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Journal ArticleDOI

Adaptation to an uncertain climate change: cost benefit analysis and robust decision making for dam dimensioning

20 Mar 2012-Climatic Change (Springer Netherlands)-Vol. 114, Iss: 3, pp 497-508

AbstractClimate 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.

Topics: Climate model (56%), Climate change (55%), Water conservation (55%), Robust decision-making (54%)

Summary (3 min read)

1 Introduction

  • 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.

2 Methodology

  • 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.

4.1 Summary

  • 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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Adaptation to an uncertain climate change: cost benet
analysis and robust decision making for dam
dimensioning
Hypatia Nassopoulos, Patrice Dumas, Stéphane Hallegatte
To cite this version:
Hypatia Nassopoulos, Patrice Dumas, Stéphane Hallegatte. Adaptation to an uncertain climate
change: cost benet analysis and robust decision making for dam dimensioning. Climatic Change,
Springer Verlag, 2012, 114 (3-4), pp.497-508. �10.1007/s10584-012-0423-7�. �hal-00719113�

Adaptation to an uncertain climate change:
cost benefit analysis and robust decision
making for dam dimensioning
Hypatia Nassopoulos
Patrice Dumas
St´ephane Hallegatte
§
March 2012
The final publication is available at www.springerlink.com http://link.
springer.com/article/10.1007/s10584-012-0423-7.
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 catch-
ment in Greece. Optimal dam design is estimated using a Cost-Benefit
nassopoulos@centre-cired.fr, ole de Recherche en Economie et Gestion (PREG),
D´epartement d’
´
Economie
´
Ecole Polytechnique 91128 Palaiseau Cedex, France. Centre
National de Recherche sur l’Environnement et le eveloppement (CIRED) Jardin Tropi-
cal - 45 bis, avenue de la Belle Gabrielle 94736 Nogent-sur-Marne Cedex, France.
This research study was financed by the European Union under the integrated project
CIRCE. We 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. We 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.
Centre National de R echerche sur l’Environnement et le eveloppement (CIRED).
Centre de Coop´eration Internationale en Recherche Agronomique pour le eveloppement
(CIRAD) M Avenue Agropolis, 34398 Montpellier Cedex 5, France
§
Centre National de R echerche sur l’Environnement et le eveloppement (CIRED).
´
Ecole Nationale de la M´et´eorologie (M´et´eo-France), 42, avenue Coriolis, 31057, Toulouse,
France
1

Analysis (CBA) based on trends in seasonal temperature and precip-
itations from 19 IPCC-AR4 climate models driven by the the SRES
A2 emission scenario. Optimal reservoir volumes are modified by cli-
mate change, leading to up to 34-percent 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 percent loss,
depending on the cl imate 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 percent to 2.8 percent
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 reser-
voirs 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.
Keywords: Optimal dam dimensioning, Climate Change, Adaptation,
Uncertainty
JEL classification: Q25, Q54, L95
1 Introduction
According to the IPCC (2007), global mean temperature could increase by
between 1 and 6
C over this century. This warming would lead to multiple
and heterogeneous changes in local climates. Some locations would experi-
ence larger warming ( e.g., the polar regions) than others (e.g., the southern
hemisphere). Some locations would receive more precipitations while others
would become drier. These local changes will have many consequences, in
many economic sectors, and will make it necessary to implement adaptation
actions.
In some sect ors, adaptation can be reactive while in others, it needs to b e
anticipated especially for investments with very long timescales (Hallegatte
et al., 2007). Anticipation necessitates detailed information on how local
climates will change. However, for various reasons detailed in Hallegatte
(2009), future local climates are uncertain: there is still a large uncertainty
on future greenhouse gas emissions, on the reaction of global temperature to
changes in greenhouse gas concentrations and on how a change in global mean
temperature would translate into changes at the lo cal scale, the last being
2

particularly important for adaptation in water management. To cope with
this situation of increased uncertainty, Hallegatte (2009) proposed to follow
Lempert and Collins (2007); Groves and Lem pert (2007) and to implement
robust anticipated adaptation strategies that aim at reducing vulnerability
in the largest possible range of climate changes.
This article applies this idea to dam dimensioning in the water man-
agement sector, a sector that is particularly sensitive to climate conditions.
In addition, in this sector, investments like dams are made for very long
time, thus requiring the taking into account of future changes. With climate
change, hydro-climatic parameters would be modified, affecting runoff, soil
moisture and groundwater level. On account of quantitatively and qualita-
tively altered water resources and affected water consumption, the conception
of hydraulic infrastructure will have to be revised.
Previous studies have investigated this issue. Frederick and Schwarz
(1999) investigate the change in renewable water supplies for the United
States, focusing on changes in mean inflow. They determine least cost man-
agement scenarios to balance change in evaporation from surfaces of man
made reservoirs and protect instr eam flows. To do so, conservation measures
appear to be less expensive than increases in supply. They use two climate
change scenarios, and obtain widely different least-cost strategies, stressing
the importance of uncertainty in future climate change. Vogel et al. (1997)
use simplified yield-storage relations to determine the sensitivity of complex
reservoir systems for river basins under climate change. Still at the regional
level, in China, Kirshen et al. (2005) go further and determine the storage
capacity needed to meet demand at the highest possible level of reliabil-
ity, taking into account the variability in precipitation and inflows. To do
so, they use the modified sequent-peak method , and evaluate the associated
costs using simplified unit-cost relations based on geophysical characteris-
tics. More recently, Ward et al. (2010) provided an estimation of global
and regional adaptation costs to reduced water availability. This study as-
sesses the cost of providing enough water to satisfy the projected industrial
and domestic water demands in 2050, using additional water st orage and
non-conventional water production. According to their results, global st or-
age capacity is projected to increase significantly by 34-36% over the period
2010-2050. Estimated adaptation costs are of $12 bn per year, with almost
90% of these costs in developing countries.
At a local level, some studies also try to assess the implication of climate
change for reservoir dimensioning. For example, Robinson (1997) determines
the maximum draw from a reservoir, and, hence, the minimum dam size
necessary to maintain a continuous energy generation under climate change in
some locations of the USA. A different methodology, based on the integrated
3

