The value of incorporating technological uncertainty in adaptive infrastructure planning – a conceptual example in hydropower investment

In response to the increasing environmental concerns, there has been significant research and development of power generation technologies based on renewable energy sources (RES) such as solar, and hydrogen. On the one hand, the technologies are becoming more attractive by offering higher efficiencies and lifetimes, and lower costs. On the other hand, it has become challenging to cost-effectively plan and deploy RES technologies as their characteristics have become significantly more uncertain. This can have strong impacts on other established renewable generation technologies, such as hydropower, which might become less or more attractive depending on technological change. Furthermore, in the context of interlinked water-energy systems, RES impacts on hydropower can have cascading effects on water use. Accordingly, decision makers require improved planning strategies to “adapt” to technological change when making long-term planning and investment decisions. 

This work explores how considering RES, namely solar and hydrogen, alongside their technological uncertainties related to installation costs and lifetimes, would impact hydropower investments in an adaptive plan. Based on a conceptual case study of a water-energy system, we demonstrate that hydropower investments could be delayed and/or reduced because of the possibility of efficiency improvements related to renewable energy technologies. Furthermore, we quantify the forgone financial value from not using adaptive approaches to design and plan infrastructure projects under technological uncertainty.