Optimal Pricing and Coordination Schemes for the Eastern Route of the South-to-North Water Diversion Supply Chain System in China

Abstract

Abstract The Eastern Route of the South-to-North Water Diversion (SNWD-ER) project in China is a highly complex interbasin water-diversion system, which is constructed to pump, store, and supply water to support the rational water redistribution in China. This article presents the optimization modeling approach for the pricing and coordinating schemes of SNWD-ER project, and discusses the analysis results and their policy implications on the pricing and coordinating mechanisms in the SNWD-ER water-resource supply chain. For the government, formulating reasonable retail price upper bound is important to control the water resource wholesale price and retail price. Besides, various water-saving mechanisms can increase the price elasticity of water demand and affect the wholesale and retail prices. For the corporations, increasing the water resource production capacity and its supply will decrease the wholesale and retail prices. Furthermore, keeping enough initial water resource inventory by enhancing the rainfall using rate, and using ‘free supply sources’-rainfall, or even some flooding sources can effectively decrease the wholesale and retail prices. Finally, for the end-users, enhancing the rainfall using rate can effectively decrease the wholesale and retail prices and reduce the energy consumption, which is good for the sustainable development and a low-carbon economy.