Foresight meets Decision Support (i.e. where it should always be)

The Water Utility Climate Alliance (WUCA) recently developed a white paper to present and evaluate Decision Support Planning Methods (DSPMs) to water utilities interested in incorporating climate change into their planning now.  The paper, 'Incorporating Climate Change Uncertainties into Water Planning' is available at http://www.wucaonline.org.

As reported on the Malcolm Pirnie site Ed Means says: "DSPMs consider multiple future conditions to incorporate more and greater uncertainties into the planning process and can be useful not only in planning for climatic uncertainty, but also in planning for uncertainty about regulatory, environmental, economic, social, and other variables affecting water utilities... There are several basic approaches that can be used:

Classic Decision Analysis
Classic decision analysis is a probability-based DSPM that systematically catalogues information and mathematically evaluates and ranks alternatives against multiple, potentially conflicting, decision objectives. Classic decision analysis illustrates the process with a decision tree or influence diagram, and handles uncertainty through the use of probabilities.

Traditional Scenario Planning
Traditional scenario planning is a scenario-based DSPM with the main objective of developing a plan that best prepares the water utility for a plausible range of uncertain circumstances. Scenarios are developed by identifying critical uncertainties and driving forces (e.g., climate, water quantity, water quality, demand, social and regulatory change, technology, economics) to create a range of future conditions that go beyond extrapolation of current trends and represent surprising but plausible conditions.

Robust Decision Making
Robust decision making is a framework that combines features of both classic decision analysis and traditional scenario planning, providing a systematic way of developing a water management strategy to best adapt to a wide range of plausible future conditions. It involves generating multiple future hydrologic/demand scenarios as well as developing multiple water resources strategies and optimizing the strategies using statistical tools.

Real Options
Real options is a method to help water managers identify water supply strategies that adjust over time and balance risks using traditional discounted cash flow approaches. Flexible investment strategies are sought that can be
risk-adjusted with time and deferred into the future. Uncertainties in real options are handled through the use of probabilities. Results are flexible in that they may incorporate delaying and phasing of facility projects.

Portfolio Planning
Portfolio planning is used in the financial world to select a portfolio containing a mix of assets or strategies that minimize financial exposure due to future market scenarios. Uncertainty is handled through the use of probabilities and Monte Carlo simulations, and minimized through hedging. Few applications in the water industry exist for this DSPM.

Shell scenario 'how to' book from 2003 available here

The classic Shell Scenario methods book, 'Scenarios: An Explorer's Guide' (2003) is available for free download here.

The book is a graphics-heavy 'take' on scenario planning, quite whimsical, no doubt all about fighting the good fight with the Dutch engineers and Scottish accountants that 'are' the Shell establishment. It's hardly the last word in scenario methods, but still interesting for what it is.

On of the key things about it is it uses the metaphor of exploration and map-making to describe how to think about building scenarios. Says Shell: "Like a set of maps describing different aspects of a landscape, scenarios provide us with a range of perspectives on what might happen, helping us to navigate more successfully."

The book describes the approach used to develop Shell's ‘People and Connections’ scenarios circa 2000 under Ged Davis. As Shell comment: "Since then, scenarios guided by Albert Bressand have been published, and more recently Shell has published a summary of its Energy Scenarios, ‘Scramble’ and ‘Blueprints’, developed under the guidance of the current leadership. These have built on, and extended, our approach. Indeed, Shell has been working with scenarios for almost 40 years, and we are still learning."

Amen to that.