Strategic design of multi-actor nascent energy and industrial infrastructure networks under uncertainty

Abstract

Energy and industrial infrastructure networks form the backbone of our energy system as they provide essential utilities and services. During the conceptual design phase of these networks, not all participants nor the capacities they require are fully known, and that creates uncertainty for project developers because decisions such as network layout have to be made at this phase. Moreover, project developers have different interests which create uncertainty regarding what good design is and how cost and revenues are allocated. Such uncertainty often leads to inferior network layouts or even vital infrastructure networks not being built at all as parties become risk-averse and do not want to ‘bet on the wrong horse.’ Hence, a way of dealing with uncertainty is required, one that recognizes uncertainties in design requirements and enables actors to properly assess risks and develop strategies to adapt to future changes in a cost-effective manner. In addressing uncertainty, the contributions of this thesis lie in four parts. The first part of the thesis focuses on the concept of flexible design and its application to the design of infrastructure networks. The concept of flexibility is applied purely from an engineering design perspective, and an actor perspective (e.g. contract) is mostly missing. In this regard, a new framework which guides flexibility consideration both in the technical and contractual designs of networks is proposed. The second part of the thesis focuses on flexibility in engineering design of networks with the objective of improving their lifetime performance in the face of uncertain design requirements. A systematic engineering design approach that combines concepts from graph theory, exploratory modeling and analysis and real options is proposed to explore worthy candidate designs, identify flexibility enablers and appreciate the value of flexible design strategies. Illustrations of the proposed approaches showed that flexible design strategy could improve the lifetime performance of networks. The third part of the thesis looks at the role of risk sharing when actors co-invest in infrastructure network projects under uncertain environment. A model that combines concepts of cooperative game theory and is developed to analyze the effects of uncertainty. Model analysis showed that actors could get more synergies from risk sharing and optimal revenue and risk allocation depend on the pre-existing business profiles of actors. These findings could reduce uncertainty among actors and may encourage cooperation in vital network investments. The fourth part of the thesis combines engineering flexibility and contractual risk sharing concepts to enhance desired performances when actors develop new networks under uncertainty. Using risk sharing to enable value trade-offs, project actors can align their interests and design networks that can mutually enhance their value. In conclusion, the conceptual frameworks and design analysis approach developed in this thesis have shown to provide a better appreciation of flexibility in the face of uncertainty. By carrying out exploratory analysis on the value effects of different flexible design strategies, actors could gain valuable insights on how to strategically deploy networks. Moroever, results show that actors could gain valuable insights regarding the value of cooperation in general and the optimal sharing of risk and the selection of suitable partners in particular.