Trade-off Analysis

• Basic questions
– “Are the solutions that are being suggested as
good as possible, i.e., are they on the frontier?”
– “How much must I give up to get a little more
of what I want most?”

– Pareto Optimality
 Pareto

Dominated Alternatives

Attribute 1

Pareto Superior Alternatives

Attribute 2
 Trade-off Analysis: Attributes
• Quantifiable characteristics of the problem
• “How could / would we define a bad /
worse; good / better outcome?”
– Reduced cost of service
– Improved reliability in delivery
– Reduced air emission
– Less use of land
– No use of Chlorine in the production process
Trade-off Analysis: Uncertainties
• Events over which the analyst has no
control
• “… it might but then again…”
– International economic conditions
– International oil prices
– Regulatory change
– Resource ($; land; human skills …) Availability
 Trade-off Analysis: Options
• Actions that could / can be taken
• “We can build / buy / legislate / regulate …”
– Build a new power plant
– Invest in energy conservation / demand side
management
– Purchase scrubbers for old power plants
– Close the power plants and build new clean
plants
– Move all power generation “off shore”
 Trade-off Analysis: Scenarios
• Combining the options into a set of rational
plans that can be analyzed
• “What could / can actually be done given
reality and resource constraints?”
– Give growth in demand (and uncertainty)
• Close the dirtiest power plant, added one new, clean
unit and invest $100 million in demand side
management.
• Invest in scrubbers for all old plants and build one
new, high efficiency, clean power plant (no DSM)
 Trade-Off Analysis: Example
$500 million Build 2 new nuclear
for DSM plants

$300 million
for DSM and
1 new power plant

Cost Scrubbers on all

$/ kWh old units

$100 million
for DSM close 1
No DSM Close 2;
plant, Scrubbers on
Build 1; Scrubbers on
all others
units operating > 35%
of the time.

Tonnes of Sox Emissions

 Trade-Off Analysis: Example 2
$500 million
for DSM

Scrubbers on all
old units
Build 2 new nuclear
plants
Cost $300 million
$/ kWh No DSM Close 2;
for DSM and
1 new power plant Build 1; Scrubbers on
$100 million units operating > 35%
for DSM close 1 of the time.
plant, Scrubbers on
all others

Tonnes of Nox Emissions

 Trade-Off Analysis:
Example of Uncertainty
Increased International
Oil Prices

Cost
$/ kWh

Tonnes of Sox Emissions

 The Policy-Making Process
Problem Policy Cast of
Definition Instruments Characters
Identify Analyst's Stakeholder
Issues Frame Frames

Analysis
Historical Analytic Decision
Why, How Methods Makers
Current Identify the Influence
Conditions Options Brokers

Definition of Definition of Definition of

Needed Change Options &Means Constituency

Definition of Identification of
Strategy Impediments

Evaluation of
Impediments

Implementation
Tactical Plan

Negotiations
Regulation Legislation
Enforcement
 Policy Analysis: “Truths”
• Question / challenge the assumptions
• THE forecast is always wrong
• Communication is the key: Make it more
understandable not more complicated
• Measure the important variables not the
variables that are easy to measure