A real-time market-based framework for basin-wide surface water pricing and allocation considering the available water uncertainty

Market-based approaches are increasingly considered reallocating instruments that put water consumption at its highest economic value among competing water users. Setting up a water market can have a lot of environmental, social, economic, and legal complexities. One of the main issues is the uncertain nature of the available water, which can cause the failure of markets, especially during drought conditions. Therefore, there is a need for market mechanisms to consider and reduce the adverse impacts of available water uncertainty on market outcomes. Accordingly, this paper proposes a new real-time seasonal smart water market framework for basin-wide surface water pricing and allocation. The framework uses the results of the reservoir water allocation optimization models and ANFIS-based monthly river discharge forecasts to better assist the water users with their bidding. The market manager uses updated available information at the beginning of each season to provide users with a more accurate understanding of available water to adjust their tradings for the rest of the year. The applicability and efficiency of the proposed framework are evaluated by applying it to the Gorganrood River basin in Iran. According to the results, the framework increased users' benefits from 721 to 1050 billion rials, which is more efficient than an annual market. Water markets can use this framework to improve their ability to cope with the uncertainty of available water, increase their users' benefits, and encourage them to improve their efficiency. Furthermore, the proposed framework allows the decision-makers in water sectors (e.g., industrial, agricultural, etc.) to discover time and location specific water allocation and price for different water users.