Abstract. Water infrastructure investment planning must consider the interdependencies within the water–energy–food nexus. Moreover, uncertain future climate, evolving socio-economic context, and stakeholders with conflicting interests, lead to a highly complex decision problem. Therefore, there is a need for decision support tools to objectively determine the value of investments, considering the impacts on different groups of actors, and the risks linked to uncertainties. We present a new open-source hydro-economic optimization model, incorporating in a holistic framework, representations of the water, agriculture, and power systems. The model represents the joint development of nexus-related infrastructure and policies and evaluates their economic impact, as well as the risks linked to uncertainties in future climate and socio-economic development. We apply the methodology in the Zambezi River basin, a major African basin shared by eight countries, in which multiple investment opportunities exist, including new hydropower plants, new or resized reservoirs, development of irrigation agriculture, and investments into the power grid. We show that it is crucial to consider the links between the different systems when evaluating the impacts of climate change and socio-economic development, which will ultimately influence investment decisions. We find that climate change could induce economic losses of up to USD 2.3 billion per year in the current system. We show that the value of the hydropower development plan is sensitive to future fuel prices, carbon pricing policies, the capital cost of solar technologies, and climate change. Similarly, we show that the value of the irrigation development plan is sensitive to the evolution of crop yields, world market crop prices, and climate change. Finally, we evaluate the opportunity costs of restoring the natural floods in the Zambezi Delta; we find limited economic trade-offs under the current climate, but major trade-offs with irrigation and hydropower generation under the driest climate change scenario.

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Water, energy, and agricultural infrastructure investments have important inter-relations fulfilling potentially competing objectives. When shaping investment plans, decision makers need to evaluate those interactions and the associated uncertainties. We compare planning infrastructure under uncertainty with an integrated water-energy-food nexus framework and with sector-centered (silo) frameworks. We use WHAT-IF, an open-source hydroeconomic decision support tool with a holistic representation of the power and agriculture sectors. The tool is applied to an illustrative synthetic case and to a complex planning problem in the Zambezi River Basin involving reservoirs, hydropower, irrigation, transmission lines and power plant investments. In the synthetic case, the nexus framework selects investments that generate more synergies across sectors. In sector-centered frameworks, the value of investments that impact multiple sectors (like hydropower, bioenergy, and desalinization) are under- or overestimated. Furthermore, the nexus framework identifies risks related to uncertainties that are not linked to the investments respective sectors. In the Zambezi river case, we find that most investments are mainly sensitive to parameters related to their respective sectors, and that financial parameters like discount rate, capital costs or carbon taxes are driving the feasibility of investments. However, trade-offs between water for irrigation and water for hydropower are important; ignoring trade-offs in silo frameworks increases the irrigation expansion that is perceived as beneficial by 22% compared to a nexus framework that considers irrigation and hydropower jointly. Planning in a nexus framework is expected to be particularly important when projects and uncertainties can considerably affect the current equilibrium.

Abstract. Water infrastructure investment planning must consider the interdependencies within the water-energy-food nexus. Moreover, uncertain future climate, evolving socio-economic context, and stakeholders with conflicting interests, lead to a highly complex decision problem. Therefore, there is a need for decision support tools to objectively determine the value of investments, considering the impacts on different groups of actors, and the risks linked to uncertainties. We present a new open-source hydroeconomic optimization model, linking in a holistic framework, representations of the water, agriculture, and power systems. The model represents the joint development of nexus-related infrastructure and policies and evaluates their economic impact, as well as the risks linked to uncertainties in future climate and socio-economic development. We apply the methodology in the Zambezi River Basin, a major African basin shared by eight countries, in which multiple investment opportunities exist, including new hydropower plants, new or resized reservoirs, development of irrigation agriculture, and investments into the power grid. We show that the linkage of the different systems is crucial to evaluate impacts of climate change and socio-economic development, which will ultimately influence investment decisions. We find that climate change could induce economic losses up to 2.3 billion dollars per year on the current system. We show that the value of the hydropower development plan is sensitive to future fuel prices, carbon pricing policies, the capital cost of solar technologies, and climate change. Similarly, we show that the value of the irrigation development plan is sensitive to the evolution of crop yields, world market crop prices and climate change. Finally, we evaluate the opportunity costs of restoring the natural floods in the Zambezi delta; we find limited economic trade-offs under the current climate, but potentially major trade-offs with irrigation and hydropower generation under climate change.

