Titel_SS06

dam structure and the implications on the safety of the people living in a town down-stream
the power plant.

Reservoir

water level

Load carrying

capacity of

dam structure

Income Costs Consequenceof dam

failure

Probability

of dam

failure

Low MediumLow

High

Small

Low

Medium

High

Small MediumHigh

Low

Medium MediumLow

High

Medium

Low

Medium

High

Medium

High

Medium

Low

High

Low

Medium

High

Large

Low

Medium

High

Large

High

Medium

Low

Table 1.1: Interrelation of benefits, costs and safety for the reservoir.

From, Table 1.1, which is clearly a simplified summary of the complex interrelations of the
various factors influencing the benefit of realizing the power plant, it is seen that the various
factors have different influences and that the different attributes such as income, costs and
safety are conflicting. In the table it is assumed that the medium load carrying capacity of the
dam structure corresponds to a medium probability of dam failure but of course other
combinations are also possible. Consider the case with a high water level in the reservoir. In
this case the potential income is large but the costs of constructing the dam structure will also
be high. Furthermore, the potential consequences in case of dam failure will be large as well.
Table 1.1 clearly points to the true character of the decision problem, namely that the optimal
decision depends on the consequences should something go wrong and moreover the
probability that something goes wrong. The product of these two factors is denoted the risk, a
measure that will be considered in much more detail in the chapters to follow. Furthermore,
not only the load carrying capacity of the dam structure is associated with uncertainty but in
fact as indicated previously also the income expected from the power plant, due to
uncertainties in the future market situation. In a similar way the costs of constructing the
power plant are uncertain as also various difficulties encountered during the construction,
such as unexpected rock formations, delay in construction works due to problems with
material supplies, etc. may lead to additional costs.

When deciding on whether or not to establish the hydraulic power plant it is thus necessary to
be able to assess consequences and probabilities; two key factors for the decision problem.

Both consequences and probabilities vary through the life of the power plant and this must be
taken into account as well. In the planning phase it is necessary to consider the risk
contributions from all subsequent phases of its life-cycle including decommissioning, see
Figure 1.4.