Scholarly article on topic 'Evaluating Infrastructure Alternatives for Regional Water Supply Systems by Model-assisted Cost-benefit Analysis – A Case Study from Apulia, Italy'

Evaluating Infrastructure Alternatives for Regional Water Supply Systems by Model-assisted Cost-benefit Analysis – A Case Study from Apulia, Italy Academic research paper on "Economics and business"

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Abstract of research paper on Economics and business, author of scientific article — C. Arena, M. Cannarozzo, A. Fortunato, I. Scolaro, M.R. Mazzola

Abstract The main challenge associated to regional water supply systems lies in understanding the best infrastructure alternatives, in terms of costs and benefits, to improve service given a certain configuration of the resources system. Both costs and benefits can be organized into a cost-benefit analysis (CBA) framework. The impacts of the alternative are better described by a model of the system reproducing its topology and characteristics as well. In this work, some alternatives to improve service in the regional water supply system of Apulia, Southern Italy, are compared through CBA. The system was modelled through AQUATOR, a state-of-the-art simulation software package.

Academic research paper on topic "Evaluating Infrastructure Alternatives for Regional Water Supply Systems by Model-assisted Cost-benefit Analysis – A Case Study from Apulia, Italy"

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Procedía Engineering 89 (2014) 1460 - 1469

Procedía Engineering

www.elsevier.com/locate/procedia

16th Conference on Water Distribution System Analysis, WDSA 2014

Evaluating Infrastructure Alternatives for Regional Water Supply Systems by Model-Assisted Cost-Benefit Analysis - A Case Study

from Apulia, Italy

C. Arenaa*, M. Cannarozzoa, A. Fortunatoa, I. Scolaroa, M. R. Mazzolaa

aDipartimento di Ingegneria Civile, Ambientale, Aerospaziale e dei Materiali (DICAM), Viale Delle Scienze, 90128, Palermo, Italy

Abstract

The main challenge associated to regional water supply systems lies in understanding the best infrastructure alternatives, in terms of costs and benefits, to improve service given a certain configuration of the resources system. Both costs and benefits can be organized into a cost-benefit analysis (CBA) framework. The impacts of the alternative are better described by a model of the system reproducing its topology and characteristics as well. In this work, some alternatives to improve service in the regional water supply system of Apulia, Southern Italy, are compared through CBA. The system was modelled through AQUATOR, a state-of-the-art simulation software package.

© 2014 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.Org/licenses/by-nc-nd/3.0/).

Peer-review under responsibility of the Organizing Committee of WDSA 2014 Keywords: Regional water supply systems, Cost-Benefit Analysis, Simulation, Reliability;

1. Introduction

Regional water supply systems are characterized by the presence of important infrastructure for conveying water volumes from one area to another. Typically, the areas at stakes are of several thousands of square kilometres and the number of people supplied is in the order of millions. This type of scheme tends to become widespread due to increasing conurbation, which favours interconnection among demand centres, or is mandatory in regions where water resources are placed far away from demand centres.

Given the often considerable complexity of these systems, the main challenge associated to regional water supply planning lies in understanding the best alternative to improve service, given a certain configuration of the resources

* Corresponding author. Tel.: +39.09123896541; E-mail address: claudioarena1@yahoo.it

1877-7058 © 2014 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/3.0/).

Peer-review under responsibility of the Organizing Committee of WDSA 2014 doi: 10. 1016/j .proeng .2014.11.429

system: the alternative can be a new aqueduct, a new tank, a new water treatment plant, or a combination of these elements; service improvements can be manifold and are associated to 1) reduction of operation costs, 2) increase of system's reliability by providing additional capacity in case of breaks and maintenance and 3) reduction of congestions (bottlenecks) due to increased pipeline capacity. These actions, in addition to incur costs, generate additional benefits related to the volume of water made available to users in relation to the status quo or BAU (Busyness as Usual) configuration. Cost-effectiveness analysis has traditionally been a straightforward appraisal technique of competing investments, where all the positive impacts are condensed in a single physical indicator (the additional water volume, in this case). In mature systems, however, where the rule of marginal decreasing benefits holds, cost-effectiveness can lead to overstate the actual feasibility of the project that may entail costs outweighing benefits. For this reason, the most appropriate evaluation technique seems to be Cost Benefit Analysis (CBA) [1, 2].

