Using real options for an eco-friendly design of water distribution systems

Abstract

This paper presents a real options approach to handling uncertainties associated with the long-term planning of water distribution system development. Furthermore, carbon emissions associated with the installation and operation of water distribution networks are considered. These emissions are computed by taking an embodied energy approach to the different materials used in water networks. A simulated annealing heuristic is used to optimise a flexible eco-friendly design of water distribution systems for an extended life horizon. This time horizon is subdivided into different time intervals in which different possible decision paths can be followed. The proposed approach is applied to a case study and the results are presented according to a decision tree. Lastly, some comparisons and results are used to demonstrate the quality of the results of this approach.