Project uncertainty

The key difference between the EU ETS and other trading programmes is that the cutbacks negotiated have been well within the range of projection uncertainty. This inevitably creates price volatility if, as has been the case before, emissions turn out to be lower than the projected basis upon which allocations are made. 

Auctioning may also provide a hedge against projection uncertainties, reduce price volatility, and increase investor stability. The recent EU ETS market collapse is a dramatic manifestation of uncertainty in emission projections. Reserving some allowances for periodic auctions ... 

Uncertainty is reality in pharmaceutical development projects. Project uncertainty can be found in ... 

DeMeyer, A., Loch, C. H., and Pich, M. T., Managing Project Uncertainty From Variation to Chaos, MIT Sloan Management Review, 60-67, Winter 2002. 

A. C. W. M. Vrouwenvelder, Project uncertainty-analysis. Delft, TNO 97-CON-R0935 (1997). 

Predicting future cash flows for a project is extremely difficult with many uncertainties, including the project life. However, providing that consistent assumptions are made, projections of cash flows can be used to choose between competing projects. 

In the feasibility phase the project is tested as a concept. Is it technically feasible and is it economically viable There may be a number of ways to perform a particular task (such as develop an oil field) and these have to be judged against economic criteria, availability of resources, and risk. At this stage estimates of cost and income (production) profiles will carry a considerable uncertainty range, but are used to filter out unrealistic options. Several options may remain under consideration at the end of a feasibility study. 

At each phase of a project cost information is required to enable decisions to be taken. In the conceptual phase these estimates may be very approximate (e.g. + 35% accuracy), reflecting the degree of uncertainty regarding both reservoir development and surface options. As the project becomes better defined the accuracy of estimates should improve. 

The uncertainty may be addressed by constructing a base case which represents the most probable outcome, and then performing sensitivities around this case to determine which of the inputs the project is most vulnerable to. The most influential parameters may then be studied more carefully. Typical sensitivities are considered in Section 13.7, Sensitivity Analysis . 

As discussed in Section 13.2, the technical, fiscal and economic data gathered to construct a project cashflow carry uncertainty. An economic base case is constructed using, for example, the most likely values of production profile and the 50/50 cost estimates, along with the best estimate of future oil prices and the anticipated production agreement and fiscal system. 

Economy of time and resources dictate using the smallest sized faciHty possible to assure that projected larger scale performance is within tolerable levels of risk and uncertainty. Minimum sizes of such laboratory and pilot units often are set by operabiHty factors not directly involving internal reactor features. These include feed and product transfer line diameters, inventory control in feed and product separation systems, and preheat and temperature maintenance requirements. Most of these extraneous factors favor large units. Large industrial plants can be operated with high service factors for years, whereas it is not unusual for pilot units to operate at sustained conditions for only days or even hours. 

Minimills and other EAF plants ate expanding iato flat-roUed steel products which, by some estimates, requite 50—75% low residual scrap or alternative raw material. Up to 16 million t of new capacity are expected to be added ia the United States between 1994 and 2000 (18). Developments ia other parts of the world also impact scrap use and supply. Possible scrap deficiencies of several million tons have been projected for EAFs ia East Asia and ia parts of Europe. This puts additional strains on the total scrap supply, particularly low residual scrap (19,20). The question of adequate supply of low residual scrap is always a controversial one. Some analysts see serious global shortages ia the first decade of the twenty-first century others are convinced that the scrap iadustry has the capabiUty to produce scrap ia the quantities and quaUty to meet foreseeable demand. This uncertainty ia combination with high scrap prices has led to iacreased use of scrap alternatives where the latter is price competitive with premium scrap. Use of pig iroa has iacreased ia EAF plants and mote capacity is being iastaHed for DRI and HBI outside the United States. 

The problem is defined during process development as information becomes available and decisions are made. Initially, the definition is limited, vague, and brief and economic analysis involves a high level of uncertainty. As the project evolves, the definition becomes more complete, more highly specific, and lengthier. At the same time, the economic assessment tends to exhibit less uncertainty. 

The accuracy of a fixed capital estimate tends to be a function of the design effort involved. As the project definition is refined, the estimates evolve from the various preliminary phases, ie, order of magnitude, predesign, factor estimates, etc, into the more detailed estimates used for budget authorization, project control, and contracts. At the same time, the uncertainty in the estimate decreases from 50% to as Htfle as 5%. 

Risk and Uncertainty Discounted-cash-flow rates of return (DCFRR) and net present values (NPV) for future projects can never be predicted absolutely because the cash-flow data for such projects are subject to uncertainty. Therefore, when stating predicted values of (DCFRR) and (NPV) for projects, it is also desirable to give a measure of confidence in the predictions. 

When setting the goals of a measurement project, it has to be asked, What exactly has to be determined. What are the final quantities required and what is the inaccuracy that can be tolerated in these quantities Only when these factors are known can an analysis be made, where the quantities to be measured and the measurement accuracy of each quantity are defined. This analysis is based on the mea surement method selected, and on the computation of measurement uncertainties. Usually the analysis of measurement uncertainties is made after monitoring however, making it beforehand is part of good planning practice. This approach ensures that the correct information with the desired accuracy is achieved. 

The projection of future emissions of fossil fuel CO2 is subject to a number of uncertainties. The growth rate has already shown great variations and the reserves of fossil fuels are not... 

Keywords Climate change. Climate projections. Downscaling, Mediterranean, Uncertainties... 

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