The modelling tools available nowadays allow setting these traditional evaluation methods into a new framework: in the presence of complex schemes, the effects of the alternatives are better evaluated by a model of the system that can accurately reproduce its topology and its most important characteristics, such as the capacity of tanks, reservoirs, pipelines, pumping and treatment plants as well as pipeline and plant losses and unit costs, and simulate water allocations along time. In this work, a number of alternative infrastructures for the Apulian regional water supply system, in southern Italy, were compared and analysed through CBA. The system has been modelled using Aquator, a commercial software package for generic water resources system simulation [3].

2. Methodology

2.1. Cost Benefit Analysis

CBA is the technique of economic analysis of investments and alternatives selected by the European Community to provide input on the eligibility of a large project (i.e. an amount of over 50 M€) co-financing with EU funds [4]. Its main feature is that all the positive and negative impacts generated by investments are expressed in monetary terms and that they are weighted over time using an appropriate discount factor reflecting the marginal rate of time preference of the investors. Costs and benefits are evaluated by comparing a base-case or BAU situation, where future demand levels are to be met by the existing system's configuration, with a system configuration featuring the planned alternative. The benefits generated by a project with a relevant social utility, like water projects usually are, can seldom be expressed entirely by the prices associated to the provision of the service; this is why CBA is first performed in a financial mode, but the actual economic sustainability of the project can only be appraised through an economic analysis, where prices reflect the actual value of the inputs employed for building and operating the infrastructure (the so called shadow prices of inputs), and the generated benefits also account for consumer's surpluses that can be captured by demand functions for the different uses of water.

In this work, for the assessment of benefits associated to incremental volumes allocated to municipal users we use the drinking water demand function (see 2.2). Benefits to the agricultural sector are assessed as the averted damage to the irrigation schemes taking into account the value of the crops that is possible to irrigate with the water made available by the alternative (see 4.3). Finally, the benefits associated to the mitigation of the impact of service interruptions were assessed as the damages averted thanks to new infrastructure in a scenario of interruption of important mains of the system. These damages were assessed using the two criteria set out above, as a function of the impacts generated by the interruptions (see 4.4).

2.2. The water demand function

The evaluation of the benefits associated with different levels of water resources' availability is carried out through the water demand function, which expresses the relationship between the demand Q of a certain good and its marginal price P (in €/m3). This relationship is decreasing and the area under the curve, until a certain availability E, measures the total benefit related to the enjoyment of quantity Q.

Mrt«t <»1* » gn*i Unaflt»

Dcnxrd prie»

Dti»n4 iuKUon

t Output. i

Fig. 1 Water demand curve [5].

The consumption of the target amount of water resource T produces a benefit B(T) that, if the target amount corresponds to point E in Fig. 1, is the area CDAE. The supply of a water amount x lower than the target generates a damage D (scarcity cost) which is quantified as follows: D = B(T) - B(x). The demand curve can take various forms; in this study we used a log-linear specification (or Cobb-Douglas) with constant elasticity •q, of the type P = aQb. In general, water demand is a function of price, income, household size, climatic conditions etc. [6] For our purposes, however, the component of demand accounted for by the price is that of interest because it is possible to associate the benefit (in €) connected to different values of water resources consumed. The following relationship has been used to calculate the benefit associated with the withdrawal of the amount W from the supply sources [7].

In eqn. (1), the quantity of water consumed by end-users is expressed as the product of W, the resource withdrawn from the supply sources, by (1 - L), being L the percentage of losses; •q, the demand elasticity to price, is set equal to - 0.4 (indoor demand is inelastic); a = PT/T (for Q=T), with PT is the marginal price of water when the water consumed equals the target T and is set equal to 1.65 €/m3. T is the monthly target consumption, estimated with a per-capita consumption of 160 l/day. As will be seen, losses L change over the years as the consequence of investments aimed at their reduction.

