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Reducing Peaks in Drinking Water Demand in the City of Guelph: Estimating the Potential Cost Savings of Delaying Water System Capacity Expansions

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Title: Reducing Peaks in Drinking Water Demand in the City of Guelph: Estimating the Potential Cost Savings of Delaying Water System Capacity Expansions
Author: Worden, David
Department: Department of Food, Agricultural and Resource Economics
Program: Food, Agriculture and Resource Economics
Advisor: Deaton, Brady Jr
Abstract: In Ontario, the water system capacity that a utility must construct and maintain is determined by maximum demand. I will demonstrate that this leads to early infrastructure investments and substantial levels of idle capacity. Little is known about the regulations and policies that drive the maximum demand/capacity expansion relationship and the primary focus of this thesis is to illuminate them. I use a unique data set that includes daily water use over the past nine years. The data is used to identify the underlying probability distribution of water use. This distribution is used to identify the likelihood that current capacity will not be adequate and that an expansion will be required. I calculate real option values to identify the expected savings of delaying water system expansion. In reasonable scenarios I demonstrate potential costs savings of approximately $38.4 million over the twenty-five year planning horizon.
URI: http://hdl.handle.net/10214/9607
Date: 2016-04


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