Optimization of the Investment of a Large System /

Plant, as a Balance between Reliability, Costs and

Incomes

Giancarlo Guenzi1 and Giovanni Cannistrà1

1 Energoconsult Srl, Via Paletta, 10 – 28100 Novara, Italy

ISSN:24481475 Paper N.60

ABSTRACT

This paper covers the optimization of the investment of a large system / plant, as a balance between
reliability, life costs and incomes; it is the development at system level of a work presented at IX ICEC
World Congress.
The general topics are:
- Relationships amongst the service supply, life cost and incomes.
- Plant alternatives, and the relevant costs.
- System reliability assessment, i.e. the outages frequency and duration, and their economic
impact.
- Criteria for comparison of the alternatives, to reach a sound decision.
Some topics are also considered:
- Economic Impact of Common Cause Failures.
- Cost reduction with autodiagnostic.
- Impact of repair times

Keywords: Risk, Cost Optimization, Reliability

1. INTRODUCTION

The energy supply continuity has become one of the more relevant factors both in Industrialized and in
Developing Countries; therefore, a suitable analysis is recommended to reach a sound compromise
between service quality and cost.

The evaluation of industrial projects is usually carried out trying to reach an optimization / compromise
between performance and what are considered overall costs along the project life; conversely,
reliability aspects are often taken into account only once that the plant configuration and the budget
have been decided, and this rarely leads to a sound optimization.
In general, reliability and performance are considered as opposite to lower cost; the solution is to reach
an optimization that can be:
- Maximum reliability at a prefixed cost, or
- Minimum cost at a prefixed reliability level
Optimization of the Investment of a Large System / Plant, as a Balance between Reliability,
Costs and Incomes 2

2. METHODOLOGY

The paper covers the reliability / cost analysis of a power station.

The several steps of the analysis are as follows:
- Identification of the possible system alternatives
- Identification of the several states, relevant to the partial / total system out-of-service
- Reliability analysis by means of Markov processes in order to identify frequency and duration of
the several system states (system outages), which correspond to the loss of produced energy
- Identification of coefficients for each state of loss of production, considering the individual
importance of several states
- Cost evaluation of the loss of produced energy
- Discounted cash-flow analysis
- Topic: Common Cause Failures
- Topic: AutodiagnosticTopic: Long repair times
For sake of clarity, the above methodology is directly applied to a real case study.

3. PLANT CONFIGURATION ALTERNATIVES

The following example will be used to clarify the application of the above proposed methodology.

The First Step is the identification of the possible Plant Alternatives.

This analysis covers the comparison of three Combined Cycle (the gas turbine exhaust is used to
produce steam) Power Plant Configuration Alternatives A, B and C, referred to the following
parameters:
- Power Plant probabilistic evaluation of the average power delivery,
- Quality of the power delivery, i.e., frequency and duration of the faulted conditions

Figure 1 – Power Plant Alternatives

Optimization of the Investment of a Large System / Plant, as a Balance between Reliability,
Costs and Incomes 3

4. CALCULATION METHOD

The methodologies suitable for systems reliability analysis are;

• Markov Process; it is very effective to represent the fault-repair process, but it can be applied only
to systems with few components; their limit is that with a certain quantity of components and
transition possibilities the transition diagram would be too expanded;
• Monte Carlo simulation; it is very effective for complex systems, but the results interpretation
could become problematic, due to the difficulty to trace the trancition process.
In the case of a power station, the Markov process is the recommended choice, because the transition
diagram is still within acceptable dimensions.

