in southwest

China, 11 km from the city of Panzhihua in Sichuan Province. The functions of this dam include

hydropower generation, irrigation, flood control and tourism. Mean annual sub-basin

precipitation has fallen generally and is linked with decreasing trends in mean annual water
inflow and incoming sediment, subject to substantial variations caused by climatic factors. The

Aswan High Dam was built across the Nile in Aswan, Egypt in 1970. It has ability to provide

water storage for irrigation, control flooding and generate hydroelectricity. Future climate

change estimation results show that the mean annual water inflow is expected to increase, along

with the incoming sediment.

4.2 Data

The data used for the empirical studies are divided into four categories, economic data,

hydrologic and sedimentation characteristics data, climate change data and dam engineering

data. The price of hydropower for Jinsha Dam is available from the Departments of Energy in

China. The unit cost of dam construction is collected from the Heng Duan Shan Society’s online

dams database. The hydrology and sedimentation characteristics data include mean annual water

inflow, standard deviation of incoming flows, standard normal variation of 𝑝%, adjustment

factor of gamma distribution and mean annual sediment inflow. Some of the data needed such as

mean annual water inflow and mean annual sediment inflow are provided in government’s

published 2003 Review of the Achievements of Hydropower Resources of the People’s Republic

of China as well as dam engineering data such as reservoir capacities, dam types and total water

releasing capacity. But data for key parameters such as standard deviation of incoming flows,

adjustment factor of gamma distribution will be illustrative and subjected to sensitivity analysis.

Climate change projections such as the percentage change of each period’s mean annual water

inflow and the percentage change of each period’s incoming sediment are provided in Chen

(2017) who uses Intergovernmental Panel on Climate Change (IPCC) model. Economic data,

hydrologic and sedimentation characteristics data and dam engineering data for Aswan High
Dam are taken from Lee, Yoon and Shah (2011), while climate change projections for this area

are provided in Elshemy and Meon (2011) where III-B1 scenario are used from IPCC relative to

2006 base case. Table 1 and 2 separately present the selected economic, hydrologic and reservoir

geometry parameters for Jinsha and Aswan High dam. Even though a high percentage of these

data is from published sources, their reliability is far from uniform. Therefore, our empirical

exercises are best viewed as illustrative.

Table 1. Selected Economic and Hydrologic Parameters for Jinsha Dam

Description Notation Value Unit

Price of hydropower 𝑃! 0.3 $

Unit cost of dam construction 𝑐 0.1 $

Mean annual water inflow 𝑉!" 58972.32 Million 𝑚!

Benefit coefficient for flood control 𝛾 1.3 -

Price of irrigation water 𝑃! 0.2 $

Maintenance and operation coefficient 𝑜𝑚𝑐 0.1 -

Annual incoming sediment 𝑀 0.56 Million mt

Discount factor 𝑟 5 %

Climate change adjustment factor for water inflow 𝛿! -2 %

Climate change adjustment factor for incoming sediment 𝜃! -5 %

Table 2. Selected Economic and Hydrologic Parameters for Aswan High Dam

Description Notation Value Unit

Price of hydropower 𝑃! 0.01 $

Unit cost of dam construction 𝑐 0.1 $

Mean annual water inflow 𝑉!" 80000 Million 𝑚!

Benefit coefficient for flood control 𝛾 1.3 -

Price of irrigation water 𝑃! 0.02 $

Maintenance and operation coefficient 𝑜𝑚𝑐 0.1 -

Annual incoming sediment 𝑀 200 Million mt

Discount factor 𝑟 5 %

Climate change adjustment factor for water inflow 𝛿! 2.9 %

Climate change adjustment factor for incoming sediment 𝜃! 20 %

One of the key data limitations is lack of historical flood records and damages for both dams. We

compute the maximum flood control benefit with an arbitrary function 𝐹𝐵 = 0.001 ∗ 𝑉!" − 5 for

Jinsha Dam, when 𝐹𝐵 = 0, 𝑉!" = 5000, implying that if the mean annual water inflow is less

than or equal to 5000 million 𝑚! , there is no flood control benefit since there would be no

damages to downstream community at this low level of water inflow. For Aswan High Dam, the
same function is taken to be 𝐹𝐵 = 0.001 ∗ 𝑉!" − 10, with 10000 million 𝑚! as the magnitude of

annual mean water inflow to be exceeded for flood control benefits to occur.

Another function we posit hypothetically for both dams is the one used to allocate the storage for

hydroelectric and irrigation purposes. Recall that 𝐾 and 𝛾 are assumed to have a negative

relationship. We specify this functional relationship for both dams as 𝐾 = 𝛾 !!.! .

