Case Study:

Life Cycle Costing for new substation designs

Executive Summary:

Gnosys Ecometrics was approached to develop a method for assessing whole life costs of large infrastructure projects that would take into account economic cost as well as environmental cost and also take explicit account of risk. This method, and the tool developed to implement it, was then applied to a number of case studies as proof of concept.

The project was carried out under the Innovation Funding Incentive scheme introduced by OFGEM to encourage network operators to invest in Research and Development (R&D) activities. Case studies were chosen to assess the application of the method and tool to quite routine decision making and also for new proposed schemes.

This case study examines the choice of which switchgear technology to use in new substation facilities and how this impacts on the facility design and therefore on its economic and environmental footprint.

Background:

Life cycle costing (LCC), also commonly referred to as total cost assessment (TCA) is a decision support method for assessing the life cycle economic impacts of business process and infrastructure investments, product developments and operations. It is intended to provide life cycle based economic information required to inform and support decisions based on a thorough investigation of the costs. These can include costs of new processes or products, new technologies, asset investments, and current and new operations across the life cycle from “cradle to grave” or from “concept to termination”.

In addition to assessing the economic costs of schemes, there is increasing awareness and desire to quantify the environmental impacts of schemes. Reporting on environmental performance and impact of new schemes is becoming increasingly important, especially climate change impacts, and there are also economic costs associated with these impacts. Life cycle costing can also take these into account and enable quantification of these impacts and comparison of different options to achieve a well balanced outcome.

Along with these factors is the need to consider risk and the potential impact of schemes on their environment, be this geographical or social. Incorporating risk into LCC requires probabilities and the ability to examine the costs that may result should the risk be realised is a powerful feature of LCC.

The overarching project was aimed at developing a methodology, and implementing it in software, to assess the economic and environmental costs of schemes and the risks associated with them, which can be used to examine options and inform decision making. Case studies were chosen from a range of existing new and ongoing schemes to prove both the application of the methods to existing schemes and more routine decision making and also its use in newly proposed and novel schemes.

Methodology Overview:

The method considers different cost elements related to both Assets and Humans and these two streams are assessed within the method. The first stream is Asset based and includes investment and operation and other costs. The second stream is that associated with Humans, notably staff, Alliance Partners or contractors and the public. Each of these streams is split again into two, one representing actual costs, either direct or indirect, and the other representing the contingent and intangible costs.

Figure 1, Basic method structure for conducting an LCC Hold for future review

Issues not included in TCA

Project Definition and Scoping

Conduct Cost Inventory Impact Assessment

Asset Stream

Human Stream

Direct/Indirect cost

Contingent cost

Direct/Indirect cost

Contingent cost

Identify uncertainty

Identify risk or probability

Identify uncertainty

Identify risk or probability

Document Results

Feedback to company’s main decision loop

Direct and indirect costs represent those costs that will definitely occur. In terms of Assets, these costs might be capital cost of materials, spoil or waste disposal cost or the costs of insurance. They will have a value attached to them, but there may be some uncertainty associated with them as costs may range in value. In terms of Human cost elements, these costs might be those associated with general health and absenteeism and recruitment and training, which can be estimated before a project begins, based on historic trends or forecasted estimates. There is again a level of uncertainty here, as these costs might be given a range rather than a discreet value.

For both Assets and Humans there are contingent costs associated with unexpected incidents that carry a cost burden. These costs arise as both Assets and Humans can be “damaged” (or injured) through an incident. This may involve company personnel, Alliance workers and contractors and members of the public. In this case there are a number of

elements of uncertainty associated with the cost. The top level of uncertainty lies in whether the incident will take place or not. An incident may be an explosion or a fire caused by a fault in an asset, it could also be due to vandalism or naturally occurring. If an incident occurs, one must consider the consequences of it and the associated costs, be these health and safety related, or those arising from damage to surrounding assets.

