A Novel Approach of Exploring Water Value: A Study Based on Sri Lankan Reservoirs

Water, often perceived as a free natural resource, plays a crucial role in meeting societal needs and ensuring its preservation for future generations. The concept of water value highlights its importance, especially in reservoirs, where its value fluctuates based on demand and availability. This paper explores the intrinsic value of water amidst stochastic variations due to weather uncertainties and introduces a novel model for economic dispatch using Dynamic Programming (DP) and Stochastic Dual Dynamic Programming (SDDP) principles. Two new approaches for calculating water value are proposed, expanding beyond the traditional zero-value assumption relative to fuel cost. The first method estimates the water value based on the per-unit generation cost of the most expensive thermal power plant in the Daily Load Curve. The second method calculates the water value as the weighted average cost of variable thermal power plants in the economic dispatch schedule. Additionally, this research examines the water value in the context of both power generation and agriculture, comparing their respective impacts. The paper underscores the importance of incorporating water value concepts into decision-making processes while addressing potential challenges. The research is contextualised within Sri Lanka, highlighting its practical implications.