The Transition Diagram has to include:

• Transition States: Transient system configurations that take into account the up-down states of the
components, their interactions, and specific failure-repair transitions
• Residence States: Cumulative states that include one or more of the above defined Transition
States, with the same output parameter that is relevant for the reliability goal (e.g. the cumulative
output power of a power station with many generating sets)
Optimization of the Investment of a Large System / Plant, as a Balance between Reliability,
Costs and Incomes 4

4. PLANT OPERATING STATES

The Second Step is the identification of the several operating states, and of the operating condition
(power delivery) relevant to these states

The sequence is as follows:

• Definition “A Priori” of the Residence States of the repairable system
• Identification of the interdependencies and CCFs, and their Transition States included in the
Residence States
• Ordering the Transition States: the ones relevant to CCFs are with progressive number after
those without CCFs. There are two areas:
- An internal area, without CCFs
- A peripheral area, with CCFs
• Solution of the Transition Matrix by means of numerical methods.
The transition Diagram and Matrix relevant to Alternative A) are reported in Fig. 2 and 3; the whole set
of transition diagrams, matrices and equations can be found in [17], available online at
http://drum.lib.umd.edu/bitstream/handle/1903/11205/Guenzi_umd_0117E_11768.pdf?sequence=1&is
Allowed=y.

Fig, 2 – Alternative C) – Transition Diagram

450 MW 300 MW 225 MW 150 MW 0 MW

GT

ST

GT

λGT GT
GT
ST GT
ST
λCCF µGT
GT ST
10
GT
µCCF 5 GT
2
λGT 9
λST GT GT
2λGT ST µGT ST GT
µST
GT λCCF GT ST
µGT 11
GT 3
µCCF 6 GT

ST 10
λCCF
GT 8
µCCF GT
0
2λGT λGT
λST GT GT GT ST

ST µGT ST µGT ST GT
λCCF
µST GT 9 GT λCCF GT 11
12
µCCF
1 4
µCCF 7
GT

ST
Generating Sets Failures
GT
Common Cause Failures (CCF)
12

Configuration C: Multi Shaft Combined Cycle

2 Gas Turbines +1 Steam Turbine
(3 Generators, 3 Transformers Transition Diagram
Optimization of the Investment of a Large System / Plant, as a Balance between Reliability,
Costs and Incomes 5

Fig. 3 – Alternative C) – Transition Matrix

The Transition Matrix is leading to a linear system of equations, that can be solved by means of usual
can be solved by means of usual numerical methods.

Without CCFs With CCFs

Step 3 – Reliability/Availability Assessment

The main characteristic of a power station, relevant for a reliability/availability analysis, is that it is a set
of generating units which can be out-of-service, either one by one, or more than one simultaneously.
In this case, the reliability/availability analysis of the three alternatives has to take into account the
following parameters, which represent the reliability/availability indices:
Optimization of the Investment of a Large System / Plant, as a Balance between Reliability,
Costs and Incomes 6

- Average Power Delivery: It is the weighed mean of the products of the power delivery of each
generating state (Residence State), and the probability of the system to reside in this state,
referred to the overall power plant capacity:

(1)

where:

PE: Average Power Delivery

PT: Power Plant Rated Power (450 MW)
i: Partial Production Generating States (150 MW, 300 MW, 225 MW, etc.)
Pi: Probability of the system to reside in State i
pi: Power Production at State i (150 MW, 300 MW, 225 MW, etc.)

The Pi probabilities are those included in the asymptotic transition matrix; they represent the
asymptotic probabilities of the system to reside into the several states.

0 - B1 ρ2,1 .... .... ρn,1 P1

0 ρ1,2 - B2 .... .... .... P2
0 = .... .... - Bi .... .... ...
0 .... .... .... - Bi .... ...
1 1 1 1 1 1 Pn

where:

ρij: rate of departure from state “i” to state “j”

- Frequency and Duration of System Residence into the “i” States: This index represent the quality
of the power delivery

5. ENERGY PRODUCTION / POWER DELIVERY ADJUSTMENT

This is the Fourth Step of the analysis.

The result of the above reliability evaluation is the power amount that can be generated and delivered
to the grid; the product “power x time = energy” leads to the further “energy x KWh tariff = project
economic income”.

