Adaptation to an uncertain climate change: cost benefit analysis and robust decision making for dam dimensioning
Abstract: Climate models project large changes in rainfall, but disagree on their magnitude and sign. The consequences of this uncertainty on optimal dam dimensioning is assessed for a small mountainous catchment in Greece. Optimal dam design is estimated using a Cost-Benefit Analysis (CBA) based on trends in seasonal temperature and precipitations from 19 IPCC-AR4 climate models driven by the the SRES A2 emission scenario. Optimal reservoir volumes are modified by climate change, leading to up to 34% differences between optimal volumes. Contrary to widely-used target-based approaches, the CBA suggests that reduced rainfall should lead to smaller water reservoirs. The resulting change in the Net Present Value (NPV) of water supply is also substantial, ranging from no change to a large 25% loss, depending on the climate model, even assuming optimal adaptation and perfect foresight. In addition, climate change uncertainty can lead to design errors, with a cost ranging from 0.3 to 2.8% of the NPV, depending on site characteristics. This paper proposes to complement the CBA with a robust decision-making approach that focuses on reducing design-error costs. It also suggests that climate change impacts in the water sector may reveal large, that water reservoirs do not always provide a cost-efficient adaptation strategy, and that alternative adaptation strategies based on water conservation and non-conventional water production need to be considered. 2012 Springer Science+Business Media B.V.
Summary (3 min read)
- According to the IPCC (2007), global mean temperature could increase by between 1 and 6◦C over this century.
- The studies presented above allow the determination of the dimensioning or cost associated with maintaining a fixed level of reliability.
- It is not always possible nor efficient to modify the storage capacity of water reservoirs to maintain unchanged the reliability of water supply, and a change in demand can also be considered.
- Section 2 presents an overview of the methodology for optimal dam dimensioning under climate change.
- This section summarizes the methodology of this study.
- Because the authors have only one simulation for each climate model, and because climate models have difficulties to reproduce natural inter-annual and inter-decadal variability, this analysis uses a combination of historical data series and of climate model outputs.
- From these climate information, the runoff probability distribution function for one given year is assumed to be the same than the runoff in a stationary climate with the same stable climate characteristics.
- The system (water and man-made reservoir) net present value is then maximized in order to determine the optimal dam dimension.
- The parameter values and the details of computation are described in section 4 of the Online Resource.
3.1 Reference case without climate change
- The relationships between dam height, reservoir surface and reservoir volume are in agreement with Georgakakos et al. (1999) with the default parameter set.
- The authors also consider other reservoir geometries to investigate model results.
- The model, indeed, is meant to be generic and this sensitivity analysis highlights how optimal storage capacity choice under climate change may depend on local constraints.
- Therefore, optimal volumes are computed for different valley lengths, which determine the marginal cost of the reservoir: in a longer valley, a given reservoir volume is achieved with a smaller (and cheaper) dam.
- The results obtained without climate change are described in detail in section 6 of the Online Resource.
3.2 Optimal dimensioning under climate change
- Consistently with IPCC (2007) for the Mediterranean region, mean runoff tend to decrease under climate change with changes between 0% and -21%.
- Details on runoff change computation and runoff change for all models are available in the Online Resource, section 5 and Table 8.
- In the following, changes in optimal volume storage, satisfied demand and economic value relative to a case with no climate change, are presented.
3.2.1 Optimal Volume
- Figure 1 shows how the water system net present value (NPV) depends on the reservoir volume, for a valley length 10km and for three models CNRMCM3 (exhibiting a very important reduction in variability and mean), CSIROMK35 (with a moderate reduction in variability and mean), and 7 8 NCARPCM1 (with an unchanged mean and an increase in variability).
- The figure includes the results with a null pure time preference and with a 3 and 6 percent rate of pure time preference (corresponding to a low, medium and high interest rate).
- When water is scarcer, the increase in unit water value could increase the benefits of building a bigger reservoir and lower the differences in size.
- Different geometries do not lead to large differences in the percentage change of optimal volumes compared with the no climate change optimal capacities (for each combination of pure time preference and climate change model).
- This correlation could explain the comparable percent change of optimal volumes, whether winter runoff, inflow variability or mean runoff is the major driver of the optimal volume.
3.2.2 Satisfied demand
- This is obvious for a long valley: in that case the reservoir is very big for all pure time preference values, and most of the variability is captured.
- Therefore, the change in satisfied demand simply follows the change in mean runoff.
