Incremental climate change and the related changes in the patterns of extreme weather events will increasingly affect the energy sector over the coming decades. Many components of the energy supply infrastructure (thermal, nuclear and hydropower plants, pipelines, etc.) incur large upfront investment costs and have long economic lifetimes. Their economic performance is fundamental for the investors and their services (electricity, heat, fuels) are indispensable for the society and the economy. This raises a wide range of adaptation decisions ranging from regulatory and design standards to investment decisions for climate proofing new builds and operating decisions of existing infrastructure. A broad range of decision making tools can be used to assess adaptation options and to provide substantial information for policy makers involved in adaptation decisions at various levels.

This presentation will assess a range of economic decision tools with a view to their potential applicability in adaptation decisions in the energy sector. The tools include decision analysis, cost-benefit analysis, cost-effectiveness analysis, and portfolio theory. The choice among them is largely determined by the role of the user in making adaptation decision in the energy sector: owner/operator of a power plant; manager of a utility with a broader set of assets, regional or national energy sector regulator responsible for reliable supply of energy, and other conditions and criteria.