Predictions show that pressure on already limited water and energy resources is expected to increase in many parts of the world as a result of growing populations, rapid urbanization, increasing pollution and climate change impacts. With water and energy playing a critical role in socio-economic development, ensuring resource security is a top policy concern. However, achieving this efficiently requires taking into account the various links between the two sectors through their joint management. Feedback between the water and energy sectors exists across system life-cycles and links the resources both spatially and temporally. Tracking the impacts of policies made in one sector on the other can thus be complicated and several 'nexus' methodologies have been developed to try and address these issues. However, the different physical, temporal and spatial characteristics of the water and energy systems present several hurdles in analyzing the two resources simultaneously. This paper overcomes many of these problems with a new, fully coupled water-energy optimization model. Based on a review of contemporary literature, the model develops an original methodology to hard-link the two systems in detail across spatial and temporal scales, as well as between individual system processes throughout the life-cycle of each resource. In addition, the model also tracks changes in water quality through each process, allowing for detailed accounting of the energy needs for water treatment. The methodology proposed in this paper can be used to investigate various cross-sectoral issues and policies such as: water availability and temperature impacts on power plant cooling; emission constraint and biofuel expansion planning impacts on water resources; and the implications of water infrastructure expansion on the energy system. The capabilities of the coupled model are investigated in an example case study for Spain. An integrated approach is shown to have several benefits including lower total costs, better resource efficiency and improved robustness for a wide range of variations in several uncertain parameters. Coupled water-energy planning thus provides a critical opportunity to improve resource security and prevent inefficient decisions which could exacerbate problems even further.

The governance of renewable electricity in Europe beyond 2020 is still uncertain. The only certain aspects are that national level targets will be abolished beyond 2020, and that most renewable electricity support schemes will take the form of competitive bidding. The objective of this paper is to assess the impact of policy choices, the so-called Design Elements, related to renewable electricity support schemes on social welfare. Presently, simulation and optimisation models are commonly applied for assessing the value of policy choice. Typically however, such models do not account for bounded rationality, and true uncertainty in investment decisions, and assume perfect information. However such assumptions can hardly be expected to hold in the real-world, especially in sectors where investment decisions which happen under knowledge of past trends and imperfect foresight, are a major determinant of welfare outcomes. The approach employed in this work is fundamentally different in that firstly, there is a shift from a ‘policy’ view to a ‘design element’ based approach of renewable electricity support assessment, and secondly investment decisions are simulated using agent-based modelling. We find that the combination of design elements that provides the highest increase in social welfare is the quantity warranty, with electricity market price accounted for ex-ante, and with technology specificity. Given the current debate on the governance of renewable energy generation in the European Union beyond 2020, the present paper offers guidance to policy makers and analysts who would like a better understanding of the relationship between policy design and social welfare.