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Optimising investment planning through adaptive management

As the water sector navigates a raft of different pressures – including climate change, population growth and managing ageing assets – it can be difficult for businesses to know when and how to allocate capital investment to achieve the best possible outcome.

One Queensland utility is branching into a novel ‘adaptive management’ approach to investment planning in order to ensure adaptation efforts are executed as effectively as possible.

Set to present at Ozwater’24 on Urban Utilities’ approach to adaptive planning and management for water cycle resilience, Strategic Asset Planning Manager Zac Foy said adaptive planning has begun to be normalised as a core part of investment planning in Australia.

“Over the past couple of decades, adaptive planning has emerged and been taken up by the water industry in Australia and globally. It is strongly applied now across Australia as typical to the way we do our investment planning,” he said.

“Urban Utilities has been through an operating model change, which resulted in a material improvement to the way in which we do our investment planning. We have moved away from a traditional master planning approach to integrated planning, and have incorporated adaptive planning throughout.

“Traditional planning would involve network and treatment plant capacity assessments, understanding where our constraints are, looking at our service performance, and upgrading assets in order to deliver improved performance.

“Adaptive planning is different. It allows us to identify a preferred pathway with a set of certain interventions, but it also allows us to think more broadly and understand our strategic uncertainties and how they might impact our preferred investment pathway.”

By keeping an eye on potential shocks and trends, Urban Utilities is able to find the best ways to invest to mitigate risks effectively, Foy said.

“There are a huge number of challenges we are facing as an industry. Whether it's an aging asset base, or climate change in the short or long term,” he said.

“Adaptive planning is a way we can plan for the extremes of those situations and optimise our investment to allocate funds where it maximises benefit to our performance. It’s about keeping options open and identifying where our tipping points may be in order to respond proactively, rather than reactively.”

Managing adaptation

Developing an adaptive pathways map has been a critical step in Urban Utilities’ journey towards adaptive management, Foy said, particularly in terms of accounting for potential shocks and trends in the long term.

“From an adaptive planning perspective, one of the main things we’ve generated is an adaptation pathways map. It helps us understand shocks, trends and the timing of different decisions, and shows all the pathways from a specific plan relevant to a catchment zone,” he said.

“We are routinely applying adaptive planning, but we are now taking the next step by considering how we can actively manage our investment portfolio at a sewer catchment and water supply zone level. It’s about stepping from planning into management as we move forward.”

Foy said the aim is to create a more proactive approach by monitoring how forecast performance tracks against actual outcomes, and then taking the opportunity to reevaluate the adaptation plan accordingly.

“In the absence of this transition, an adaptation plan will be produced as part of our integrated plan, it will be endorsed by the business, and then it would likely sit on a shelf until planning is next revisited. Previously the integrated planning team might reassess the plan on a time-based cycle such as a three- or five-year cycle,” he said.

“We are trying to move away from that time-based rigor and start to employ adaptive pathway monitoring, where we are actively monitoring and evaluating our planning outcomes. It’s about creating tools to visualise the adaptation pathways map, so it's not a static image that sits inside a planning document.

“We keep an eye on those tipping points or decision deadlines, and we monitor them as we move forward. We forecast performance outcomes and have started to monitor water cycle performance more accurately, year on year.

“If we are tracking well in terms of our plan, there is no need to adapt. But if we see that our actual performance is not tracking with our forecast, we then investigate. It could trigger the need for us to go back to our plan and work through a major update.”

Balanced investment

Foy said effective investment allocation is at the heart of adaptive management – it’s a process that enables clearer decision making with the aim of avoiding over or under investment.

“There is always a risk that we will allocate funds to projects that are justified based on forecasts or modelling which we may find can ultimately be deferred when the time comes to commence work. Population growth is a great example of that. If populations aren't growing in the areas as expected, or aligned to the planning basis, we risk overcapitalising unnecessarily,” he said.

“Adaptive management allows us to track population growth and validate that through data sets, and then adjust the investment plan to account for any difference.

“But there are also issues with under allocation of capital. How much investment is enough for climate change adaptation? How far do we go? It’s a really long-term challenge.

“The beauty of adaptive management is that it allows us to avoid over captialising and reallocate those funds to more strategic, insight-based challenges, like climate change adaptation projects.”

During his presentation at Ozwater’24, Foy will discuss how Urban Utilities has leveraged strategic foresight relating to potential shocks and trends, including adapting assets to deal with the various expected impacts of climate change.

“We have climate change adaptation works underway for some of our pump stations. We have lifted switchboards above flood heights to adapt to flood risk and are considering the potential future impact on these levels associated with sea level rise,” he said.

Interested in learning more about Urban Utilities’ approach to adaptive management? Register for Ozwater’24 here.