The Effect of Parameter Uncertainty on Hydropower Asset Replacement Cost Models

Abstract

Hydropower asset managers use whole-life cost models to better manage risk costs and asset replacement strategies for their hydroelectric powertrain and balance of plant assets. Whole-life cost models can be simplified to four main input variables: Weibull scale (α) and shape (β) parameters that inform the probability of failure; a planning horizon δ, indicating the frequency of the decision-making opportunity; and a cost ratio (CR) that compares unplanned outage costs with planned outage costs. Both the probability of failure models and the cost estimates suffer from high uncertainty and a lack of information regarding confidence bounds. The sensitivity of model results to the uncertainty inherent in the CRs is highly important for informing facility and fleet-wide decision making. Weibull shape and scale parameters were modeled at ±10% errors for a wide range of CRs. This sensitivity study reveals that (1) a ±10% error in the shape parameter imparts a 0.04% to 5.89% change in the optimized annualized cost (OC) over the range of CRs; (2) at CRs above 1.4, the 4-year (±10%) error in the scale parameter causes a change in optimal point (OP) of replacement of 2 to 4 years; and (3) as CRs increase, the impact of errors on OP first measured as 7 years decreases to less than 1 year by the time CRs reach 2.4.