Minimizing the Cost of Innovative Nuclear Technology Through Flexibility: The Case of a Demonstration Accelerator-Driven Subcritical Reactor Park

Presented is a methodology to analyze the expected Levelised Cost Of Electricity (LCOE) in the face of technology uncertainty for Accelerator-Driven Subcritical Reactors (ADSRs). It shows that flexibility in the design and deployment strategy of an ADSR park demonstrator significantly reduces its expected LCOE. The methodology recognizes in the conceptual design a range of possible technological outcomes for the ADSR accelerator system. It identifies flexibility “on” and “in” the design to modify the future development path in light of such uncertain scenarios. Uncertainty and flexibility are incorporated in the ADSR valuation. The resulting economic assessment is more realistic than typical discounted cash flow analysis that does not consider a range of development outcomes, or the flexibility to change development path

Stochastic optimisation-based valuation of smart grid options under firm DG contracts

Under the current EU legislation, Distribution Network Operators (DNOs) are expected to provide firm connections to new DG, whose penetration is set to increase worldwide creating the need for significant investments to enhance network capacity. However, the uncertainty around the magnitude, location and timing of future DG capacity renders planners unable to accurately determine in advance where network violations may occur. Hence, conventional network reinforcements run the risk of asset stranding, leading to increased integration costs. A novel stochastic planning model is proposed that includes generalized formulations for investment in conventional and smart grid assets such as Demand-Side Response (DSR), Coordinated Voltage Control (CVC) and Soft Open Point (SOP) allowing the quantification of their option value. We also show that deterministic planning approaches may underestimate or completely ignore smart technologies

STOP-IT: strategic, tactical, operational protection of water infrastructure against cyberphysical threats

Water supply and sanitation infrastructures are essential for our welfare, but vulnerable to several attack types facilitated by the ever-changing landscapes of the digital world. A cyber-attack on critical infrastructures could for example evolve along these threat vectors: chemical/biological contamination, physical or communications disruption between the network and the supervisory SCADA. Although conceptual and technological solutions to security and resilience are available, further work is required to bring them together in a risk management framework, strengthen the capacities of water utilities to systematically protect their systems, determine gaps in security technologies and improve risk management approaches. In particular, robust adaptable/flexible solutions for prevention, detection and mitigation of consequences in case of failure due to physical and cyber threats, their combination and cascading effects (from attacks to other critical infrastructure, i.e. energy) are still missing. There is (i) an urgent need to efficiently tackle cyber-physical security threats, (ii) an existing risk management gap in utilities’ practices and (iii) an un-tapped technology market potential for strategic, tactical and operational protection solutions for water infrastructure: how the H2020 STOP-IT project aims to bridge these gaps is presented in this paper.Postprint (published version

Assessing Social Impacts of Investments: Developing Effective Evaluation Systems to Measure Social Returns

Strategic and clear structures provide a solid foundation for effective and sustainable impact assessment. While the details of the evaluation systems and processes will vary by program and desired impact, there are guidelines and considerations based on best practices that have broad applications for any kind of evaluation

Value creation, risk management, and real options

The real options approach considers strategic management and decision-making as a process aimed at actively reducing exposition to downside risk and promoting exposition to upside opportunities. It stands at the hinge between pure finance and other areas of decision making under risk such as project evaluation, market entry and exit, organizational restructuring and re-engineering, technology adoption, climate change and biodiversity decisions, etc. The approach underlines a frame of mind and uses methodologies that appeal to a wide array of managers, thus providing a common language. Real options have applications in many areas that are central to modern corporations: market coverage and development, finance, human resources management, technology management, R&D and knowledge management, etc. Thinking in terms of real options represents a major development in strategic but remains relatively unknown in spite of its adoption by firms such as Airbus, GE, Hewlett Packard, Intel, Toshiba and others. Nonetheless, as shown in the academic literature and as argued in some of the quotes below, the contribution of higher level managers to the value of a firm lies in the creation and the exercise of real options. Indeed the value of strategic management itself can be assessed that way. At a more macroeconomic level, the efficiency of financial systems rests primarily on proper risk assessment and management in project evaluation. The real options approach is the crucial analytical tool to fulfill such a need and act as a link between the financial and the real sectors. Lorsqu'on applique une approche options réelles à la gestion, à la gestion stratégique en particulier, c'est que l'on perçoit la prise de décision stratégique comme un processus visant à la fois la réduction active de l'exposition au risque baissier et l'augmentation de l'exposition aux opportunités favorables. L'approche des options réelles se situe entre la finance pure et les autres domaines de la prise de décision en situation risquée tels l'évaluation de projet, l'entrée et la sortie d'un marché, la restructuration et la ré-ingénierie organisationnelle, l'adoption de nouvelles technologies, les décisions sur le changement climatique et la biodiversité, etc.. Elle souligne un état d'esprit et utilise des méthodologies auxquelles souscrivent beaucoup de gestionnaires, offrant ainsi un langage commun. Les options réelles concernent plusieurs domaines primordiaux des entreprises modernes : la couverture et le développement du marché, la finance, la gestion des ressources humaines, la gestion de la technologie, la R&D, la gestion des connaissances, etc.. Cette approche représente un changement important dans la gestion stratégique mais demeure relativement peu connue malgré son adoption par des entreprises telles que Airbus, GE, Hewlett Packard, Intel, Toshiba et autres. Néanmoins, comme l'indique la littérature académique et le soulignent certaines des citations ci-dessous, la contribution des gestionnaires à la valeur de l'entreprise peut se mesurer à l'aune des options qu'ils font surgir et qu'ils gèrent. À un niveau plus macroéconomique, l'efficacité des systèmes financiers repose essentiellement sur une bonne évaluation des risques et de la gestion des projets. Les options réelles constituent l'outil analytique crucial pour cette évaluation et font ainsi le lien entre secteur financier et secteur réel.Real Options, Investments, Uncertainty, Options réelles, Investissements, Incertitude

