Sedimentation and the economics of selecting an optimum reservoir size

This paper attempts to develop an easily reproducible methodology for the economic selection of an optimal reservoir size given an annual sedimentation rate. The optimal capacity is that at which the marginal cost of constructing additional storage capacity is equal to the dredging costs avoided by having that additional capacity available to store sediment. The cost implications of misestimating dredging costs, construction costs, and sediment delivery rates are investigated. In general, it is shown that oversizing is a rational response to uncertainty in the estimation of parameters. The sensitivity of the results to alternative discount rates is also discussed. The theoretical discussion is illustrated with a case study drawn from Highland Silver Lake in southwestern Illinois.