The impact of assuming perfect foresight for investment analysis in water resources systems

Payet-Burin, Raphaël; Kromann, Mikkel; Pereira-Cardenal, Silvio; Strzepek, Kenneth; Bauer‐Gottwein, Peter

doi:10.1002/essoar.10504115.1

Cited by 1 publication

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“…In this version, using a single objective function for the entire planning horizon, the model assumes "perfect foresight" and "perfect cooperation." In Payet-Burin et al (2020), the "perfect foresight" assumption is found to have a small impact compared to uncertainties linked to climate…”

Section: Methodsmentioning

confidence: 99%

Nexus vs. Silo Investment Planning Under Uncertainty

Payet-Burin¹,

Kromann²,

Pereira-Cardenal³

et al. 2021

Front. Water

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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.

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Section: Methodsmentioning

confidence: 99%