Valuing flexibility in the migration to flexible-grid networks

Increasing network demand is expected to put pressure on the available capacity in core networks. Flexible optical networking can now be installed to increase network capacity in light of future traffic demands. However, this technology is still in its infancy and might lack the full functionality that may appear within a few years. When replacing core network equipment, it is therefore important to make the right investment decision between upgrading toward flexible-grid or fixed-grid equipment. This paper researches various installation options using a techno-economic analysis, extended with real option insights, showing the impact of uncertainty and flexibility on the investment decision. By valuing the different options, a correct investment decision can be made

Social Equity Impacts of Congestion Management Strategies

This white paper examines the social equity impacts of various congestion management strategies. The paper includes a comprehensive list of 30 congestion management strategies and a discussion of equity implications related to each strategy. The authors analyze existing literature and incorporate findings from 12 expert interviews from academic, non-governmental organization (NGO), public, and private sector respondents to strengthen results and fill gaps in understanding. The literature review applies the Spatial – Temporal – Economic – Physiological – Social (STEPS) Equity Framework (Shaheen et al., 2017) to identify impacts and classify whether social equity barriers are reduced, exacerbated, or both by a particular congestion mitigation measure. The congestion management strategies discussed are grouped into six main categories, including: 1) pricing, 2) parking and curb policies, 3) operational strategies, 4) infrastructure changes, 5) transportation services and strategies, and 6) conventional taxation. The findings show that the social equity impacts of certain congestion management strategies are not well understood, at present, and further empirical research is needed. Congestion mitigation measures have the potential to affect travel costs, commute times, housing, and accessibility in ways that are distinctly positive or negative for different populations. For these reasons, social equity implications of congestion management strategies should be understood and mitigated for in planning and implementation of these strategies

Making asset investment decisions for wastewater systems that include sustainability

Effective integrated water management is a key component of the World Water Vision and the way in which aspirations for water equity may be realized. Part of the vision includes the promotion of sustainability of water systems and full accountability for their interaction with other urban systems. One major problem is that “sustainability” remains an elusive concept, although those involved with the provision of urban wastewater systems now recognize that decisions involving asset investment should use the “triple bottom line” approach to society, the economy, and the environment. The Sustainable Water Industry Asset Resource Decisions project has devised a flexible and adaptable framework of decision support processes that can be used to include the principles of sustainability more effectively. Decision mapping conducted at the outset of the project has shown that only a narrow range of criteria currently influence the outcome of asset investment decisions. This paper addresses the concepts of sustainability assessment and presents two case studies that illustrate how multicriteria decision support systems can enhance the assessment of the relative sustainability of a range of options when decisions are being made about wastewater asset investment

Recognizing Risk in Human Capital Investments: A Real Options Approach to Strategic Human Resource Management

An issue that has not yet been explored in the field of strategic human resource management (SHRM) is that of managing the ‘risks’ involved in human capital management of the firm. We address this issue using the real option theory framework. We argue that certain HR practices manage risk and generate opportunities for the firm by creating \u27options\u27 for its human capital management. These HR options help ensure stability of returns from human capital and thus sustain competitive advantage. Different types of HR options and the role of certain HR practices in creation of these options are discussed

Internet of Things and Their Coming Perspectives: A Real Options Approach

Internet of things is developing at a dizzying rate, and companies are forced to implement it in order to maintain their operational efficiency. The high flexibility inherent to these technologies makes it necessary to apply an appropriate measure, which properly assesses risks and rewards. Real options methodology is available as a tool which fits the conditions, both economic and strategic, under which investment in internet of things technologies is developed. The contribution of this paper is twofold. On the one hand, it offers an adequate tool to assess the strategic value of investment in internet of things technologies. On the other hand, it tries to raise awareness among managers of internet of things technologies because of their potential to contribute to economic and social progress. The results of the research described in this paper highlight the importance of taking action as quickly as possible if companies want to obtain the best possible performance. In order to enhance the understanding of internet of things technologies investment, this paper provides a methodology to assess the implementation of internet of things technologies by using the real options approach; in particular, the option to expand has been proposed for use in the decision-making process