With a growing urbanisation and the emergence of climate change, the world is facing a more water constrained future. This phenomenon will have direct impacts on the resilience and performance of energy sector as water is playing a key role in electricity generation processes. As energy is becoming a thirstier resource and the pressure on finite water sources is increasing, modelling and analysing this closely interlinked and interdependent loop, called 'water-energy nexus' is becoming an important cross-disciplinary challenge.
Conflict often arises in transboundary river where several countries share the same source of water to be used in productive sectors for economic growth. From the perspective of the upstream users, it would be ideal to store the water for hydropower generation and protect the city against drought whereas the downstream users need the supply of water for growth. This research use the case study on the transboundary Blue Nile River basin located in the Middle East where the Ethiopian government decided to invest on building a new dam to store the water and generate hydropower. This leads to an opposition by downstream users as they believe that the introduction of the dam would reduce the amount of water available downstream. This calls for a compromise management where the reservoir operating rules need to be derived considering the interdependencies between the resources available and the requirements proposed by all users. For this, we link multiobjective optimization algorithm to water-energy use simulation model to achieve effective management of the transboundary reservoir operating strategies. The objective functions aim to attain social and economic welfare by minimizing the deficit of water supply and maximizing the hydropower generation. The study helps to improve the policies by understanding the value of water and energy in their alternative uses. The results show how different optimal reservoir release rules generate different trade-off solutions inherently involved in upstream and downstream users requirements and decisions. This study stimulates the research in this context by using simulation based optimization techniques to manage for security for food, water and energy generation, which leads to improve sustainability and long-term political stability.