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WRSE

THE NEXT GENERATION WATER INVESTMENT MODEL

CLIENT

REQUIREMENT
REQUIREMENT

An investment planning tool that enables water companies to best plan their investments in water supply over the next 75 years.

CHALLENGE
CHALLENGE

Providing robust and flexible plans that can deal with many different uncertainties (weather, population, delays) over the very long-time frame seems impossible. Can we make it possible?

SOLUTION
SOLUTION

A new water investment planning model that combines multiple cutting-edge optimisation methods.

Supporting water resource management
Supporting water resource management

The shortage of water resources is high on the agenda of many countries. Despite its reputation for rain, the UK is not an exception, and particularly in the South East of England where high population (more than 19 million people) places a great burden on the water supply.

As a regulatory requirement, every 5 years water companies in England and Wales must produce plans on how they will meet their future demand. The plans must follow the “Economics of Balancing Supply and Demand” framework, and models are used to optimise the option investment to achieve the needed increase in water supply capacity. Water Resources in the South East (WRSE) is an alliance of the six water companies in South East England as well as the Environment Agency, Ofwat, the Consumer Council for Water, Natural England and Defra. WRSE’s aim was “to develop an affordable, sustainable and resilient regional approach to water resource management”, which would support the water companies in their planning.

Complex planning for the 75 year horizon
Complex planning for the 75 year horizon

Product forecasting and demand fluctuations have always represented a big challenge for companies especially during the design of a new manufacturing line or plant. Getting the right product mix, coordination and optimisation of resources such as machines, operators, materials, etc. are some of the challenges that GSK face operationally. For us the challenge, was developing a model that captured all the required complexity while being fast enough and flexible enough to answer the business questions and allow a wide exploration and optimisation of the problem space.

This is a complex problem with potentially very large supply-demand deficits. Because of the long planning horizon, the uncertainties in climate, population and legislative drivers are significant. There is a need to optimise against this uncertain future to produce resilient plans. Previously, the main focus had been on identifying the least cost plan that met demand – a relatively straightforward optimisation problem. But being able to produce plans that are resilient and adaptable to uncertain events decades in the future and also incorporate other performance metrics (environmental benefit, customer preference and more) is a major technical challenge. How can we plan 75 years ahead for such a complex problem and with so many uncertainties?

A cutting-edge water investment model
A cutting-edge water investment model

Decision Lab developed a completely new water investment model. It uses cutting-edge optimisation techniques – stochastic programming, real option analysis, adaptive pathways, multi-criteria optimisation – overlaid on the least-cost optimal solution. Our optimisation model is run within a web-application developed by HR Wallingford and a database implemented by Mott MacDonald.

Breaking down the problem into manageable pieces
Breaking down the problem into manageable pieces

We broke the problem into two main stages: a risk model for integrating the various uncertainties in the baseline supply and demand throughout the planning horizon; and an optimisation investment model itself that can provide multiple types of output that guide users through their planning process. Users start with potential options (investment schemes) and run a baseline case – the least-cost plan ignoring uncertainties. They then move on to consider: a range of least-cost plans that handle different potential pathways in the future; then a single adaptive plan of selected options that best handles the future uncertainties; and finally, multiple pareto-optimal adaptive solutions that optimise additional metrics.

Careful water planning for all the companies
Careful water planning for all the companies

The project benefited from a close technical relationship between the model developers and WRSE, and investment from Decision Lab itself. The model will support the South East water companies develop their water resource management plans. We hope the model may also help with planning for other parts of the country and even outside the UK, where many regions of the world face significant challenges of future water deficits. The model has huge potential to be adapted to other industries and sectors. According to GSK, the top 3 benefits provided by the modelling activity are: 1. Faster approval timeline – the trust in the modelling outputs has smoothed the stage gate approval of the concept and allowed to move faster into the next project phase. 2. Increased confidence in the amount of equipment required for the new production line that ultimately led to reduction in CAPEX by a double digit number. 3. The ability to evaluate over 200 different business scenarios in a short amount of time. Our tool has the capability to deliver continued value to the project so that in the future it will be possible to further evaluate capacity requirements as function of the demand forecast variability. The model also has the capability to be extended to people and material flow for the final operational layout.

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We’re a team of innovators who are excited about unique ideas and help companies to create amazing solutions.

Infrastructure Water

The Next Generation Water Investment Model

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