Development of a system dynamics model for financially sustainable management of municipal watermain networks

• Published in: Water research (Oxford) Vol. 47; no. 20; pp. 7184 - 7205
• Main Authors: Rehan, R., Knight, M.A., Unger, A.J.A., Haas, C.T.
• Format: Journal Article
• Language: English
• Published: England Elsevier Ltd 15.12.2013
• Subjects: affordability; Community Participation; Conservation of Natural Resources - economics; Conservation of Natural Resources - methods; durability; Financial Management; Financial sustainability; Financing strategies; funding; government agencies; Infrastructure rehabilitation; issues and policy; mathematical models; Models, Economic; Models, Theoretical; pipes; researchers; System dynamics; water distribution; Water supply; Water Supply - economics; water utilities; System dynamics; Infrastructure rehabilitation; Financial sustainability; Financing strategies; Water supply
• ISSN: 0043-1354; 1879-2448
• DOI: 10.1016/j.watres.2013.09.061

This paper develops causal loop diagrams and a system dynamics model for financially sustainable management of urban water distribution networks. The developed causal loop diagrams are a novel contribution in that it illustrates the unique characteristics and feedback loops for financially self-sustaining water distribution networks. The system dynamics model is a mathematical realization of the developed interactions among system variables over time and is comprised of three sectors namely watermains network, consumer, and finance. This is the first known development of a water distribution network system dynamics model. The watermains network sector accounts for the unique characteristics of watermain pipes such as service life, deterioration progression, pipe breaks, and water leakage. The finance sector allows for cash reserving by the utility in addition to the pay-as-you-go and borrowing strategies. The consumer sector includes controls to model water fee growth as a function of service performance and a household's financial burden due to water fees. A series of policy levers are provided that allow the impact of various financing strategies to be evaluated in terms of financial sustainability and household affordability. The model also allows for examination of the impact of different management strategies on the water fee in terms of consistency and stability over time. The paper concludes with a discussion on how the developed system dynamics water model can be used by water utilities to achieve a variety of utility short and long-term objectives and to establish realistic and defensible water utility policies. It also discusses how the model can be used by regulatory bodies, government agencies, the financial industry, and researchers. [Display omitted] •System dynamics model water network developed for a water utility in Ontario, Canada.•Model evaluates sustainability of pay-as-you-go, borrowing & cash reserving policies.•Demonstrates use of system dynamics model for strategic & tactical asset management.