4.3 Results

Table 3. Simulation Results for three types of climate scenarios for Jinsha Dam

Climate change scenarios Reservoir Capacity Net Present Value Life-Span

(Million m3) (Million $) (y)

Designed 108 - -

Vin & Mt Constant (baseline) 1,943 483,670.86 235

Vin Decreasing Mt Constant 1,744.770722 240,376.34 49

Vin Decreasing Mt Decreasing 1,744.770697 240,377.51 49

Table 4. Simulation Results for three types of climate scenarios for Aswan High Dam

Climate change scenarios Reservoir Capacity Net Present Value Life-Span

(Million m3) (Million $) (y)

Designed 81,000 - -

Vin & Mt Constant (baseline) 13,417.14 29,342.41 67

Vin Increasing Mt Constant 19,208.75 46,718.97 96

 Vin Increasing Mt Increasing 27,452.93 41,409.49 66

Table 3 and 4 presents the optimization results for total reservoir capacity; social net present

value and life span based on different climate change scenarios for both dams. The baseline case

we report keeps the annual mean water inflow and incoming sediment constant. For each dam,

we then consider two cases associated with climate related variation in annual mean water inflow:

no change for incoming sediment and change for incoming sediment. The results indicate that

climatic influences on annual water inflow and the incoming sediment significantly impact

optimal choice of total reservoir capacity. Increasing annual mean water inflow in combination

with increasing incoming sediment induces a larger reservoir capacity while a relatively small

reservoir capacity results from decreasing annual mean water inflow and decreasing incoming

sediment.

4.4 Sensitivity Analysis

At this time, sensitivity analysis has only been carried out for the Aswan High Dam. The

baseline case model was modified to investigate the consequences of varying the standard

deviation of annual mean water inflow, the flood control benefit coefficient, the unit value of the

hydroelectric and the discount rate. Figure 3 to 12 shows the total reservoir capacity, net present

value and life span of the dam when these key parameters are changed for each climate change

scenarios.

Figure 3


Figure 4

Figure 5

Figure 6
Figure 7

Figure 8
Figure 9

Figure 10
Figure 11

Figure 12
The baseline case of the standard deviation of annual mean water inflow is 300; it was varied

from 100 to 1000. As one would expect, higher standard deviation results in a larger total

reservoir capacity for all climate change scenarios but less net present value. The flood control

benefit coefficient was varied from 1 to 3, while its value in the baseline case is 1.3. For each

scenario, total reservoir capacity increases as well as the net present value, whereas, the net

present value increases more slowly while the flood control benefit coefficient increases

proportionally. However, this variation in these two parameters has relatively modest impact on

the optimal results. In contrast, changing of the unit value of water supply for hydroelectric and

the discount rate affect the optimal results much more substantially. For the baseline case, unit

value of water supply for hydroelectric is $ 0.01; as the value was increased from 0.01 to 1, the

total reservoir capacity increases concavely and the net present value increases linearly, the life-

span of the dam is also increases. The value of the discount rate for our baseline case is 5%. This

was changed from 3% to 15%. Since future outcomes have lower present value with higher

discount rate (vice versa), the net present values are increased when the discount rate is reduced,

meanwhile, total reservoir capacity and life span of the dam both decline when discount rate

increases. When the discounted future value is less, the optimal solution for the design of the

dam will reduced considering of the maximum benefit.

5. Summary and Conclusion

Dams serving multiple purposes are gaining importance as they can provide several development

benefits from a single investment. On the one hand, changing climatic and hydrological

conditions present technical challenges to multi-purpose dam projects. On the other hand, multi-

purpose dams offer important solutions to climate change adaptation needs. Therefore, designing
and management of these dam projects while addressing climate change in order to achieve a

more sustainable hydrologic system becomes crucial. This paper presents an optimal control

model of reservoir capacity designing and multi-purpose management of such dams while

incorporating climate change factors.

Results of illustrative applications to Jinsha dam and Aswan High dam show that optimal choice

of dam capacity is significantly impacted by climate change induced trends in mean annual water

inflow and amount of sediment inflow. Furthermore, the relative importance of each purpose of a

dam may be impacted by climate change factors. Optimal size of a dam is suggested considering

future precipitation and river runoff projections in order to avoid dam failure or waste of

resources. Sensitivity analysis with respect to several key parameters is also carried out to check

the robustness of important empirical findings. The model results are more sensitive to changes

in unit value of water yield and discount rate as compared to changes in standard deviation of

water inflow and flood control coefficient.

Finally, we feel that the empirical results from this paper should be viewed as illustrative only.

Improvements in data quality and availability of additional empirical studies would make the

model yield results that are more reliable for policy purposes.
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