Technical evaluation and life cycle cost analysis of transmission and distribution assets.

Abstract

Electric Power Transmission and Distribution (T&D) Asset Managers spend on average 30% of their capital expenditure on the procurement of primary and secondary plant and equipment. Furthermore, T&D Asset Managers spend on average 50% of their operating expenditure on the maintenance and operation of plant and equipment over their useful lives which is generally 40 years for primary plant and 15 years for secondary equipment. The privatisation of T&D in many countries and emerging markets means that shareholder return is now a major performance indicator for these companies. Regulatory bodies are becoming stricter in the pursuit of efficiency and productivity, constraining expenditure. This has the effect of reducing shareholder return if not managed appropriately. In order to meet shareholder expectations whilst maintaining consumer and regulatory requirements, T&D Asset Managers must apply innovative techniques to lower their capital and operating cost while meeting regulatory requirements. Therefore, T&D Asset Managers must take optimum advantage of every opportunity for improvement. The major items for cost reduction or productivity improvement are: procurement optimization, delivery efficiency and organisational overheads. Procurement Optimization relates to the procurement of equipment, materials and services. Plant and equipment costs are a major chunk of this spend. Delivery efficiency refers to the design, construction and maintenance of T&D network assets. Opportunities for improvement can exist in design and construction process as well as smart contracting strategies. Lastly, organisational overheads relate to the organisation’s cost for achieving the company’s outcomes. The major costs here are the cost of internal labour and the cost of capital. This research investigation focusses on asset management, asset strategy and equipment evaluation and specification. It involves a technical evaluation of T&D assets and a life-cycle cost analysis of plant and equipment with the goal of minimizing or reducing life cycle cost and hence, reducing risk exposure. A deliberate focus on asset strategy, assessment, specification, and the supply chain will ensure that T&D asset managers deploy fit for purpose assets at the lowest life-cycle cost. Based on the results obtained from this investigation, Asset Managers must apply a structured approach and have a long term view in order to achieve the lowest life-cycle cost whilst meeting regulatory and consumer requirements, within an acceptable risk exposure. This research study provides context and proposes tools and methodologies which can be utilised for effective decision making across the full supply chain for primary and secondary T&D equipment as applicable to the electricity supply industry.