2.3. Modelling of the water system in Aquator

As benefits are associated to incremental water volumes, it is important to understand and demonstrate if and where these volumes are allocated. This can be done through software packages providing models for the simulation of generic water resources systems. An updated survey of these models is available in [8]. In this study, we used Aquator, a software package for the simulation of complex water systems with multiple uses, which allows to model and interface the natural river networks and the water supply networks, with an accurate reproduction of their topology. Aquator works on a daily time step and it can simulate the behaviour of the water system either by establishing the allocation of resources to demand centres solely on the basis of its optimization algorithm within the current time step and other predefined rules, or being also guided by user-defined rules. The software adopts an arcs and nodes paradigm and water is used to meet demand using a proven algorithm that seeks to minimize cost in the current time step, but preserves the state of resources.

3. Case Study: Apulian regional water supply system

By extension and capacity, the Apulian Aqueduct is considered among the most important works of hydraulic engineering of its age. It consists of a large and complex system supplying an area with more than 4,000,000 inhabitants. This complex supply system has been developed over a period of about a hundred years.

The carbonate aquifers have constituted for centuries the only source of water supply for Apulia. In fact, with the exception of the Ofanto and Fortore rivers, the Apulian territory is devoid of major rivers. Hence, Apulia had to obtain supplies from sources that fall in other regions. At the beginning of the twentieth century the construction of the Apulian Aqueduct began for transferring the waters of Sele and Calore springs in Campania (Sele and Calore are two rivers with their mouth in the Tyrrhenian sea). Other important sources have been added more recently and they also fall outside Apulia: Pertusillo and Monte Cotugno (also named Sinni) reservoirs, for instance, are located in Basilicata. Overall, the system features five reservoirs, with a total active capacity of around 900 Mm3 and all of them are multipurpose, supplying water also for irrigation and industrial districts. Another important water resource for both municipal supply and irrigation is the regional aquifer from which Acquedotto Pugliese (also termed AQP in the following), the utility operating the system, draws through about two hundred wells located throughout the region. As shown in Fig. 2, the Apulian water resources system consists of five main schemes named Sele-Calore, Fortore, Pertusillo-Sinni, Locone, and Ofanto.

A critical aspect of the Apulian water system is the supply of Salento, the peninsula at the far end of the region (the heel of the so called Italian boot), which is based to a good extent on withdrawals from the regional aquifer, whose waters are deteriorated due to overexploitation. For the central and northern areas of the region, the main problems are related to the inefficiency of the hydraulic pipes and the non-completion of the main schemes; however, the issues related to the northern part of the system will not be analysed in this study.

3.1. Infrastructure alternatives for Salento

Several alternative infrastructural measures have been proposed to remedy the problems of Apulia's southernmost area. In this study we used Aquator for the analysis of some alternative (Fig. 3 shows the screenshot of the Zero scheme).

Fig. 2 Main schemes of the Apulian water resources system.

Fig. 3 The Zero scheme in Aquator. In particular, the following projects have been considered (Fig. 4):

• Construction of the Sinni municipal water aqueduct.

• Doubling of the Sinni aqueduct.

• Use of the compensation capacity of the Pappadai reservoir and construction of the new San Paolo tank.

• Use of desalted water of Tara river sources.

Fig. 4. The four project alternatives analysed. From top left clockwise: Sinni municipal aqueduct, Doubling of Sinni aqueduct, Use of Pappadai

Reservoir + new treatment plant at San Paolo, Tara desalination plant..

While these alternatives will be described in some detail below, it is important to highlight that considerable efforts have been placed over the last ten years on the improvement of water supply in Apulia, also as a reaction to some important drought events, such as the one at the beginning of the millennium and the one in 2008. Probably, the most

important project that is being carried out is a large programme of water losses reduction in both the bulk water supply system and in the urban water distribution networks of each of the over 200 Apulian municipalities.

Water losses accounted to over the 50% of the supply volume and their reduction was obviously seen as the first step to improve the regional water balance. This is relevant for this application, as the planned loss reduction is expected to cut losses of 12% in ten years, corresponding to a decrease of over 60 Mm3/year in the withdrawal from the supply sources. Clearly, this has implications on the projects to be assessed because transport capacities that are presently insufficient for the current flow levels may become sufficient if flows are reduced. This has been accounted in the analysis as will be shown in section 4.2.

