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Contribution type: lightning talk and poster
Modeling investment decision-making in the steel industry under deep uncertainty
Presenter: Philipp Wächter
Description:
Investment decision-making in the steel industry is characterized by an inconvenient combination of long asset lifetimes and deep uncertainty. Parameters such as future H2 prices, CO2 prices, and CCS availability strongly influence the correct choice in steelmaking technology yet remain highly uncertain. Thus, these investment decisions carry considerable risk which investors must navigate.
In this contribution, we explore how modeling investment decision-making under deep uncertainty can provide insight into the steel industry transformation. We investigate which technology choices remain robust across a wide range of scenarios, and which allow steelmakers to retain strategic flexibility.
Using the open-source TEAM framework (Techno-Economic Assessment and Manipulation), we conduct techno-economic assessments of competing steelmaking technologies across a multidimensional parameter space of uncertain parameters. Cost and performance data are drawn from and extended within POSTED (Potsdam Open-Source Techno-Economic Database).
Building on these assessments, we model sequential investment decisions from 2026 to 2050 under many scenarios with different trajectories of uncertain parameters. A myopic NPV-based module selects technologies at each decision point without foresight, such that long asset lifetimes can create path dependencies and lock-ins. The resulting distribution of pathway outcomes is analyzed using Conditional Value at Risk (CVaR) and regret - the difference between the realized and the ex-post optimal outcome in each scenario - capturing downside risk and decision robustness beyond E[NPV]. We present illustrative results comparing technology rankings under expected value and risk-oriented criteria.
Background:
POSTED (Potsdam Open-Source Techno-Economic Database) is a public database of techno-economic data on energy and climate-mitigation technologies, developed at the Potsdam Institute for Climate Impact Research (PIK) as part of the Ariadne project. TEAM (Techno-Economic Assessment and Manipulation) is a companion framework for performing techno-economic assessments using such data. Together, they provide a consistent, open-source pipeline for curating technology cost and performance data and carrying out energy and climate-mitigation analyses.
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