Case Study
Flexible Design for Nuclear Power Plants under Uncertainty
Michel-Alexandre Cardin, Sizhe Zhang, William J. Nuttall
This case study explores how flexible engineering design can improve the economic performance and resilience of energy infrastructure under deep uncertainty. Using real options analysis, dynamic programming, and simulation, the study quantifies how design flexibility transforms capital-intensive energy projects into adaptable, value-maximizing systems.
image by ake1150 @ Adobe Stock
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Motivation
Energy infrastructure investments face volatile markets, policy change, and evolving technologies. Traditional fixed designs can lock organizations into costly, suboptimal outcomes. The study’s motivation was to integrate strategic flexibility into design so that systems could adapt as new information emerges, aligning engineering performance with financial resilience.
Methodologies
- Real Options Analysis (ROA): Quantified the value of managerial flexibility (e.g., defer, expand, switch, or abandon options) in energy system design.
- Dynamic Programming: Modelled sequential investment and decision stages to capture time-dependent uncertainty resolution.
- Monte Carlo Simulation: Generated probabilistic scenarios for key uncertain drivers such as fuel price, technology performance, and policy evolution.
- Scenario Planning & Sensitivity Analysis: Assessed robustness of design configurations across multiple market and policy environments.
- Agent-Based Simulation (illustrative): Explored decision interactions among investors, regulators, and operators in adaptive design settings.
Insights
- Economic Value of Flexibility: Designs incorporating staged deployment or technology switching significantly increased expected net present value (ENPV) and reduced downside risk.
- Decision Timing Matters: Delaying irreversible commitments until uncertainty partially resolves yields measurable value—captured as the value of flexibility.
- Design for Adaptation: Embedding real options within technical architectures (e.g., modular plant configurations) provides resilience against volatile fuel or carbon-price scenarios.
- Quantified Impact: Across studied cases, flexible strategies improved ENPV by 25–40 % compared with fixed designs, while cutting the probability of negative NPV outcomes by more than half.
- Organizational Implication: Firms adopting flexibility-aware engineering workflows achieve better alignment between design teams and financial planners, leading to more robust project portfolios.
Training
Relevant lectures and skills:
- Real Options Analysis
- Monte Carlo Simulation
- Dynamic Programming
- Sensitivity Analysis
- Scenario Planning
