THE OPTIMALITY OF CAPACITY SHARING IN STOCHASTIC DYNAMIC-PROGRAMMING PROBLEMS OF SHARED RESERVOIR OPERATION

This paper is concerned with finding an optimal allocation of water entitlements for each of two users of water who share a reservoir. Two instruments of allocation are considered. The first, release sharing, involves sharing the releases from the reservoir; the second, capacity sharing, is concerned with allocating to each user of water a share of inflows, reservoir capacity and leakage and evaporation losses. Stochastic dynamic programming problems of reservoir operation under each type of sharing arrangement are formulated. It is shown that the maximum discounted expected profit from reservoir operation over the life of the storage using capacity sharing is at least as large as that obtained using release sharing and that release sharing is not Pareto efficient.