3.2. Alternative 1 - Construction of the Sinni Municipal aqueduct

This alternative involves the construction of a main that from the Ginosa storage tank conveys the drinking water, by gravity, directly to the San Paolo node, in order to support the Pertusillo aqueduct that presently supplies the provinces of Brindisi, Lecce and Taranto. The work has an estimated amount of 237 M€, excluding VAT. Expected benefits include: 1) improvement of the water balance of Salento by meeting the seasonal demand peaks that cannot currently be met due to insufficient transport capacity of the aqueduct; 2) reduction of withdrawals from the Salento aquifer; 3) reduction in energy costs due to the reduction of pumping to the Parco del Marchese tank; 4) greater flexibility of the system by providing a different path to water in case of maintenance of Pertusillo aqueduct.

3.3. Alternative 2 - Doubling of the Sinni aqueduct

The project involves doubling the existing Sinni aqueduct, currently a multipurpose one (irrigation and civil), in order to separate the two uses. The new water supply line has been designed for the maximum capacity of the Parco del Marchese water treatment plant (6 m3/s). The work has an estimated cost of 169.9 M€, excluding VAT. The expected benefits from the project include: 1) the increase in the availability of water for the areas currently supplied by the Pertusillo-Sinni system thanks to the full exploitation of the capacity of the Parco del Marchese water treatment plant; 2) the decongestion of the water supply line, especially during summer when the peak of irrigation withdrawals makes it difficult to satisfy the civil demand which also peaks in the same time of year; 3) the likely reduction of the probability of interruption of service due to the aging of the existing pipeline, which was built over twenty-five years ago. For the irrigation sector the benefits obtained are related to the decongestion of the water supply line to the service of the Ionic area, and the replacement of groundwater resources from the Salento aquifer that are now heavily compromised by seawater intrusion.

3.4. Alternative 3 — Use of the compensation capacity of the Pappadai reservoir and construction of the new San Paolo tank

This third project entails the construction of a water treatment plant (with treatment capacity of 500 l/s) at the San Paolo tank exploiting the transport capacity of the Sinni aqueduct during winter and the seasonal compensation capacity of the Pappadai tank (capacity of 20 Mm3). This new scheme will increase the flexibility of water supply of Salento. The total investment cost is estimated at 40.00 M€. The expected benefits of this intervention are associated: 1) to the possibility to separate the municipal supply of the Ionian area of Salento from that of the Adriatic side, which would continue to be performed through the current supply from Pertusillo aqueduct; 2) reduction of withdrawals from the Salento aquifer; 3) reduction in energy costs due to the reduction in the volume of water pumped to the Parco del Marchese tank; 4) greater flexibility of the system by providing a different path to water in case of maintenance of Pertusillo aqueduct.

3.5. Alternative 4 — Use of desalted water of Tara river sources

This last project involves the construction of a desalination plant of brackish water of Tara spring, in the Taranto Gulf, in order to use it for the supply of Taranto and Salento peninsula, through one of Taranto's urban tanks,

increasing system's water availability of 0.6 m3/s. Currently this supply is provided by the Pertusillo - Sinni scheme originating from the Parco del Marchese tank. The treated brackish water has a low salt content (1.7 to 2.5 g/l), so that the desalination can be obtained through a reverse osmosis plant (RO) that is characterized by a capacity of production of desalinated water equal to 625 l/s (treating 916 l/s of raw water). The unit cost of treatment is equal to 0.27 €/m3. The total investment cost is estimated at 49.00 M€. The expected benefits of the intervention are related to: 1) reduction of withdrawals from the underground aquifer; 2) direct supply of Taranto for 500 l/s; 3) consequent increase of the corresponding flow rates from the Pertusillo scheme, in favour of eastern Adriatic Salento.

4. Construction of Aquator models for the evaluation of design alternatives

We have built models for the evaluation of design alternatives starting from a Zero scheme, representing the water system's status quo. The model in Aquator features a total of 700 elements of which 105 are demand centres and 347 links (pipelines). This scheme has been validated by the technical staff of AQP, in that the distribution of flows, water allocations and costs have been acknowledged as reflecting the actual management process.

