Consider the alternatives
No analysis can be considered complete until the user has had an opportunity to consider the alternatives. What happens if a certain maintenance activity is performed more often or less often? Will it improve performance, and if so, how much?
Let’s consider a relatively common asset, a distribution transformer, which has a current value of $1 million and is 30 years into its 35 year projected lifespan. The asset owner or operator, in this instance, has the option to refurbish the transformer for $1 million— which would provide an additional 10 years of life—or to replace the transformer for a cost of $3.5 million—which would provide an additional 35 years of life. On top of that, asset owners would also have the option to blend these approaches by refurbishing the transformer and replacing it in 10 years at an estimated cost of $4.5 million. When considering these three options, the best answer becomes clearer when the lifecycle costs have been presented in a logical and actionable manner. To do this, all of the three scenarios must be analyzed in a side-by-side fashion to determine in when it makes the most sense to take on the capital costs associated with refurbishment or replacement of the asset.