Methodology

Flood risk investment study

Project Stages

1
Represent Flood
Risk
2
Represent Future
Scenarios
3
Represent Flood Interventions
4
Quantify Flood Impacts and Benefits of Interventions
5
Quantify Costs (£ and Carbon)
6
Calculate Optimal
Investment
7
Review and evaluation of methods
Hydrology
Economic
Adaptive Approach
Reviewing Our Methods

Hydrology

The study modelled current and future flood risk from both rivers and surface water, including tidally influenced river reaches. It also considered and brought together modelled housing/industry growth projections and climate change scenarios to attempt to understand the impact of flood risk now and into the future. The studies geography spans three significant river catchments; the Nene, the Great Ouse and the Thames. A flood risk modelling approach was needed that would provide sufficient local detail but that could be applied and analysed on a regional scale.
Existing in-channel water level data was combined with representative hydrograph profiles in a full hydrodynamic floodplain model. Peak water levels were identified from the State of the Nation Database (SoN 2018) and were used to provide a consistent set of levels across the study area. An industry standard 2D hydraulic model was used to represent how floodwater spreads across the floodplain. Verification checks with local models (where available) did identify some inconsistencies, however, for the purpose of this regional scale study the SoN water levels were considered adequate. It should be noted that the flood modelling approach taken is suitable for economic analysis only, this is due to the number of assumptions made to allow for the large geographical scale modelled.
Four types of flood risk interventions were considered: flood storage, Natural Flood Management linear, defences (NFM), and property level resilience (consisting of a generic combination of flood gates, non-return valves, and airbrick covers). Specific planned interventions were not considered. It should also be noted that this study is wholly desk based and as such deliverability testing of these interventions within the study area has not been undertaken.

Economic

The economic impacts of flooding and the benefits of flood risk interventions through damages avoided were calculated. This was compared against the capital and maintenance costs of the interventions. There is enormous uncertainty around future climate change and the location and level of housing and infrastructure development. As such a range of 29 future climate and growth scenarios were considered in this study.
It is important to be aware of some key assumptions made in the economic assessment as follows:
  • Net present value metrics are reported in 2020 prices and values unless otherwise stated
  • Discounting is undertaken in line with the HM Treasury Green Book1 principles (3.5% per annum for the majority of categories other than for life and health impacts at 1.5%)
  • A consistent appraisal period for the investment pathways was set to allow for comparison. Specific flood interventions have an appropriate assumed lifespan. For new development related impacts, a shorter lifespan is used to reflect best practice. This will ensure a level playing field for the different pathways
  • All cost and benefit values are produced at factor (unit costs) or market prices. It is assumed that present day costs and impacts are applicable over the length of the study period (100 year).

Adaptive approach

Different combinations of flood risk protection investment options were analysed to identify the optimum/best economic return over the next 100 years. An adaptive approach works on the premise that because the future is uncertain, if you gamble on a singular future happening, you will be wrong. Instead, it encourages you to keep your options open so that you can allow for adjustment in the future depending on the future reality while still gaining the benefits of planning and investing ahead of time. By applying adaptive planning in this instance, it allows more robust decision making which considers a range of future risks and has helped highlight early flood risk investment opportunities where the evidence has identified no regrets options which will always be cost beneficial despite the uncertain future.
In this project, consideration beyond the suite of individual optimums is made via a ‘real options analysis’, which is defined in the Green Book (HM Treasury, 2022). This real options analysis implicitly accounts for the flexibility, robustness, and lost opportunity of interventions, through the effect they have on the weighted net present value under all futures. For example, the net present value of a near-term intervention which only provides good value in half of the futures will be ‘dragged down’ by a negative net present value in the futures in which it does not provide good value.
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