A multi-objective decision-making framework for the choice between mutually exclusive alternatives under uncertainty: Assessing the competitiveness of offshore wind for a gas field electrification on the NCS

Abstract

Due to rising concerns about climate change and anticipated energy demand increase the Norwegian government advocates for floating offshore wind to decarbonize its oil and gas industry on the Norwegian continental shelf (NCS). To realize this endeavor, small-scale projects are vital for driving technological innovation and cost reduction without incurring the risk of extensive losses. As floating wind is an immature technology, the relevant investment decision is complicated by a highly uncertain commodities market and strengthening environmental regulations. Hence, when making an investment decision, the operator should also consider objectives that are beyond economic value. In this work, we analyze the factors affecting the attractiveness of the floating offshore wind as means to decarbonize brownfield projects on the NCS by applying a multi-objective decision support system for corporate decision-makers. We develop a decision-making framework representing a stepwise approach for decision support based on qualitative and quantitative assessment. In this paper, we combine tools from multi-objective decision analysis and real options valuation to develop a decision framework addressing managerial flexibility under uncertainty. The framework allows for the choice between mutually exclusive alternatives considering multiple objectives and sources of uncertainty. By applying the framework to a case study on the NCS, our findings suggest that higher carbon payments do not enhance the attractiveness of OWFs, underscoring the importance of policy changes such as increased subsidies and cost reductions for promoting investments in the OWFs.