Significant investment will be needed in integrating energy and water systems. However, there are risks and uncertainties associated with ESI technologies, policy, prices, market evolution, weather and climate that can have a substantial effect on financial performance and the timing of investments (Yang et al., 2008). These effects are not well-represented in traditional deterministic discounted cash flow investment models estimating expected revenue streams (Dixit and Pindyck, 1994). This WP will develop models of energy investment that consider the inherent risk and uncertainty of integrated energy system technologies using Real Options Analysis (ROA), which is a known technique in corporate finance but has been limited in its application to the energy sector (Fernandes et al., 2011; Devine et al., 2014). It will use this framework and other methods to assess different hedging and support strategies to mitigate the risks associated with ESI and future markets to achieve socially-optimal levels of integrated energy system investment.