4.1. Hydrologic input

The model runs on a daily basis, routing a hydrologic input into water allocations to the demand centres. The hydrologic input is that of an average water year and consists of average monthly inflow totals to the five system's reservoirs and of average monthly spring yields, which the model then breaks into equal average daily values. As far as groundwater resources are concerned, besides a number of minor wells spread throughout the region, whose withdrawals have been set equal to the 2012 ones, the core of the problem is the Salento aquifer, whose present withdrawals exceed safe yield: in order to understand and assess the impact of the various alternatives on this issue, the withdrawal level has been set equal to 35.4 Mm3/year, around the half of the current value, in both the zero scheme and in all the other scenarios considered.

4.2. Demand analysis and scenarios

In order to account for the planned reduction of water losses in both the existing regional aqueducts and in the urban water distribution networks, thanks to the large investments that are currently being carried out throughout the region, simulations of future operational scenarios have been performed with reference to years 2012, 2014, 2016 and 2018. In these years the amount of water supplied is expected to reduce, while after 2018 the amount of water supplied by the regional systems is assumed to remain constant. Water demand and withdrawals profiles from the supply sources along 2012 - 2018 have been developed: it has also been necessary to make assessments about water loss reduction in the mains of the regional scheme as well as in the so-called sub-distribution, the part of the system between the large tanks at the end of the main regional systems and tanks of the individual urban centres.

As far as irrigation demand is concerned, it was necessary to reflect on how to estimate demand from Sinni reservoir: the available historical records, consisting of monthly supply values for irrigation in the last twenty years, could hide a compression of demand due to a possible capacity bottleneck of the water system constraining water supply; clues of this compressions can be found in the recorded total flow value that in summer often approaches the aqueduct's maximum (16 m3/s). For this reason, the Sinni's irrigation and industrial demand have been modified by setting the July and August values as the highest recorded irrigation delivery in the twenty-year period of reference. In addition, as a new irrigation scheme in Salento depending on Sinni reservoir has been completed, it was decided to include water demand from this project in the Zero scheme.

In addition, an increase of irrigation demand by the districts supplied by the Sinni aqueduct was also assumed. It is assumed that the demand is currently only partially expressed due to a lack of availability of water resources and that other planned supply-side interventions will make available additional supplementary volumes (37.5 Mm3/year) that will be absorbed by these irrigated areas.

Each alternative is evaluated individually and simulated by adding it to the Zero scheme.

4.3. Estimate of the profitability of irrigated land

The assessment of the profitability of the irrigated land was performed with reference to the irrigated areas in the districts supplied by the Monte Cotugno reservoir, which amount to about 13,800 hectares. Data from the National Institute of Land Economy (INEA), contained in [9], indicate a consumption of about 12,000 m3/hectare for this district. In order to assign an economic value to this information, it is first necessary to evaluate an average productivity per ha (in tons/ha) and then cross-check this information with the selling price [€/ton.] of each crop, thereby obtaining an average production value per irrigated hectare of 6,600 €.

This value was used to estimate the benefits, or even the possible damages, generated by the infrastructures according to the greater, or lesser, availability of water volumes for the irrigation sector compared to the zero scheme.

4.4. Service interruption scenarios

A service interruption of thirty days was assumed for Pertusillo aqueduct downstream the Parco del Marchese node. The interruption has been assumed to occur in the month of July, when water demand has a peak, and has been placed half a way the planning window, in year 2024. As usual, the interruption was simulated both in "with" and in the "without" configuration. For Sinni aqueduct, a three months interruption was assumed immediately downstream of Monte Cotugno reservoir. The interruption is placed in year 2024, in the trimester June - August.

5. Results

For each alternative, costs and benefits have been evaluated with respect to the BAU for a planning horizon of 30 years, and they have been discounted at rate of 5%. The investment costs for all the alternatives considered were evaluated assuming that investment costs (net of IVA) are spread over the first six years of analysis according to the following percentages: 5% for the first year; 15% for the second year; 20% for the remaining four years. Fixed operation and maintenance (O&M) expenditures have been set equal to 1% of the investment cost of the alternative and have been added to the other costs starting from the 7th year, when it is assumed that the infrastructure enters operation. Table 1 shows the investment as well as O&M costs and incremental damage (if any) compared to the BAU configuration, caused by the interruption of Pertusillo and Sinni aqueducts for each of the analysed configurations of the system. The table also shows the benefits in terms of lower operating costs, reduction of irrigation and municipal deficits, and reduction of the damages caused by the interruption of Pertusillo and Sinni aqueducts.

