What is the Effect of Interannual Hydroclimatic Variability on Water Supply Reservoir Operations?

Abstract:

Rather than deriving from a single distribution and uniform persistence structure, hydroclimatic data exhibit significant trends and shifts in their mean, variance, and lagged correlation through time. Consequentially, observed and reconstructed streamflow records are often characterized by features of interannual variability, including long-term persistence and prolonged droughts. This study examines the effect of these features on the operating performance of water supply reservoirs. We develop a Stochastic Dynamic Programming (SDP) model that can incorporate a regime-shifting climate variable. We then compare the performance of operating policies—designed with and without climate variable—to quantify the contribution of interannual variability to standard policy sub-optimality. The approach uses a discrete-time Markov chain to partition the reservoir inflow time series into small number of ‘hidden’ climate states. Each state defines a distinct set of inflow transition probability matrices, which are used by the SDP model to condition the release decisions on the reservoir storage, current-period inflow and hidden climate state. The experimental analysis is carried out on 99 hypothetical water supply reservoirs fed from pristine catchments in Australia—all impacted by the Millennium drought. Results show that interannual hydroclimatic variability is a major cause of sub-optimal hedging decisions. The practical import is that conventional optimization methods may misguide operators, particularly in regions susceptible to multi-year droughts.