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:diagnostics/ :transformation/ :investment planning/ :portfolio optimisation/ :investment economics/ :regulation and economics/ :training/. Review of the water industry UKWIR project – when to repair, refurb or replace assets ICS Consulting November 2011. Agenda.

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slide1

:diagnostics/

:transformation/

:investment planning/

:portfolio optimisation/

:investment economics/

:regulation and economics/

:training/

Review of the water industry UKWIR project – when to repair, refurb or replace assetsICS Consulting November 2011

agenda
Agenda
  • Intro to the UKWIR project
    • Objectives
    • Deliverables
  • Key findings of the project
  • Application
    • Demo of the tool
project objectives
Project Objectives
  • Project commenced in Spring 2011
  • Development of a robust modelling and costing guidance:
    • Identify potential intervention strategies for different types of assets
    • Identify and justify asset policy decisions
    • Identify intervention cost approaches
    • Map best practice approaches to Common Framework structure
    • Focus primarily on non-infrastructure assets
  • Practical examples
    • Develop Excel Tool
    • Costing and deterioration examples
what are the challenges to address
What are the challenges to address?
  • Limited scope of interventions considered – used to answer:
    • At what point do we stop reactively repairing assets and replace it due to cost considerations?
    • Should we proactively invest to get a better level of service?
  • Limited use of asset attributes
    • Lack of maintenance, environment, location, asset history, etc.
    • Hard to understand impact of some intervention if only have ‘age’ only
  • Optimal asset policy may be a mix of interventions
  • Optimal asset policy may not be optimal across the asset base
  • COTS - time consuming for a single intervention strategy, and may not be well suited to a range of different interventions strategies
  • Focus has been on next 25 years, rather than next 5 years.
the guidance centres on the development and build of a risk modelling framework
The guidance centres on the development and build of a risk modelling framework
  • The framework must start with considering the TOP DOWN priorities
  • Top down priorities are generally communicated in terms of service performance (though some may be asset performance)
  • Many of these will be ‘valued’ – using WTP for example
  • We also need to model up to these service performance metrics

Customer and Environmental Values

Corporate Priorities and Constraints

Service Performance

Asset Performance

Physical Assets

Investment

developing a modelling approach involves a number of stages
Developing a modelling approach involves a number of stages

1

Asset and Intervention definition

2

Asset deterioration modelling

3

Service Consequence modelling

4

Determining costs

5

Decision making

the modelling approach involves a number of stages
The modelling approach involves a number of stages

Stage 1:

  • Identify assets to be modelled and the range of interventions
  • Consideration of the triggers for intervention
    • Intervention when a trigger is hit can be manually set or determined by optimisation process
  • Modern equivalence may be relevant to capture

1

Asset and Intervention definition

2

Asset deterioration modelling

3

Service Consequence modelling

4

Determining costs

5

Decision making

the modelling approach involves a number of stages1
The modelling approach involves a number of stages

Stage 2:

  • Estimate asset performance profile
    • Fix on fail baseline
    • Range of alternative intervention strategies
  • To model interventions and triggers – not just age only models
  • Ideally need some measure of condition/performance – helps identify intervention impacts

1

Asset and Intervention definition

2

Asset deterioration modelling

3

Service Consequence modelling

4

Determining costs

5

Decision making

the modelling approach involves a number of stages2
The modelling approach involves a number of stages

Stage 3:

  • Estimation probability of service failure given asset failure
  • Estimate severity of the service failure
  • For the intervention strategies need to estimate:
    • Number of asset failures; number of interventions; asset base profile; expected service levels
  • Validation techniques needed

1

Asset and Intervention definition

2

Asset deterioration modelling

3

Service Consequence modelling

4

Determining costs

5

Decision making

the modelling approach involves a number of stages3
The modelling approach involves a number of stages

Stage 4:

  • Cost of interventions
  • Impact of interventions on operational costs
  • Inclusion of social costs and benefits and private costs in the costing framework
  • Discounting and NPV

1

Asset and Intervention definition

2

Asset deterioration modelling

3

Service Consequence modelling

4

Determining costs

5

Decision making

the modelling approach involves a number of stages4
The modelling approach involves a number of stages

Stage 5:

  • Selection of the optimal asset policy
  • Selection of the optimal programme of investment
  • Use of corporate tools to support decision making is preferable
  • Understand sensitivity and uncertainty around the modelling inputs and assumptions
  • Clear explanation of the choices made about investment