However, for a sound project evaluation, it is advisable to consider also two different points of view:
- Utility Point of View: the Utility main interest is in energy selling, therefore the system
performance index is simply the Project Economic Income = Energy x KWh Tariff. However,
there are some constraints related with Industrialized/Developing Countries, Load Forecast and
Power Station size, as reported in the following chapters.
Optimization of the Investment of a Large System / Plant, as a Balance between Reliability,
Costs and Incomes 7

- Customer Point of View: for the Customers, the main concern is to avoid as far as possible
power outages; therefore, the several system “states” with less than the total possible power
delivery have to be penalized.

Moreover, two different points of view relevant to the Customers have to be considered, in order to
take into account the specific aspects of power delivery in Industrialized or Developing Countries, as
follows.

• Industrialized Countries: Specific characteristics of these Countries are:

- Load Forecast with a moderate per cent increase;
- Consistent Generating Park, with a permanent reserve, suitable to promptly compensate a
power station out-of-service.
The decision to install a new power station is often due to the necessity to substitute an old
existing one; only in few cases it is necessary to install a new power station, to face the future
load demand.
Eventually,
- A new power station should be called to produce at full capacity just from its start-up.
Therefore, the economic income is just the energy produced at the total capacity, possibly with
a reasonable reserve margin;
- The partial or total out of service of the new power station is supposed to be easily
compensated by the remaining generating park, and the penalization of the “states” with
limited production can be either modest or null.

• Developing Countries: Specific characteristics of these Countries are:

- Load Forecast with sometimes relevant per cent increase; in many cases, the Load Forecast is
conditioned by the power availability, and it can increase with the addition of a new power
station.
- Limited Generating Park, with poor reserve; difficulty to promptly compensate a power station
out-of-service, which can be dramatically sharpened in case that the faulted power station is
the predominant one.
The decision to install a new power station is mainly due to the necessity to match the increasing
Load Demand.
Eventually,
- A new power station is usually oversized for the present Load Demand, and it can be called to
produce only at partial capacity along the first years. Therefore, the economic income is the
cost of the energy produced at partial capacity, until the Load Demand is increased up to
require the full power availability.
- The partial or total out of service of the new power station can be barely compensated by the
remaining generating park, and the penalization of the “states” with limited production
becomes quite relevant.

The project evaluation is usually carried out by means of the widely used DCF - Discounted Cash Flow
technique; in this case, the DCF “income” is the energy selling, that has to be adapted in accordance
with the above considerations.

Specifically:
- The system “states” with total or higher energy production have to be compared with the actual
Load Demand; otherwise the DCF income would be not realistic. This comparison leads to quite
negligible effects in Industrialized Countries, but relevant effects in Developing Countries.
- The system “states” with low or null production have to be “penalized”, due to the difficulties
arising from the total or partial power outage; the penalization is low or negligible in Industrialized
Countries, and it can be serious in Developing Countries.

The above mentioned penalization of every low production state of all the alternatives has to be
computed as an yearly “outcome” Q in the Discounted Cash Flow; it has to be considered as an
amount to be properly assessed on a case-by-case basis, taking into account the specific
characteristics of the project, as above discussed.
This fixed amount has to be adjusted with the following figures / coefficients:
- L: Loss of produced energy; this is coming from the identification of states and their power
production.
Optimization of the Investment of a Large System / Plant, as a Balance between Reliability,
Costs and Incomes 8

- C: Unit (KWh) Shadow Cost of the lost energy; this shadow cost (outcome) has to be assessed
on a case-by-case basis, and it can be quite different from the unit cost (income) of the produced
energy.
- K1: Coefficient that takes into account the difficulties for the power outage; this coefficient is much
greater for Developing Countries that for Industrialized Countries. and especially in case that the
power station in analysis is predominant.
- K2: Coefficient that takes into account the extension of a power outage; a general black-out is
much worse than a localized outage. This coefficient is much higher for Developing Countries,
Finally, the penalization (yearly outcome) is:

Q = L*C*K1*K2

The above criteria is originated by a general system reliability rule: If the overall system is poor, the
component reliability has to be strong.

6. FINAL ANALYSIS

This is the Fifth Step of the Analysis

The project evaluation can be properly carried out by means of DCF – Discounted Cash Flow
technique.

