The Palisade Academic
UK Department of Energy and Climate Change uses @RISK for carbon emission targets

UK Department of Energy and Climate Change uses @RISK for carbon emission targets

The UK government’s Department of Energy and Climate Change (DECC), is tasked with maintaining secure and economic energy supplies for the UK, while ensuring that the UK’s greenhouse gas emissions meet international targets set to combat climate change.

To monitor carbon budgets, the Central Modelling Team at the DECC undertakes annual projections of energy use and emissions by modelling both overall UK energy demand and the electricity supply system and calculating the emissions based on the fuels used. These projection figures are uncertain however, due to variation in each of the economic and technical inputs used in the models.

DECC uses @RISK to explore the overall effects of these uncertainties and estimate the probabilities of not meeting the carbon budget.

“@RISK has all the sophisticated functionality required for Monte Carlo modelling, but is straightforward to use,” explains Dr Roger Lampert from the DECC Central Modelling Team. “Before adopting Monte Carlo modelling, the custom was to use scenario analysis. Using @RISK we can now use the statistical properties of the input data to better represent the full spectrum of possible model inputs. Consequently. we have more insight into the spectrum of outputs. The statistical rigour of the modelling gives us much more confidence in the level of uncertainty of our emissions estimates and therefore the UK’s ability to meet the carbon budgets.”

» Read the complete case study here

How are you using Palisade software in your research and classroom? We'd love to hear your story.

New Book: Business Risk and Simulation Modelling in Practice: Using Excel, VBA and @RISK (The Wiley Finance Series)

This new first edition text from the Wiley Finance Series is a complete guide to the principles and practice of risk quantification for business applications. Author Michael Rees, an expert on risk management and modeling, utilizes @RISK extensively to illustrate points and perform analyses. The book is unique in its coverage of the theory, context, and approaches to risk management and modeling issues. Nearly 100 practical, real-life models are provided to demonstrate key concepts.

» Learn more and order Business Risk and Simulation Modelling in Practice

Business Risk and Simulation Modelling in Practice: Using Excel, VBA and @RISK (The Wiley Finance Series)
Licensing Options

There are three easy ways to get the DecisionTools Suite for your students:

Course Licenses available from Palisade. These are economical, annually renewing bulk licenses for both
network lab and laptop installation.
» Learn more

Student Versions from Palisade. These are 12-month versions available for purchase individually by students through either the Palisade web site or the school store.
» Learn more

Textbook Editions available bundled with textbooks.
These are time- and model-limited licenses.
» Learn more

Get DecisionTools Suite 7.5 for your course by contacting:

AddressPalisade Academic Sales
800-432-7475 / 607-277-8000

Teaching Tips & Examples

Safety Stock and Combining Warehouses

Excerpted from RISKOptimizer for Business Applications by Roy Nersesian, Published by Palisade Corporation

Determining an optimal amount of safety stock to keep on hand in your warehouse can be difficult to estimate because demand doesn’t stay constant. In this example, Roy Nersesian discusses using RISKOptimizer to estimate the amount of safety stock needed to prevent stock outs as well as estimate inventory when combining warehouses. He walks through the concepts behind each challenge and explains how to calculate reorder point to avoid dipping into the desired amount of safety stock.

» Download the example file
» Learn more about RISKOptimizer

Tech Tip of the Month

Best Fit for Small Data Sets 

How does @RISK handle fitting small data sets?

A: In @RISK 6.x-7.x, the default statistic for measuring goodness of fit is AIC (more specifically, AICc). For small data sets, the AIC calculation strongly prefers distributions with fewer parameters. (This is an application of the principle of parsimony.) When doing a fit on {1,2,3,4,5} as discrete data, you will notice that @RISK prefers a RISKPoisson distribution, even though the RiskIntUniform is clearly a better fit. The Poisson distribution is a one-parameter distribution, and the uniform integer distribution (RiskIntUniform) is a two parameter distribution. The AIC statistic’s preference for distributions with fewer parameters trumps the poorer likelihood functions suggested for such a small data set. So, how should you handle working with such a small data set?

Here are three options:

  • For small data sets, consider changing Fit Ranking to BIC. Although BIC also favors distributions with fewer parameters, it doesn't favor them as strongly as AIC does. (Please see attached illustration.)
  • Refrain from taking the first listed fit, instead examine the fitted distributions. Your data probably won't show the kind of dramatic difference that we got from this artificial data set, but you may find that a fit that doesn't have the best statistic actually does a better job in a particular region of the graph that you care most about.
  • Use more data points. @RISK does allow fitting to as few as five data points. But in general, the more points you have, the better the fitted distribution will match the true theoretical distribution that those points represent. Extending this made-up data set, with as few as nine points {1,2,3,4,5,6,7,8,9} @RISK computes the smallest AIC statistic for the integer uniform distribution.

» Fit Comparison Excel Download
» View other Techniques and Tips

Featured White Paper

Obesity and Life Expectancy with and without Diabetes in Adults Aged 55 Years and Older in the Netherlands: A Prospective Cohort Study
Dhana K., Nano J., Ligthart S., Peeters A., Hofman A., Nusselder W., et al. PLoS Med 13(7): e1002086. doi:10.1371/journal.pmed.1002086 (2016).

Overweight and obesity are associated with increased risk of type 2 diabetes. Limited evidence exists regarding the effect of excess weight on years lived with and without diabetes. This study aimed to determine the association of overweight and obesity with the number of years lived with and without diabetes in a middle-aged and elderly population. Palisade’s @RISK is used to calculate the confidence interval of life expectancy estimates for individuals who were normal weight, overweight, and obese and the difference in years lived with and without diabetes.

Palisade Corporation  Read the paper here

Palisade Corporation

The Academic Global Leader in
Risk and Decision Analysis
Palisade Corporation is the world's leading provider of risk and decision analysis software and solutions. Founded in 1984, its products @RISK and the DecisionTools Suite are used by over 95% of the Fortune 100, in nearly every industry around the world. Palisade is headquartered in New York State, and has offices in London, Sydney, Rio de Janeiro, and Tokyo.

What is The DecisionTools Suite?
The DecisionTools Suite is the world’s only integrated set of risk and decision analysis programs. The Suite includes @RISK for Monte Carlo simulation, BigPicture for mind mapping and data exploration, PrecisionTree for decision trees, and TopRank for “what if” sensitivity analysis. In addition, DecisionTools Suite comes with StatTools for statistical analysis and forecasting, NeuralTools for predictive neural networks, and Evolver and RISKOptimizer for optimization. All programs work together seamlessly, and all integrate completely with Microsoft Excel for ease of use and maximum flexibility.

The Suite is offered in three affordable and flexible licensing options for those in academia: Student Versions, Course Licenses and Full Academic Versions.

» Schools using Palisade software
Textbooks using Palisade software

In This Issue

» UK Department of
   Energy and Climate
   Change uses @RISK for
   carbon emission targets

» Licensing Options

» Teaching Tips &

   Safety Stock and
   Combining Warehouses

» Tech Tip
   Best Fit for Small Data Sets

» Featured White Paper
   Obesity and Life Expectancy
   with and without Diabetes in
   Adults Aged 55 Years and
   Older in the Netherlands:
   A Prospective Cohort Study

» About Palisade and the
   DecisionTools Suite

Keep in Touch
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2016 Palisade Risk Conferences
An intensive networking and software training event presented by Palisade trainers and consultants, with real-world case studies presented by industry experts.

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