An example of investment planning of power distribution using quantitative reliability and cost analyses

From 2012, there will be a new regulation of the electrical power distribution system tariffs in Sweden. Still there are uncertainties regarding the final content, but the basic concept is now settled. Known parts of the new regulation have been used as input to the economic analysis of a potential investment in a Swedish power distribution system owned by Fortum Distribution. The described method could however be applied on any European power distribution system, with adaptation to national laws and regulations. First, a reliability model of the concerned part of the system was created for every potential investment alternative. Quantitative reliability analyses were then performed on these models. Based on calculated reliability indices and assumptions regarding the new regulation, outage costs were calculated. These costs were used as input to life cycle cost (LCC) analyses including more parameters, e.g. maintenance costs. Different investment proposals were evaluated and compared. Sensitivity analyses with respect to increasing outage compensation and WACC (weighted average cost of capital) were made, supporting the same investment. In this case, one investment alternative was clearly pointed out as the best.