Results show that the only project that seems economically sustainable is the doubling of Sinni aqueduct. These results are quite different than those obtained from the previous study [10], that had provided positive ratings for the first two infrastructures analysed (in that study, the cases of Pappadai and Tara had not been analysed). This difference must be ascribed primarily to the fact that evaluation in [10] was based on simplified water balances of parts of the system that did not account for the complexity of the actual scheme. From this standpoint, the difference in this study and in [10] between the assessments of benefits associated to averted municipal deficits in the "municipal Sinni" alternative is particularly striking; besides the unavoidable, minor, differences in the data employed, as the two studies have been issued in different years, this can be explained by the fact that unlikely the Sinni aqueduct, there is no evidence that Pertusillo aqueduct is operated at its maximum capacity for all its length, which is the main assumption in the analysis of the "Municipal Sinni" alternative in [10]. In addition, [10] treats this part of the system as isolated, while some demand centres may be supplied by different mains and this is also accounted for in the Aquator scheme.

It should be noted that both the Sinni Municipal aqueduct and the Pappadai schemes feature incremental damages to the irrigation sector compared to the base case: this occurs because in the Aquator model developed for this application municipal water allocations have a priority: as in the Sinni Municipal Aqueduct alternative no incremental transport capacity is added to the Sinni aqueduct upstream the Ginosa node, its transport capacity during the months of July and August is saturated; stated differently, there is a bottleneck upstream, while downstream the presence of the Sinni Municipal aqueduct makes it possible to prioritize the municipal sector and to allocate more water to municipal uses, thereby penalizing the irrigation areas.

Table 1 Results of the analysis and comparison with a previous study

Doubling Sinni Sinni Municipal aqueduct Pappadai Tara

Previous Study This study This study Previous Study [10]

Investment 137.70 137.70 192.17 192.17 32.42 39.71

ä O&M 18.77 18.77 26.17 26.17 4.42 5.41

§ % © ^ Incremental damages for the irrigation sector (interruption of Pertusillo aqueduct) - - 4.84 - - -

— « ^ .Q 'S ^ § € s s — £ (S Incremental damages for the civil sector (interruption of Pertusillo aqueduct) - - - - 3.45 6.48

s o Incremental damages for the irrigation sector - - 69.29 - 12.38 -

Total 156.47 156.47 292.47 218.34 52.67 51.6

Doubling Sinni Sinni Municipal aqueduct Pappadai Tara

Benefits from lower operating costs - - 28.54 9.60 14.57 0.6

Averted damage (civil deficit) - - 3.66 354.48 3.66 6.07

t Z % BS « ® o S a » se £* 2 jg § © © Averted damage (irrigation deficit) 163.75 151.46 - - - -

Averted municipal damage (interruption of Sinni Aqueduct) 11.99 53.60 - - - 1.20

Averted irrigation damage (interruption of Sinni Aqueduct) 41.05 - - - - -

« is a S o u Averted municipal damage (interruption of Pertusillo Aqueduct) - - 2.56 - - -

Averted irrigation damage (interruption of Pertusillo Aqueduct) - - - - 6.09 -

Total 216.79 205.06 34.76 364.08 24.32 7.87

Benefit/Cost Ratio 1.39 1.31 0.12 1.67 0.46 0.15

While further work is needed to analyse the varying performances of these alternatives and to understand and justify the differences between them and between this and previous studies, this paper has shown a potential improvement compared to assessments based on the same cost-benefit methodology, but on simpler physical models of the system.

6. Conclusions

In this work some infrastructural alternatives for improving the performances of the regional supply system of Apulia (Southern Italy) were compared through Cost Benefit Analysis. Changes in variable costs and benefits

compared to a base case are related to changes in how water volumes flow in the system and are allocated to end users. The system has been modelled through Äquator, a software package by Oxford Scientific Software.

The comparison with the results of a previous study that used the same techniques of assessment for individual benefits, but relied on water budgets drawn from simplified schemes of the system, highlights the benefits of simulation in this kind of analysis.

Acknowledgements

This work has been developed in the framework of the MOGESA project, a research project of Palermo University's DICAM funded by AQP. The analysis and conclusions of this study are the sole responsibility of the authors and do not necessarily reflect the views of AQP.

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