Apr 2013
Electricity Transmission
Improved Life Cycle Costing Methods
Apr 2013
National Grid Electricity System Operator
National Grid TO Innovation Team
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Innovation Funding Incentive
Asset Management
Traditionally, investment decisions have been made on the basis of capital costs of equipment only. This approach has been accepted since the capital costs for electricity transmission assets are large compared to annual operating costs and, being incurred up-front, are dominant in the discounted cash flow. However, it is becoming increasingly important that the whole life cycle be considered when evaluating options, including costs of obtaining raw materials, manufacturing, maintenance, losses and decommissioning/disposal of equipment.

The use of more holistic Life Cycle Costing (LCC) methods are an imperative for companies based on capital intensive assets having long asset lifetimes where the true current and future costs of ownership and operation are to be critically assessed with investment decision criteria that are searching and meaningful. Although the importance of this approach is recognised, its complexity and a lack of meaningful data and appropriate techniques have hindered its implementation.

While health and safety risk assessment is a well established discipline, very little has been done on life cycle assessment of human hazards and risks from plant manufacture, to scheme construction and commissioning, to operation and maintenance through to end of life management. There are significant potential benefits to being able to carry out such assessments in order to quantify the most effective ways to reduce hazards and risks and how to assess the effort and cost required to achieve safety by design for both new and current schemes.

To establish a methodology for evaluating the life cycle costs of transmission system assets and to account for the potential health and safety performance of such assets across their life cycle. The methodology will be used to support the development of asset investment and management policy and will allow optimum solutions to be identified taking into account economic, environmental and social costs. It will also inform health and safety policy and the cost benefit assessment of risk reduction and improved risk management strategies.