Cost categories The costs identified for incorporation into the LCC are split into five cost categories: Type 1: Direct, these relate, for example, to capital investment and operational costs of a scheme or facility Type 2: Indirect, these relate to hidden corporate and operational or site overhead costs, for example corporate PR programmes Type 3: Contingent liabilities, these relate to costs associated with unexpected consequences – these generally include probabilistic assessment to reflect asset failures and uncertainties Type 4: Intangibles, these relate to internal intangible costs; for example staff costs and maintenance of relationships, which can be difficult to quantify Type 5: External, these relate to external costs not paid by the company, for example, environmental emissions

Goal The goal of the case study reported here was to carry out an LCC to assess the benefits or otherwise of utilising either Air Insulated Switchgear (AIS) or Gas Insulated Switchgear (GIS) in new substations. There is some debate surrounding the choice of which switchgear is preferable both economically and environmentally. AIS is seen as the cheaper option, and GIS is typically reserved only for sites where AIS is not feasible. Examining the whole life costs of the two options will lead to clarification on whether previous assumptions are true and how the environmental costs may contribute to choice of switchgear.

Functional Unit The functional unit adopted for the study was a substation, as a new installation, consisting of 6 switchgear bays and all other requirements for a functioning facility. The installation can either use AIS or GIS switchgear but is constrained to use existing technologies. The model is intended to include construction and operation; end-of-life will not be included, i.e. the wholesale refurbishment of the facility is not included in this study. Some end-of-life aspects are however considered where individual components reach their

end of life within the 40 years under examination, due to unplanned failure. In this case account is made of the costs of disposal of these components and replacement with new. Carbon emissions, and more precisely green house gas emissions, were also explicitly considered as was the potential impact of the cost of carbon, being realised as an internalised rather than an externalised cost.

Approach To carry out this study it was assumed that the site chosen for the new installation could accommodate either AIS or GIS technology. Typically urban sites where space and land price is an issue utilise GIS as it has a smaller footprint. AIS technology requires more space and so it utilised where possible, space permitting. Different land prices would indicate whether the chosen site was in a rural or urban environment which could heavily impact on the economic burden of the facility, dependant on the technology chosen.

It was also assumed that there were no other limitations on the site that would force the choice of one technology over another. These sorts of limitations might be security of the facility or impact of local pollution on the site, which might promote GIS over AIS, as it is located within a building.

A final assumption was that the technology installed is modern and meets manufacturer specifications, particularly with respect to SF6 use and loss rate. This is a key element as the use of SF6, which is much greater for GIS, and its loss, will have environmental impacts that need to be taken into account.

Figure 2, Example of some of the cost elements considered in this case study

Material costs

Construction Phase

System Losses

Probability factor

SF6 leak

Operation Phase

Incident occurrence

Green house gas emissions

Probability factor

Maintenance cycle Employee injury

Company reputation and market share

End-of-life Phase/Refurbishment

Results: The essential conclusions are: 1. The type I costs dominate the 40 year lifetime of the scheme, for both scenarios. These include all the installation and materials costs as well as the costs of the assets. Relatively speaking, for normal operation in the absence of faults, the cost of operating the switchgear is small compared to the capital investment cost.

2. Similarly, the global warming potential (GWP) or carbon impacts, of the schemes are dominated by the construction impacts, due to the embedded carbon within the assets being installed.

3. On comparing the two technologies, GIS is more expensive over the lifetime than AIS in all stages of the lifetime, i.e. both construction and operation. However, the difference between the two scenarios only 17% of the cost of the GIS facility.

Figure 3, Total project costs comparison, by cost category

4. On examination of the GWP impacts, SF6 leakage dominate both scenarios, with the power losses contributing relatively small amounts. This is particularly clear when examining the potential effect of future changes in the UK generation mix on the impact on system losses. In this case there is little effect seen on the yearly global warming impact for the two technologies as the CO2 emission reduces with the introduction of larger amounts of renewable generation.

Figure 4, Comparison of global warming potential over the lifetime of the facility

5. Monte Carlo assessments examining total GWP of the scenarios instead of costs suggest that the GIS scheme has a consistently higher environmental impact then AIS, and this impact increases significantly when SF6 tank rupture events occur, which while these have a low probability, it is possible that such an event may happen once of even twice within the lifetime of the scheme.

Figure 5, Monte Carlo assessment of the environmental impacts of the two facilities

6. Monte Carlo assessments suggest that, in general, AIS remains less expensive than GIS. However, it is possible that cross-over could occur when extremes of outage and others costs are incurred when the low probability failure event and contingent costs begin to occur.

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