Abstract. Water infrastructure investment planning must consider the interdependencies within the water–energy–food nexus. Moreover, uncertain future climate, evolving socio-economic context, and stakeholders with conflicting interests, lead to a highly complex decision problem. Therefore, there is a need for decision support tools to objectively determine the value of investments, considering the impacts on different groups of actors, and the risks linked to uncertainties. We present a new open-source hydro-economic optimization model, incorporating in a holistic framework, representations of the water, agriculture, and power systems. The model represents the joint development of nexus-related infrastructure and policies and evaluates their economic impact, as well as the risks linked to uncertainties in future climate and socio-economic development. We apply the methodology in the Zambezi River basin, a major African basin shared by eight countries, in which multiple investment opportunities exist, including new hydropower plants, new or resized reservoirs, development of irrigation agriculture, and investments into the power grid. We show that it is crucial to consider the links between the different systems when evaluating the impacts of climate change and socio-economic development, which will ultimately influence investment decisions. We find that climate change could induce economic losses of up to USD 2.3 billion per year in the current system. We show that the value of the hydropower development plan is sensitive to future fuel prices, carbon pricing policies, the capital cost of solar technologies, and climate change. Similarly, we show that the value of the irrigation development plan is sensitive to the evolution of crop yields, world market crop prices, and climate change. Finally, we evaluate the opportunity costs of restoring the natural floods in the Zambezi Delta; we find limited economic trade-offs under the current climate, but major trade-offs with irrigation and hydropower generation under the driest climate change scenario.

Water, energy, and agricultural infrastructure investments have important inter-relations fulfilling potentially competing objectives. When shaping investment plans, decision makers need to evaluate those interactions and the associated uncertainties. We compare planning infrastructure under uncertainty with an integrated water-energy-food nexus framework and with sector-centered (silo) frameworks. We use WHAT-IF, an open-source hydroeconomic decision support tool with a holistic representation of the power and agriculture sectors. The tool is applied to an illustrative synthetic case and to a complex planning problem in the Zambezi River Basin involving reservoirs, hydropower, irrigation, transmission lines and power plant investments. In the synthetic case, the nexus framework selects investments that generate more synergies across sectors. In sector-centered frameworks, the value of investments that impact multiple sectors (like hydropower, bioenergy, and desalinization) are under- or overestimated. Furthermore, the nexus framework identifies risks related to uncertainties that are not linked to the investments respective sectors. In the Zambezi river case, we find that most investments are mainly sensitive to parameters related to their respective sectors, and that financial parameters like discount rate, capital costs or carbon taxes are driving the feasibility of investments. However, trade-offs between water for irrigation and water for hydropower are important; ignoring trade-offs in silo frameworks increases the irrigation expansion that is perceived as beneficial by 22% compared to a nexus framework that considers irrigation and hydropower jointly. Planning in a nexus framework is expected to be particularly important when projects and uncertainties can considerably affect the current equilibrium.

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Abstract. Water infrastructure investment planning must consider the interdependencies within the water-energy-food nexus. Moreover, uncertain future climate, evolving socio-economic context, and stakeholders with conflicting interests, lead to a highly complex decision problem. Therefore, there is a need for decision support tools to objectively determine the value of investments, considering the impacts on different groups of actors, and the risks linked to uncertainties. We present a new open-source hydroeconomic optimization model, linking in a holistic framework, representations of the water, agriculture, and power systems. The model represents the joint development of nexus-related infrastructure and policies and evaluates their economic impact, as well as the risks linked to uncertainties in future climate and socio-economic development. We apply the methodology in the Zambezi River Basin, a major African basin shared by eight countries, in which multiple investment opportunities exist, including new hydropower plants, new or resized reservoirs, development of irrigation agriculture, and investments into the power grid. We show that the linkage of the different systems is crucial to evaluate impacts of climate change and socio-economic development, which will ultimately influence investment decisions. We find that climate change could induce economic losses up to 2.3 billion dollars per year on the current system. We show that the value of the hydropower development plan is sensitive to future fuel prices, carbon pricing policies, the capital cost of solar technologies, and climate change. Similarly, we show that the value of the irrigation development plan is sensitive to the evolution of crop yields, world market crop prices and climate change. Finally, we evaluate the opportunity costs of restoring the natural floods in the Zambezi delta; we find limited economic trade-offs under the current climate, but potentially major trade-offs with irrigation and hydropower generation under climate change.