- On the opposite, the optimal reservoir is smaller in a drier climate, and the satisfied demand is significantly reduced.
- In practice, the reduction in satisfied demand is larger than the reduction in runoff with a fixed water value.
- Optimal adaptation does not maintain water availability.
3.2.3 Net present value
- The change in net present value takes into account the reservoir size, such that smaller reservoirs lead to lower costs, and the change in satisfied demand.
- Net change in NPV is relevant, because it corresponds to the cost of climate change with optimal adaptation taken into account.
- Minimum and maximum percent changes in net present value are shown on Table 1 for three valley lengths and three pure time preferences.
- Detailed results for all models are available in Online Resource.
- The net benefit of the dam may indeed become negative due to climate change for the smallest water price.
3.3 Error costs and robust decision-making
- Climate model uncertainty is here a potential source of error regarding optimal dam dimensioning.
- Table 1 shows that, especially for low rates of pure time preference, optimal dimensions differ markedly between different climate change scenarios.
- The authors find a maximal error cost that varies between 0.3% and 2.8% of the net present value for the different cases.
- This analysis shows that climate change influences in a significant manner the optimal dimensioning of water reservoirs.
- Since climate change is uncertain, optimal reservoir design is also uncertain.
- Importantly, their analysis suggests that the reduction in rainfall should lead to building smaller dams and that reduced water availability can not be cost-effectively compensated by more water storage in a setting where the unit value of water is considered to be independent of demand.
- In their case, the costs associated with these errors are not large compared with the net present values differences between scenarios, as they lie between 0.3 percent (with a long valley and a high discount rate) and 2.8 percent (with a short valley and no discounting).
- Optimums are flat and therefore not very sensitive to the volume chosen in the end.
4.2 Conclusion on adaptation decision making
- Since the optimal net present value is very flat, a cost-benefit analysis appears not to be very useful to discriminate against the different volumes, in the case studied here.
- The net present value resulting from the cost-benefit analysis, however, is a good measure of the opportunity to build the dam, since it is not very sensitive to errors in the dam design.
- In absence of better information, and in a robust decision-making framework, the authors suggest the use of the volume minimizing the maximum error cost.
- In such a framework, therefore, the development and use of many climate models in parallel is very important.
- It also means that 13 model development should not necessarily be concentrated on a so-called “best” model.
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Cites background from "Adaptation to an uncertain climate ..."
...From CBA to regret minimization: The case of dam dimensioning Nassopoulos et al. (2011) applies the idea of robustness to dam dimensioning in the water management sector, a sector that is particularly sensitive to climate conditions....
Cites background from "Adaptation to an uncertain climate ..."
...This can result in prediction of regions in which irrigation can be developed and sustained considering changing climate, water availability, water price and water management infrastructure (see Nassopoulos et al., 2008, 2012)....
"Adaptation to an uncertain climate ..." refers background in this paper
...Potentially important climate change impacts on variability (Schär et al. 2004) are thus disregarded....
...A potentially important impact of climate change on variability, see e.g. Schär et al. (2004), is thus disregarded....
...Potentially important climate change impacts on variability (Schär et al., 2004) are thus disregarded....
"Adaptation to an uncertain climate ..." refers background or methods in this paper
...…on how climate will change, using scenario analysis and robustness criteria was more adequate than cost-benefit analysis; see for instance Lempert and Collins (2007); Groves and Lempert (2007); Hallegatte (2009), and applications to water management in Groves et al. (2007); Dessai…...
...To cope with this situation of increased uncertainty, Hallegatte (2009) proposed to follow Lempert and Collins (2007); Groves and Lempert (2007) and to implement robust anticipated adaptation strategies that aim at reducing vulnerability in the largest possible range of climate changes....
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Q1. What have the authors contributed in "Adaptation to an uncertain climate change: cost benefit analysis and robust decision making for dam dimensioning" ?
This research study was financed by the European Union under the integrated project CIRCE. The authors would like to thank Jean-Louis Dufresne from the LMD laboratory for his valuable advice on climatic data extraction and Maria M. Mimikou Professor of NTUA, for letting us use the figure of the general plan of the area. The authors would also like to thank Yannis Kouvopoulos from Public Power Corporation of Greece for his encouragement, ITIA research team from the National Technical University of Athens Faculty of Civil Engineering for the reports on historical runoff and Professor Athanasios Loukas and Lampros Vasiliades from University of Thessaly, Department of Civil Engineering, Volos for their indications on data sources.