Determining an Optimal Water Mix for Hong Kong

In this paper, we adapt the decision-making model proposed by Leroux and Martin (2016) to include an additional water resources type to make it suitable for Hong Kong's current and proposed water supply mix. More precisely, we broaden the model to account for purchased water (from China) which is currently the primary source of water for Hong Kong. In addition, purchased water price uncertainty has been integrated, which differs from the uncertainty on water inflows and quality. Harvested stormwater and manufactured water, although not currently used in Hong Kong, may be sources for the future and are therefore considered in a 4-pronged scenario. The objective is to derive the optimal shares for each water supply. We obtain the optimal water mix and consumption levels for several scenarios, the current scenario, the proposed 4-pronged scenario, a drop in water quality, and self-sufficiency. The 4-pronged scenario advocates for a large-scale development of desalination plants in Hong Kong; however, it is also significantly more expensive and therefore results in a lower optimal water consumption which has implications regarding the current water tariff approach.