Incomes
- Energy selling, properly evaluated and adjusted as described in the previous chapters.
- Residual value of the Plant

Outcomes
- Capital cost of the several alternatives.
- Penalization of the low power states, as described in the previous chapters.
- Operational costs of the Life Cycle.

Overall (very summarized) results:

Configuration B) proved to be the more reliable, although the difference with the other configurations
was not high; conversely the cost of Configuration B) was higher.
However, Configuration B) has been chosen because it was the best compromise, taking into account
that it had to be installed in a Developing Country, and it was the predominant Power Station, therefore
the necessity to avoid as far as possible any outage was predominant.

Other aspects related to both reliability and costs, and included in the life Cycle, are:
- Preventive Maintenance;
- Corrective Maintenance;
- Spare Parts.
They will be treated in future papers.

7. TOPIC – CCF (COMMON CAUSE FAILURES)

A typical solution to improve system reliability is the use of sub-system / component redundancy; in
fact, this is a good practice, but it is entailing additional costs.
A typical problem with the redundancies is the occurrence of CCFs (Common Cause Failures) wich
can decrease so much the impact of the redundancies.
In simple words, a CCF is such an additional component in series with the redundant ones; in most
cases, this fictitious additional component can become predominant and neutralise the impact of
component redundancies. In terms of economics, the benefit of the additional cost of the redundancies
is frustrated by the impact of the CCF.
Optimization of the Investment of a Large System / Plant, as a Balance between Reliability,
Costs and Incomes 9

Typical CCFs are:

- Common Auxiliary Systems, shared by the redundant components; e.g. a common water cooling
system for two redundant motors / compressors.
- Design Limit of the redundant components; e.g. the undersizing of redundant emergency lube oil
pumps leads to the sequential out of service of both pumps (it really happened to the Authors
called to start up a Power Plant that during a shut down a lube pump became overloaded and had
to be disconnected; the redundant one of course suffered the same problem and a serious
situation had to be faced). The Design Limit is a typical attitude of some designers, that, once
accepted the additional cost of a redundancy, want to limit as far as possible the cost of the
individual components.

Therefore, a comprehensive CCF analysis is highly recommended, in order to avoid frustrating the high
cost of the redundancies.

A suitable methodology has been developed by the Authors to properly include CCFs in the Transition
Diagram and Matrix; it has to be pointed out that CCFS:
- Add new Transitions;
- Do not add new Cumulative Residence States;
Therefore, it is possible to “superpose” the CCFs and their transitions to the previous transition
diagram without CCFs. The new CCFs and their transitions have to be “ordered” in such a way that
they will be with higher sequential codes; in this way they will appear only in a peripheral strip of the
transition matrix. In Fig. 3 it is possible to see that the internal (grey) part of the transition matrix is
“without” CCFs, and the external (light) strips are relevant to CCFs.

8. TOPIC – AUTODIAGNOSTIC

A reliability / cost optimization must take into account both the impact of the “heavy” faults and the long
outages (loss of energy delivery) due to their long repair times.
Auodiagnostic proved a very effective technique to reduce dramatically the probability of “heavy” faults
on main equipment; in fact, the degradation factors are permanently monitored, and it is possible to
detect and to decide when and how to repair the fault before it becomes the cause of a serious
equipment damage.
A specific study [9] has been carried out comparing the outage time of two EHV (Extra High Voltage)
Substation alternative configurations:
1. 1 ½ Circuit Breaker Scheme – Tot. 9 High Voltage Circuit Breakers
2. Single Circuit Breaker Scheme – Tot. 6 High Voltage Circuit Breakers
The comparison showed that with the adoption of autodiagnostic it is possible to adopt the simpler
(cheaper) 2) configuration with almost the same reliability. In fact, the adoption of autodiagnostic has a
relevant impact on the simpler configuration, and conversely a negligible impact on the more expensive
one, that is already very reliable.

