Case Study
Power of Screening Models for Developing Flexible Design Strategies in Hydropower Projects: Case Study of Ethiopia
Jonathan Baker; Paul Block M.ASCE P.E, Kenneth Strzepek M.ASCE; Richard de Neufville M.ASCE
2014
This paper examines the use of screening models for hydropower infrastructure planning under uncertainty, focusing on a case study in Ethiopia. The study demonstrates how flexible design strategies can optimize infrastructure investments and manage uncertainties in electricity prices. The screening model identifies the best construction sequences for hydropower dams and evaluates options to adapt to future contingencies, improving long-term project outcomes.
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Motivation
Hydropower is a critical tool for sustainable and climate resilient electricity generation. This importance is especially pronounced in developing regions like Ethiopia, where hydropower has the potential to meet growing energy demands and support economic development. Additionally, “long-term price changes in water resources benefits may greatly affect a project’s value, however the traditional approach to river basin planning has not been able to take full account of these uncertainties.” (Abstract, p. 1)
Methodologies
- Binomial Lattice Model: “A binomial lattice model is developed to explore the impact of price uncertainty. A binomial lattice model is a standard approach to showing possible future price paths and is widely used in investment analyses.” (Hydropower Price Uncertainty Model, p. 4)
- Screening Models: “A midfidelity screening model [is used] to identify flexible design opportunities and strategies. Such a model is adopted to explore the impacts of future electricity price uncertainty on a proposed system of hydroelectric dams in Ethiopia.” (Abstract, p. 1)
Insights
- Exercise Flexibility in Construction: “The screening model is used to (1) identify the most flexible construction sequence for building the dams and (2) value various options exercised on the most flexible construction sequence” (Abstract, p. 1)
- High-fidelity Not Required for Effective Uncertainty Analysis: “Results indicate that the best option increases the expected net present value of the most flexible construction sequence by nearly 2%… This study highlights the value of a systematic approach using a midfidelity screening model to assess the uncertainties present in water resource infrastructure investments.” (Abstract, p. 1)
Training
Relevant lectures:
- Paradigm change in engineering systems and planning
- How to optimise design and decision-making under uncertainty
- How to manage the design process
