(675c) Distributed Decision Making in the Energy-Water Nexus: A Comparison with Centralized and Decentralized Governance

Global energy and water resources are under immense stress owing to the rising population growth accompanied by increased urbanization and industrialization [1]. The energy-water nexus is a concept that is founded on tackling the challenges faced by these resources and their corresponding systems in a holistic manner, which thereby accounts for their interdependence and inter-connectivity [2]. In a conventional context, all sub-systems within the nexus are assumed to have information symmetry and hold the same level of priority when decisions pertaining to their design and operations are made. In other words, there is effectively a single decision-maker that manages the interactions and demands of the nexus constituents simultaneously to meet unified objectives. However, the systems within the nexus realistically have competing objectives that need to be accounted for, with varying levels of priorities, when decisions are made. Furthermore, through this perspective where the sub-systems of the nexus are classically assumed to be in full cooperation, the role and presence of a separate governance entity that can manage these divergent objectives is overlooked.

In this work, the impact of distributed decision-making, where the localized decisions made by the subsystems are coordinated by an independent regulatory entity to achieve overall benefits, is analyzed in the context of the energy-water nexus. Understanding distributed decision-making is pivotal to accurately ascertain the role of governing institutions in enabling synergies within the nexus. Through this approach which essentially combines elements of decentralized and centralized governance approaches, the regulatory authority can still exercise a central influence while decision-making abilities are spread across different nexus subsystems [3]. Therefore, in this work, a separate regulatory authority is factored in with the energy and water supply systems to coordinate their respective functions. Towards this effort, the regulatory authority is set up to introduce subsidies, incentives, and penalties that can influence the design and operations of the nexus to meet set overall economic and environmental targets. The nexus is then formulated to represent the energy and water supply systems to meet their respective demands. The representative energy system is characterized by a framework for the cost-optimal design of a renewable energy supply system with resource and land constraints through appropriate clustering and preprocessing of relevant data [4], while the water system is based on a reverse osmosis desalination plant whose operational behavior is approximated using neural networks [5]. The decisions to be made by the governing authority and the nexus have different levels of priorities that need to be integrated into the mixed-integer mathematical models they represent. To incorporate such hierarchical decision-making, the optimization problems of the two entities are reformulated using a bi-level optimization framework [6]. Here, the decisions of the lower-level entity are set as a multi-parametric programming problem to derive explicit and exact solutions as functions of upper-level decisions. The solutions obtained in terms of these variables are then incorporated into the upper-level entity’s optimization problem and solved as a single level problem. In this manner, we present a multi-level framework for distributed decision-making, where the nexus, aimed to minimize overall costs while meeting resource demands, has distinct priorities from those of the governing authority, intended to minimize the environmental impact of the nexus through regulatory frameworks directed towards promoting sustainable practices and relieving stresses on resources.

References:

1. J. Garcia, F. You, 2016, The water-energy-food nexus and process systems engineering: A new focus, Computers & Chemical Engineering, 91, 49-67
2. Liu, V. Hull, H.C.J. Godfray, D. Tilman, P. Gleick, H. Hoff, C. Pahl-Wostl, Z. Xu, M. Gon Chung, J. Sun, S. Li, 2018, Nexus approaches to global sustainable development, Nature Sustainability, 1, 466-476.
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6. Avraamidou, E. N. Pistikopoulos, 2022, Multi-Level Mixed-Integer Optimization, De Gruyter, Germany.