Water, energy, and food are all essential components of human societies. Collectively, their respective resource systems are interconnected in what is called the “nexus”. There is growing consensus that a holistic understanding of the interdependencies and trade-offs between these sectors and other related systems is critical to solving many of the global challenges they present. While nexus research has grown exponentially since 2011, there is no unified, overarching approach, and the implementation of concepts remains hampered by the lack of clear case studies. Here, we present the results of a collaborative thought exercise involving 75 scientists and summarize them into 10 key recommendations covering: the most critical nexus issues of today, emerging themes, and where future efforts should be directed. We conclude that a nexus community of practice to promote open communication among researchers, to maintain and share standardized datasets, and to develop applied case studies will facilitate transparent comparisons of models and encourage the adoption of nexus approaches in practice.

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This study analyses the impact of assuming perfect foresight of future agro-hydrological events in hydroeconomic analysis of water infrastructure projects. The impact is evaluated based on the estimated monetary benefits of a proposed water infrastructure investment diverting Yellow River water to the Hai River basin in China, resulting in supply augmentation and improved water quality. The impact of foresight is quantified as the change in project benefits, evaluated with different assumed lengths of future foresight compared to a perfect foresight benchmark. A hydroeconomic optimization model formulated as a deterministic Linear Program, LP, is optimized to represent the perfect foresight benchmark. Imperfect foresight is modeled by wrapping the hydroeoconomic optimization model in a Model Predictive Control, MCP, framework. Using this LP-MPC framework, different lengths of foresight can be modeled by continuous re-optimizations with updated forecasts over a planning horizon. The framework is applied to the water-scarce and polluted Hai River basin in China, which is suffering from groundwater overdraft and is dominated by agricultural irrigation demands. The hydroeconomic optimization model describes the nine largest reservoirs in conjunctive use with the major groundwater aquifers. The water infrastructure project, allowing transfers of Yellow River water to the plain area of the Hai River basin, is evaluated under long-term sustainable groundwater abstraction constraints, and joint water allocation and water quality management. The value of foresight in agricultural water allocations is represented, using a model that links yield response to water allocations, accounting for delayed yields in agricultural irrigation. Estimated benefits of the proposed project evaluated with decreasing lengths of foresight and compared to the perfect foresight benchmark show that an assumption of perfect foresight underestimates the actual benefits of the water infrastructure investment in the irrigation intensive Hai River basin. This study demonstrates that it is important to evaluate the impact of assuming perfect foresight in any hydroeconomic analysis, to avoid misleading conclusions regarding the costs and benefits of planned projects.

Hydroeconomic optimization models considering the inter-relations in the water-energy-food nexus are potential tools to evaluate water infrastructure and policy development that will contribute to multiple Sustainable Development Goals. However, most of these models are deterministic and assume perfect foresight. Thus, the optimal management decisions are found with perfect knowledge of future conditions, which might bias the economic evaluation of infrastructure investments. We show how the Model Predictive Control (MPC) framework can be used to overcome the perfect foresight assumption. By implementing the MPC framework in WHAT-IF, a perfect foresight hydroeconomic optimization model, we show how MPC leads to more realistic simulated reservoir operations and consequently to a more realistic valuation of investments. To evaluate the impact of the perfect foresight assumption, we evaluate infrastructure investments in the Zambezi river basin with and without the MPC framework. We find significant differences (up to 12%) between the perfect foresight and MPC frameworks when estimating the value of hydropower and irrigation investments. By carrying out the analysis for four different climate change scenarios, we find that the impact of the perfect foresight assumption is particularly important in a water scarce context.