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topics:uncertainty [2026/03/27 22:55] – admintopics:uncertainty [2026/05/28 13:05] (current) – klaus.kubeczko_ait.ac.at
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 <WRAP intro> <WRAP intro>
-Uncertainty is inherent to smart grid transitions and has to do with limited information and predictability of future events. +Uncertainty denotes conditions where there is no sufficient information to assign reliable probabilities to outcomes, ranging from parametric uncertainty (known unknowns) to deep uncertainty around hardly imaginable futures (unknown unkowns).
-</WRAP> +
- +
-<WRAP insight> +
-Smart grid transitions involve deep uncertainty — where probabilities themselves cannot be known — requiring governance responses different from standard risk management tools.+
 </WRAP> </WRAP>
  
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 Energy transitions involve long planning horizons, capital-intensive infrastructure, new actors, and shifting regulatory frameworks. All of this generates both risk and uncertainty in ways that interact and compound. Understanding the difference between the two, and where each comes from in energy systems specifically, is a precondition for designing effective governance responses. Energy transitions involve long planning horizons, capital-intensive infrastructure, new actors, and shifting regulatory frameworks. All of this generates both risk and uncertainty in ways that interact and compound. Understanding the difference between the two, and where each comes from in energy systems specifically, is a precondition for designing effective governance responses.
  
-<WRAP callout> +<WRAP callout> Uncertainty resists calculation, but it can be approached through embracing the inherent diversity of possible futures. </WRAP>
-When decision-makers treat genuine uncertainty as if it were calculable risk, they tend to underinvest in resilience and overestimate the reliability of their forecasts. +
-</WRAP>+
  
 ===== Shared definitions ===== ===== Shared definitions =====
  
-The canonical distinction comes from Frank Knight's 1921 work //Risk, Uncertainty and Profit//.((Knight, F. H. (1921). //Risk, uncertainty and profit//. Houghton Mifflin. https://oll.libertyfund.org/titles/knight-risk-uncertainty-and-profit)) Knight argued that risk applies to situations where the outcome is unknown but the odds are measurable — probabilities can be estimated from prior data or general principles. Uncertainty, by contrast, applies to situations where the odds themselves cannot be known, where no reliable probability distribution can be assigned to future outcomes.+A canonical distinction in economics comes from Frank Knight's 1921 work //Risk, Uncertainty and Profit//.((Knight, F. H. (1921). //Risk, uncertainty and profit//. Houghton Mifflin. https://oll.libertyfund.org/titles/knight-risk-uncertainty-and-profit)) Knight argued that risk applies to situations where the outcome is unknown but the odds are measurable — probabilities can be estimated from prior data or general principles. Uncertainty, by contrast, applies to situations where the odds themselves cannot be known, where no reliable probability distribution can be assigned to future outcomes.
  
-The distinction is not merely academic. In conditions of risk, standard tools of insurance, hedging, diversification, and statistical forecasting can function. In conditions of genuine uncertainty, those tools give false assurance. Institutional economists and governance scholars draw on Knight's distinction to explain why energy system transitions are so difficult to manage: many of the most consequential variables — technology trajectories, political shifts, regulatory change, consumer behaviour at scale — are genuinely uncertain rather than risky in Knight's sense.+In conditions of risk, standard financial tools of insurance, hedging, diversification, and statistical forecasting can function. In conditions of genuine uncertainty, those tools may give false assurance. The distinction between risk and uncertainty from economics helps to explain why energy system transitions are so difficult to manage: many of the most consequential variables — technology trajectories, political shifts, regulatory change, consumer behaviour at scale — are genuinely uncertain rather than risky in Knight's sense.
  
 Drawing on expert stakeholder research in the UK electricity sector, Connor et al. (2018) group the sources of risk and uncertainty in smart grid deployment into seven categories.((Connor, P. M., Axon, C. J., Xenias, D., & Balta-Ozkan, N. (2018). Sources of risk and uncertainty in UK smart grid deployment: An expert stakeholder analysis. //Energy//, 161, 1–9. https://doi.org/10.1016/j.energy.2018.07.115)) Drawing on expert stakeholder research in the UK electricity sector, Connor et al. (2018) group the sources of risk and uncertainty in smart grid deployment into seven categories.((Connor, P. M., Axon, C. J., Xenias, D., & Balta-Ozkan, N. (2018). Sources of risk and uncertainty in UK smart grid deployment: An expert stakeholder analysis. //Energy//, 161, 1–9. https://doi.org/10.1016/j.energy.2018.07.115))
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 ===== Topic notes ===== ===== Topic notes =====
  
-~~DISCUSSION|Discussion~~+~~Discussion~~