Investment Strategies to Maintain the State of Water Networks

Abstract

Purpose: This article focuses on the problem of deciding the annual investment that a water company should allocate to the rehabilitation of its distribution and sanitation networks. The objective is to find the investment amount necessary to maintain an adequate quality and sustainability of the infrastructure. It is not a simple decision, as there are different criteria that may be of interest to the different agents involved. In this paper, we consider four criteria related to the reliability of individual pipes and the complete network. These indicators are the infrastructure value index, the average age of network pipes, the risk index and the probability of failure. Design/methodology/approach: A methodology is proposed to estimate the best annual investment by analysing the evolution of these indicators. Concretely, two strategies are tested. The first one is a minimax-based approach that seeks a balanced solution for all the indicators. The second one is named as minimal deviation strategy and seeks to minimise the deviation of all the indicators in the last year of the time horizon compared to the initial year. Findings: In order to obtain a realistic sample of the performance of both strategies, 201 scenarios, i.e. 201 different annual investments have been simulated. According to the first strategy, an annual investment of 55.5 M€ is the best option, while the minimal deviation strategy presents an annual investment of 39.5 M€ as the best decision. The study reveals that different evaluation functions lead to completely different annual investment. Concretely, the minimax evaluation function is more conservative than the minimal deviation strategy. Originality/value: This study proposes an original approach to address the decision problem of investments in asset management. To the best of the authors’ knowledge, it is the first attempt to treat that problem using this kind of evaluation functions. However, it is still a relatively straightforward proposal and there are many possible options to continue this line of research.