economic-engineering optimization model CALVIN (Tanaka et al., 2006) is
used to study the ability of California water supply system to adapt to long
term climatic and demographic changes. This methodology allows for the
determination of shadow values for infrastructure capacities and conveyance
capacities. The study shows that, in that case, conveyance expansion is the
most relevant option.
In response to a change in the precipitation regime, the variability of wa-
ter supply can increase or decrease. To assess the performance of hydraulic
infrastructures along this dimension, the reliability is a commonly used indi-
cator. According to Koutsoyiannis (2005), the reliability of a reservoir is the
probability that the reservoir will accomplish a n eeded function, for exam-
ple demand satisfaction, over a specific time period under stated conditions.
The studies presented above allow the determination of the dimensioning or
cost associated with maintaining a fixed level of reliability. Mimikou et al.
(1991b); Mehrotra (1999) also determine water reservoir dimensions to reach
different reliability targets.
Equivalently, one can consider the change in water demand that can still
be satisfied at an unchanged reliability level. For instance, a reduction in
precipitation with unchanged water demand can lead to more frequent sup-
ply interruption, i.e. the water demand that is satisfied at an unchanged
reliability level is lower. Sometimes, accepting a change in available water
can be more efficient than trying to keep up with climate change with dif-
ferent infrastructure. Brikowski (2008) shows that for some reservoirs in the
Great Plains of USA, due to groundwater mining and climate change, t he
decline in streamflow leads to a profound inefficiency of reservoirs: negative
water budgets even become common as over half of the water flowing into
the reservoirs evaporates.
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. Instead of a dimensioning based
on a target, cost-benefit analysis may be used to determine the optimal di-
mension of a dam, taking into account demand and supply changes. In
O’Hara and Georgakakos (2008), the effectiveness of storage capacity expan-
sion is assessed for the water supply of San Diego in the US, and an optimal
investment policy is determined. In this study, several capacity expansion
increments are tested, and a valuation of demand and water imports is per-
formed. Three climate models are used, and a sensitivity analysis is also
conducted on population change and plausible model parameter values. The
expansion problem is then solved as a recursive mathematical programming.
We find in the literature two approach es, one that determines the size or
cost of infrastructure based on a target in water delivery, and one that uses
4

Figures (12)
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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....

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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)....

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TL;DR: It is found that an event like that of summer 2003 is statistically extremely unlikely, even when the observed warming is taken into account, and it is proposed that a regime with an increased variability of temperatures (in addition to increases in mean temperature) may be able to account for summer 2003.
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"Adaptation to an uncertain climate ..." refers background in this paper

  • ...Potentially important climate change impacts on variability (Schär et al. 2004) are thus disregarded....

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  • ...A potentially important impact of climate change on variability, see e.g. Schär et al. (2004), is thus disregarded....

    [...]

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Abstract: Many decisions concerning long-lived investments already need to take into account climate change. But doing so is not easy for at least two reasons. First, due to the rate of climate change, new infrastructure will have to be able to cope with a large range of changing climate conditions, which will make design more difficult and construction more expensive. Second, uncertainty in future climate makes it impossible to directly use the output of a single climate model as an input for infrastructure design, and there are good reasons to think that the needed climate information will not be available soon. Instead of optimizing based on the climate conditions projected by models, therefore, future infrastructure should be made more robust to possible changes in climate conditions. This aim implies that users of climate information must also change their practices and decision-making frameworks, for instance by adapting the uncertainty-management methods they currently apply to exchange rates or RD (ii) favouring reversible and flexible options; (iii) buying “safety margins” in new investments; (iv) promoting soft adaptation strategies, including long-term prospective; and (v) reducing decision time horizons. Moreover, it is essential to consider both negative and positive side-effects and externalities of adaptation measures. Adaptation–mitigation interactions also call for integrated design and assessment of adaptation and mitigation policies, which are often developed by distinct communities.

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"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....

    [...]


Frequently Asked Questions (1)
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.