It is possible to evaluate the impact of autodiagnostic, with the following sequence, in the frame of the
above described methodology.
The faults which can be detected in their early stage by autodiagnostic should be identified and
separated since the beginning in the FMEA (Failure Modes and Effects Analysis).
Two separated sets of faults should then be considered in the transition diagram, which will have the
same residence states. The problem is that if the new “heavy” faults would be included (added) in the
original frame, it is very likely that the transition matrix could became too large to be easily handled;
this is the biggest limit of the Markov Process. The solution is to carry out two separate Markov
analysis, considering the same transition and matrix diagram as follows (symbols and codes are same
as for (1)):
A. A Markov analysis with all the faults but the “heavy” ones; it has to be pointed out that in this case it
is necessary to evaluate the power NOT delivered in every residence state, instead of the delivered
power.
Optimization of the Investment of a Large System / Plant, as a Balance between Reliability,
Costs and Incomes 10

(2)

B. A further Markov analysis with the same residence states, but considering only the “Heavy” faults.

(3)

The Average Power Delivery, not taking into account the simultaneous probability of outages (REA –
Rare Events Approximation), is

(4)

Fig. 4 – EHV SubStations Schemes

1 ½ CB Scheme Single CB Scheme

Optimization of the Investment of a Large System / Plant, as a Balance between Reliability,
Costs and Incomes 11

9. TOPIC – LONG REPAIR TIMES

Long repair times of the main equipment have of course to be avoided as far as possible, because
they correspond to long power outages. A recurrent situation is that, simply in order to maintain a
standard design, a more expensive High-Tech solution is adopted in cases where a non High-Tech
solution could be proposed, with approximately the same cost (sometimes cheaper); the problem is
that a High-Tech solution usually has a long repair time and requires very skilled (expensive) repair
team, conversely a standard solution is easily restored in service.
A typical case is the High-Voltage interconnection between the Main Step-Up Transformers of a Power
Station and the High Voltage Grid. Along many decades this interconnection has been provided by
means of a short aerial line, but in the last decades many interconnections have been done with High
Voltage cables buried in the soil; this latter solution was originated in order to avoid exposed aerial
cables in urban areas.
The HV cables then became almost a standard solution, and now it is common to find them also in
Power Stations installed in not industrialized areas. It has to be pointed out that a cable has a lower
unit (1/km) failure rate than an aerial line, which is subject to lightning strokes etc., but in the case of a
cable there is to add the failure rate of the cable terminations at the two extremities, which is not low
and fixed i.e. independent from the conductor length; eventually, the overall failure rate a short HV
cable is of the same order of that of a short aerial line; unfortunately, the repair of a HV termination is
quite expensive (it requires High Tech components and very skilled personnel) and the repair time is
much longer than for an aerial line. An interesting study covering the HV cables repair times is reported
in [18].
Of course, the long repair times play a more important role in non industrialized countries, and mainly
in case that the power station is predominant; conversely their role can be relevant but not dramatic in
countries with very developed and interconnected HV grid, where the same grid is providing a sort of
network redundancy.

Also the interconnections of the Wind generators, and the main HV interconnection between the Wind
generating park and the HV grid are usually provided with buried cables [19], with sometimes heavy
problems; an alternative with Medium Voltage aerial lines for the generators, and HV aerial line for the
main interconnection, should always be taken into account.

In order to limit the size of the transition diagram and matrix, the above mentioned interconnections
can be included in “macrostructures” as an extension of the equipment they are connected to; the
theory of the “macrostructures” is comprehensively treated in [3].

