A probabilistic approach to cost and duration uncertainties in environmental decisions
- Sandia National Labs., Albuquerque, NM (United States)
Sandia National Laboratories has developed a method for analyzing life-cycle costs using probabilistic cost forecasting and utility theory to determine the most cost-effective alternatives for safe interim storage of radioactive materials. The method explicitly incorporates uncertainties in cost and storage duration by (1) treating uncertain component costs as random variables represented by probability distributions, (2) treating uncertain durations as chance nodes in a decision tree, and (3) using stochastic simulation tools to generate life-cycle cost forecasts for each storage alternative. The method applies utility functions to the forecasted costs to incorporate the decision maker`s risk preferences, making it possible to compare alternatives on the basis of both cost and cost utility. Finally, the method is used to help identify key contributors to the uncertainty in forecasted costs to focus efforts aimed at reducing cost uncertainties. Where significant cost and duration uncertainties exist, and where programmatic decisions must be made despite these uncertainties, probabilistic forecasting techniques can yield important insights into decision alternatives, especially when used as part of a larger decision analysis framework and when properly balanced with deterministic analyses. Although the method is built around an interim storage example, it is potentially applicable to many other environmental decision problems.
- Research Organization:
- Sandia National Laboratory
- DOE Contract Number:
- AC04-94AL85000
- OSTI ID:
- 469808
- Report Number(s):
- CONF-960804--Vol.1
- Country of Publication:
- United States
- Language:
- English
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