This paper presents and applies a simulation-based methodology to assess the value of flexible decentralized engineering systems (i.e., the ability to flexibly expand the capacity in multiple sites over time and space). This work differs from others by analyzing explicitly the tradeoffs between economies of scale (EoS) — which favors building large capacity upfront to reduce unit cost and accommodate high anticipated demand — and the time value of money — which favors deferring capacity investments to the future and deploying smaller modules to reduce unit cost. The study aims to identify the best strategies to deploy capacity of complex engineered systems over time and improve their economic lifecycle performance in the face of uncertainty. This study is illustrated using a waste-to-energy system operated in Singapore. The results show that a decentralized design with the real option to expand the capacity in different locations and times improves the expected net present value by more than 20% under the condition of economies of scale α = 0.8 and discount rate λ = 8%, as compared to a fixed centralized design. The results also indicate that a flexible decentralized design outperforms other rigid designs under certain circumstances since it not only reduces transportation costs, but also has the advantage of flexible deployment strategies, such as deferring investment and avoiding unnecessary capacity. The results help designers and managers better compare centralized and decentralized design opportunities and to recognize the value of flexible decentralized designs in small-scale urban environments. The example also provides guidance for applying flexibility to a wider range of complex engineered systems and to determine the best strategies for deploying the capacity of systems in other urban contexts.

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