1

Asset and Intervention definition

2

Asset deterioration modelling

3

Service Consequence modelling

4

Determining costs

5

Decision making

designing the framework
Designing the framework
  • Top down needs to align with bottom up
  • Failure Modes Analyses needed to develop the bottom up approach:
      • Modes – mechanical asset failure: repairable or not
      • Causes – maintenance, age, usage, corrosive environment…
      • Effects – supply interruption, pollution…..
  • Need to consider the impact of duty standby and duty assist
  • Data gaps are likely – may need to group failure modes, result asset attributes, etc in light of that
  • There is only so many gaps in data that can be dealt with elicitation and other techniques
designing the framework1
Designing the framework
  • Consistency in the framework is desirable
    • Data gaps may mean that the robustness across the whole analysis is not uniform
    • Deal with this using sensitivity analysis and uncertainty
  • Actual time and effort in modelling some elements depends on the size of the programme in relative terms – the more the expenditure, the more effort should be put in
  • It’s a journey
    • PR09 was a key learning point.
    • The time and resources to make the change to adapt to the learning could be considerable – and may not always be worth it.
the key messages in risk modelling
The key messages in risk modelling
  • Need to estimate pre- and post-investment profiles
  • Data gaps are inevitable and infill commonplace
    • Uncertainty around data should be explicitly considered in the analysis.
  • Survival analysis is most popular in modelling end-of-life failures for assets
    • Best practice is to use the Weibull distribution
    • AND many assets are repairable in nature
  • A mix of interventions should be included in the modelling framework
    • Proactive and reactive; Repair, refurbish and replace
    • Different levels of the asset hierarchy
    • The restoration times for the different types of interventions – rather than assets!
  • Intervention impacts articulated in terms of asset attributes and history
    • Performance, energy consumption, condition, nrs failures / refurbishments
    • Need better intervention benefits tracking
key messages in risk modelling
Key messages in risk modelling
  • NI assets…. need to capture system reliability
    • BUT some reliability modelling techniques are resource and time consuming – need to be pragmatic given this
  • All service impacts need to be expressed in monetary figures
    • Aim for Cost Benefit Analysis (CBA) for all investments
  • Decisions based on CBA need to be made at the programme level even though the modelling is at asset group level.
  • Uncertainty and sensitivity analysis are crucial
    • Understand robustness of decisions and the impact of data gaps and modelling errors
the example in the tool
The Example in the Tool
  • Asset Selection by the Steering Group
  • Rapid Gravity Filter
  • Simplified to the four major assets
    • Actuator
    • Blower
    • Tank
    • Pipework
  • Demo of costing and deterioration modelling principles
what does the data need to look like
What does the data need to look like?
  • Excerpt of the failure data for actuator…..
  • Need to model qualitative data as a dummy
weibull modelling
Weibull modelling….
  • Stata and R Weibull model
  • Stata estimates the shape parameter (b and 1/b); R estimates (1/b) only
  • Intercept and predictor coefficients in R are scaled by b. Hence for the constant in Stata of -10.28, the equivalent in R is -10.28/3.595 = 2.861
  • Key: Know the parameterisation of the software and the modelling tool !
what about repairable rates
What about repairable rates
  • Again, know the parameterisation of the software and the tools
  • Need to use count data regression – note: the offset/exposure
  • Choice between exponential and power model – need to be sure which you are modelling – depends on the nature of the age variable
summary of inputs and outputs
Summary of inputs and outputs
  • Service measures and social values
  • Discount rates
  • Energy prices & carbon prices
  • Asset lists – age and attributes
  • Deterioration models
    • Weibull end of life survival rates
    • Repairable failures
  • Service impacts
  • Interventions – costs and impacts
  • Intervention strategies
    • Age based triggers
    • (Repairable) failure based triggers
  • Pre and post simulation strategies
    • Age profile
    • Numbers of failures
    • Numbers of interventions
    • Intervention costs, energy costs
    • Service WTP, carbon costs
  • Cost benefit assessment of each strategy
    • Change in risk/service benefits (between pre and post)
    • PV of Benefits
    • PV of Costs
    • NPV
    • Graph of breakdown of NPV by asset
    • Ranking of strategies – to select ‘best’ one
slide24

:diagnostics/

:transformation/

:investment planning/

:portfolio optimisation/

:investment economics/

:regulation and economics/

:training/

Review of the water industry UKWIR project – when to repair, refurb or replace an assetICS Consulting November 2011