Alpine Space project ideas

Branko, Mihovilovic

Vortal Ltd.

Public/private organisation representing enterprises and especially SMEs

SVN

branko.mihovilovic@siol.com

Expert System for (Waste)Water Pricing

07/11/2008

17/05/2010

Priority 3 Environment and Risk Prevention

Natural resource management
Production (env. friendly)
Public services
Water management

Drinking water shortages increase dramatically, especially in south Europe. Also the amount of used water that returns to the natural hydrological system is reduced. This affects the possible energy production, irrigation, tourist and other activities downstream of the extraction point. Therefore it is important to look for ways to save fresh water and re-use wastewater. This would allow a double use of water for the same extraction costs and mandatory wastewater treatment costs. The aim of the ESWP project is to find and use the right balance between prices of water services, which fully reflects the provided services, covering environmental and resource costs, and assure the sustainable use of water resources. These results in form of optimal pricing policies will be achieved by an Intelligent Information System, where the interaction among the supplier's econometric water cost model, consumer's demand model and the knowledge of the ecological balance of the water system. It is expected, that until 2020, the climate changes in (south) Europe will worsen existing conditions through reducing precipitation and drought. Consequently, the necessary moisture of the soil will not be achieved. This means that more potential conflicts will occur in rural and urban regions, where the draught risks, based on the appropriate use of limited water resources, are high. The potential damage to entire regional ecosystems due to water shortage is also high. Water and aquatic ecosystems management implies the management of resources which change, depending on the characteristics of the fluvial ecosystems and surface area of the catchments where they are situated. The most important new economic issues related to water use, that the region will face, are: 1. Environmental issues related to landscapes and mountain ecosystems, 2. The water quality and its use in mountain region, 3. The water quantity and quality for downstream irrigation, 4. The environmental uses of water resources and the economic benefits, 5. The relationship between ethical values and the maintenance of an equitable water distribution of the existing resources at the inter-regional level and the socio-economic impact. If the social and environmental issues are taken into account, and if we adopt objectives which include sustainability and fairness, the economical inefficiency among urban and rural community becomes a high level of ecological-social efficiency. When the definition of the indicators of economic and ecologic-social efficiency is needed (according to directive 2000/60/EC -Article 9.1), it is necessary to distinguish between objectives that resolve social and environmental problems and those that produce more market value. The preservation of the social structure, traditional forms of production in the rural environment and the opportunities that permit them to be involved in water production and its benefits without losing their identity and cohesion tends is also important.

The main objective of the ESWP project is to set up a system, which stimulates the achievements of “allocate efficiency” (the principles of rational choices, individual maximization and utilitarianism) among different stakeholders: mountain-landscape regions, rural-urban communities, supplier and consumer, that are related through the recognition of the interdependences of costing and pricing issues of the water use. The efficient use of water is directly related to AoI 2.4 of SEE program, because the waste water program has been focused on creating revenue streams for a long time (combined power/heat/cold production, recycling of phosphorus for fertilizer production, carbon credits/joint implementation). To achieve these principles, three economic models will be implemented in ESWP system: 1. Supplier’s marginal cost analysis – According to WFD in Article 9, analysis has three main components: financial, resource and environmental. Suppliers should consider the principle of recovering the costs of water services. In such case, it is expected that relevant calculations, necessary for consideration of the principle of cost recovery, as well as adequate contribution of the different water uses would be ensured. A key objective of this analysis will be to improve payment transparency in order to understand which water services are actually paid for, to which extent, by whom and how. Among all water services, waste water treatment is important because it is related to green energy production. 2. Consumer’s demand analysis – is related to the amount of water used and discharged. This meets two objectives: a) Pricing policies can make users more efficient in their use of water resources by giving them financial incentives, moving them to advanced technologies and practices of using available resources; b) For the waste water use, ESWP pricing will incentive users to move to less polluting practices in order to use waste water efficiently, before discharging it into the environment. 3. Disproportionate costs and price model – This model will refer to beneficial objectives being achieved by other means in the context of designations, derogations and new modifications of prices. It refers to measures for improving quality of water and energy production, done by economic indicators. Time series optimization will compare responses to price changes for a user group across a period of time. It will also do an analysis of the price incentive issues as information on the volumes used in order for price tends to be more readily available. Behavioral optimization will estimate the relationship between the price of water and water demand. The model will help to produce real time decision-making processes that aim to achieve economic objectives such as maximizing the total income of a farm, by taking into account the key technological, legal and economic constraints faced by given economic sectors.

The core of the supplier cost model and the consumer demand model, will be based on collecting the relevant knowledge of water supplying and consuming in each of two typical regions: Pannonia and Carpathian region with river Danube water basin, and Mediterranean (Greek and east part of Apennine peninsula). The data and information will be collected by the questionnaires, designed as web applications. Acquisitioned knowledge will be written as domain ontology (i.e. a formal representation of a set of concepts within the domain and the relationships between those concepts). All necessary economic models substantiated by various examples and test data, will be built by using interactive programming tools. Domain ontology is the core part of ESWP system, because it represents the description of the system on the expert level (terms, concepts, taxonomies). Based on these conceptual and formalized models (classes, instances, attributes, rules, etc.), the true ESWP system will then be implemented. There are two essential pillars on which the ESWP system leans: 1) The Econometric water supplier’s cost model that efficiently allocates supplier’s resources. This model interacts with consumer’s demand model and signals the consumers about the appropriate water resources costs and capacity availability (prices above marginal cost lead to excessive conservation, while prices below marginal cost lead to wastage). Consumer’s demand model estimates price and income elasticity, considers negative externalities and observes the impact of various pricing regimes on the supplier revenue constraints. By using these economic measures, the reduction of domestic water consumptions should exceed 25%, and the reduction of leakages (losses in the distribution network) for over 30%. 2) The efficient processing of water domain information and knowledge that will be continuously collected over the Web services and stored into the water domain ontology will enable an effective trans-boundary water resource management.

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Counties: Austria, Italy, France, Germany Activity: Research centers, Public authorities (water supplying) Experiences: Water management, Micro Economy