10. REFERENCES

[1] Billinton, Allan “Reliability Evaluation of Power Systems”, Plenum Press – Ch. 13 “Evaluation
of Reliability Worth”.
[2] Billinton, Allan, Salvaderi (Editors) “Applied Reliability Assessment in Electric Power Systems”,
IEEE Press, Ch. 4 “Reliability Cost/Worth”.
[3] Birolini, “Reliability Engineering”, Springer Ed.
[4] Guenzi, Impact of Equipment and System Reliability on Project Economic Optimization, ICEC
IX Congress, Milan 2014
[5] IEEE Std. 399 Recommended Practice for Industrial and Commercial Power Systems Analysis
[6] IEEE Std 438 Recommended Practice for the Design of Reliable Industrial and Commercial
Power Systems.
[7] Guenzi – Cannistrà, “Economic Evaluations in Reliability Analysis of Repairable Systems” Univ.
Bocconi - AICE Seminar, 1999.
[8] Guenzi – Cannistrà, “Technical and Managerial Risks, and their Relationship with Economic
and Financial Risks” - Univ. Bocconi – AICE Seminar, 2000.
[9] Guenzi – Politano, “EHV Substations Reliability Improvement by means of Circuit Breakers
Autodiagnostic” – IEEE Powertech, Bologna 2003, Paper 327.
Optimization of the Investment of a Large System / Plant, as a Balance between Reliability,
Costs and Incomes 12

[10] Guenzi – Cannistrà, “Technical Risk Analysis of Multi-Disciplinary Projects - AACEI

International Congress, Orlando 2003, Paper ‘Risk 22’. (Included in AACEI Professional Guide)
[11] Guenzi – Cannistrà, “Series and Derivative Lighting Systems- Reliability and Maintainability
Comparison” - AIDI - Impianti in Serie e Global Service nell’Illuminazione Pubblica - IEN
Istituto Galileo Ferraris - 2005
[12] Guenzi – Cannistrà, “Incandescent/LED Lamps in Airfield Lighting System, ‘Reduced Minimum’
Comparative Probabilistic Assessment – Effect on Airports Maintenance and Operation” –
IESALC 2006 Conference.
[13] Guenzi, Carrara, Fabio, Alquati “RAM Analysis in Concept Selection Design Phase, a Case
Study: Integrated Gas Power Generation Project”, MM2007 Roma, Paper 007.
[14] Mosleh, University of Maryland Risk and Reliability Center, Lecture Notes.
[15] Munasinghe, “The Economics of Power Systems Reliability and Planning”, a World Bank
Research Publication.
[16] Guenzi, Cannistrà “Appraisal of High-Tech Industrial Assets”, 2002 AACEI International
Congress – Portland 2002 – Paper “Risk 10” (Included in AACEI Professional Guide)
[17] Guenzi, “Reliability Evaluation of Common Cause Failures and other interdependencies in
Large Reconfigurable Networks”, PhD Dissertation, Univ. of Maryland, 2010.
[18] Kandalepa, Tuinema, Rueda, Van der Meijden “Reliability Modeling of Transmission: an
Explanatory Study on further EHV Underground Cabling in the Netherlans”, IEEE Energycon
2016, Leuven.
[19] Dahmani, “ Modélisation, optimisation et analyse de fiabilité de topologies électriques AC de
parcs éoliens offshore”, PhD Thesis, Universitè de Nantes, 2014.

ABOUT THE AUTHORS

Giancarlo Guenzi was born in Italy on 1946. He received a Master of Science equivalent degree in Electrical Eng. - Power
Plants from Politecnico di Milano, a Master of Science in Electrical Eng. - Power Systems Analysis from USP - São Paulo,
Master of Science and PhD – Doctor of Philosophy in Reliability Engineering from University of Maryland; furthermore, he is
Certified Cost Engineer and Fellow of AICE – ICEC A, Life Senior Member IEEE, and Professional Engineer in Novara – Italy.
He is Managing Director of Energoconsult, Novara – Italy, in charge of cost engineering studies, risk and reliability analysis,
power systems design and analysis.
He is author / co-author of more than 30 papers covering cost engineering, reliability and risk analysis, ground grids, protection
systems.

Giovanni Cannistrà was born in Italy on 1949. He received a Doctoral Degree in Electrical Engineering (Magna cum Laude) on
1973 from Università di Bologna; he was Certified Cost Engineer and Fellow of AICE – ICEC A. He has been Site General
Manager in foreign offices of consulting companies, General Manager and Vice-President of OCEM Group, and he is Chief of
Project Management of Energoconsult.
He holds many patents on airfield lighting systems, and he is author / co-author of more than 20 papers covering cost
engineering, reliability and risk analysis.